Today, the Indian startup ecosystem is not only attracting global venture capital funds but also angel investors who are realizing that the private market is too big an opportunity to give a pass. As a result, angel investment activity has skyrocketed by 234% in the last five years.
Bring easy access to promising startups to the mix and everybody wants to don the hat of angel investors. So how can new angels step in and get started?
“Most angels tend to invest in the early stages because that's when the company needs it the most and find it harder to raise capital,” says Deepali Nangia, Partner at Speedinvest and angel investor in more than 30 female-founded companies, during the Ask Me Anything (AMA) session.
Networking is the key
Angel investors are regularly out on the hunt to have a good deal flow and grab the best deals available. However, Deepali claims that access to good deal flow appeared more difficult as a woman.
She says it helps to let your network of entrepreneurs and operators in the ecosystem know that you are interested in supporting them or investing in business in sectors of your interest.
Joining online communities of angel investors and social media platforms like LinkedIn are also a good source of inbound leads. “They are not necessarily always great quality but as an early angel, you should need as many companies as possible to learn how to weed out over time,” she says.
The holy grail of startup investment
Once you have decided to become an angel investor, setting up an investment thesis is the first important step that sets the direction.
Speedinvest focuses on six sectors including fintech, health, and deeptech. It ventures deep into each sector to add value to the startups in terms of business model, corporate development and others.
Deepali enjoys going through lots of deals which serves as intellectual exercise and eventually building a community to learn from.
She says that building an investment thesis is often a natural extension of one's educational and professional background. “Someone who studied microbiology or medicine might be more interested in health as a sector,” she adds.
The investment thesis can be shaped out of one’s background, passion, intellectual curiosity or a place you want to make an impact.
Regardless, an investor may notknow as much as the entrepreneur who is in the thick of things to build the business, especially in spaces like crypto, Web3, and spacetech, among others. Investors can learn a great deal by talking to people, osmosis, and reading.
Deepali always maintains a direct open channel of communication with the founders to know them better and does not prefer investing through syndicates.
At the same time, angel investing is as much about investing in people as it is in the business. Further, operational metrics are not likely to apply just yet in the early stage. However, she digs into available data of products like retention rates in the early stage which can paint a fair picture of future growth.
In addition to that, if one does not get a good feeling about the deal and the founder, Deepali believes it is best not to go ahead.
In cases where the deal progresses, angels should bring more than just the capital to the table. This could include leveraging your network to help founders connect with the right people or even pave the way for the next round of funding.
Investors should also remember that building a business is hard and entrepreneurs are often lonely at the top and just be that mental health support for them.