January 2, 2023
January 2, 2023
min Read

Angel investing 101: How you can get started and invest like the ‘Sharks’

Team LetsVenture

Increasing earnings in India coupled with the willingness to create wealth has led to a paradigm shift in making investments. While the public markets have been mostly preferred as it is low in risk, the current growth and wealth creation opportunities in the private market is also attracting a new breed of angel investors betting on the early-stage startup ecosystem.

Angel investors play a key role in helping many of the startups to enter the market and grow. Thanks to the value created by mature startups, the growing acceptance of entrepreneurship, and popularity of reality show Shark Tank India, many are now considering becoming an angel investor. 

As a pioneer in connecting angel investors with startup founders, LetsVenture has been working towards enabling angel deals and created a network of over 17,000 investors from more than 60 countries. 

This new year, LetsVenture presents a quick guide and resources into kickstarting angel investing.  

Who is an angel investor?

An angel investor is usually a high-net-worth individual who provides financial backing for small startups or entrepreneurs in exchange for equity in their business. They back startups in their early and riskiest stages, often when it is just an idea. 

Why consider angel investing?

Though the private market is one of the riskiest asset classes of investment, many angel investors are happy to take the risk as they get to experience the journey of starting up and working closely with founders and is also a great way to create wealth. 

Vivek Khare, who had invested in foodtech unicorn Zomato (now a public company) in its earliest days, believes that people should invest in startups to create wealth, improve productivity, and stay updated about the latest trends and developments in the industry. Hailing from a middle-class family, Vivek says it is by investing in good, early-stage businesses that he could retire so early and be financially secure. 

Entrepreneurs often become angel investors just to give back to the ecosystem. Kunal Bahl, co-founder of Titan Capital, is driven by the passion to support founders more than the opportunity to create wealth for themselves. 

“The attractiveness of a commercial opportunity allows us the ability to keep doing it (angel investing) over a long period of time. But we do it because it comes from a place of intellectual interest, passion, and to pay it forward,” he tells LetsVenture in The Private Market Show. 

It is no wonder then that India’s top five angel investors in 2022 were all founders themselves. 

How does one actually become an angel investor?

However, it is crucial to keep in mind that not everyone can become an angel investor. 

The Securities and Exchange Board of India (SEBI) mandates that any individual considering investing as an angel must have net tangible assets of at least Rs 2 Cr excluding the value of his principal residence. 

In addition to that, they must fulfill one of the following criteria:

  1. Prior experience in investing in a startup or emerging or early-stage ventures
  2.  Experience as a serial entrepreneur, having promoted or co-promoted more than one startup venture
  3. Senior management professional with at least ten years of experience

How can one invest through the LetsVenture Angel Fund?

LetsVenture Angel Fund (LV AIF) is a Category 1 Angel Fund registered with SEBI. It acts as a vehicle or scheme that pools money when individual investors express their commitment to invest in a startup. 

LetsVenture Angel Fund creates a scheme for every startup investment so that angel investors hold the unit of the scheme while the LV AIF holds shares of the startup. 

Hence, LetsVenture Angel Fund represents each angel investor participating in the scheme on a startup’s captable. The fund also safeguards and represents the angel investors’ rights whenever the next round of funding, quarterly report, or yearly valuation takes place. 

At present, LetsVenture manages a portfolio value of over $10.4 B including startups like SUGAR Cosmetics and Khatabook, among others. Angel investors can start exploring startup profiles and deals by signing up on the platform here.

How should one determine good businesses to invest?

After nearly a decade of working with and investing in early-stage startups, Vivek Khare has a clear idea of what a good business is: where competent people run squeaky clean companies, which are well-governed, offering products or services customers love. 

However, investors need to note that it is not always easy to identify such businesses in their early stages and that it is more of an art than science. Most angel investors bet on the founders and their grit, determination, and flexibility, the Total Addressable Market (TAM) as the total possible market, and its competitors. 

Beyond that, experienced investors like Anupam Mittal, who has backed more than 200 startups, believe that gut and instinct will always play a role when making investment decisions. 

“This is because gut and instinct are an informed sense over years of what you've been doing and that's why as you keep doing something with experience, your instinct gets better and with confidence, your instincts get sharper,” he shares at LetsIgnite 2022.

(For more insights and resources on private market investing, sign up on LEARN, a destination platform for lessons in angel investing.)

Team LetsVenture
Angel Investors
Private Market Investment

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