How to decide if angel investment is the right way forward for you

Angel investment is nowadays no longer confined to a few but has now penetrated among the general population owing to the booming Indian startup ecosystem. Success stories of individual investors such as Sanjay Mehta, a venture capitalist and tech investor who made a whopping 280X return on an early investment in hotel aggregator startup unicorn OYO, have inspired many to explore the segment. 

Now investing in startups is more accessible than ever. 

However, one should be mindful that private market investment is a high-risk asset, especially for angels who typically back startups in early stages. 

Donning the angel investor’s hat

Angel investors are motivated by different reasons, ranging from wanting to learn about the dynamic startup ecosystem to indirectly experiencing entrepreneurship or simply eyeing big returns. Well, they are not alone.   

With Indian startups steadily producing high growth and high returns, the private market ecosystem has grown into an opportune area of wealth creation for investors around the world. As a result, it is attracting capital from both foreign venture funds and angel investors. 

As one begins their journey as an investor, they need to know how they can help and add value to their portfolio companies. In the early stage, angels might need to support not only with capital but also with mentorship. As an early backer, be ready to get involved in the business and help it grow.

The right time 

As the popular saying goes, “everything comes to you at the right time.” Timing is a crucial factor behind success and private market investing is not an exemption.  

When LetsVenture hosted an exclusive dinner session with founder-investor Anupam Mittal a couple of months ago, he was approached by two recent graduates, among many others. 

When asked for advice on investing in the right startups, “don’t invest in startups. Don’t do it at this age,” pat came the reply from Anupam. Noting that the young boys were using their parent’s money to fund startups, he suggested getting some experience to better understand the ecosystem and consider investing after accumulating certain money or wealth. 

Startup investing requires individuals to have a clear understanding and expertise about the market. They need to be able to decide if a certain bet matches their thesis and if it would meet their expectations. Thus, it is advisable to first gain experience in your preferred sector before entering the markets.

Getting started

In fact, many experienced investors believe that although one should do all the due diligence and strategically evaluate startups for best returns, they should also be ready to let go of the money as startup investment is a long-term game.   

Nakul Saxena, head of investor relations and fund management at LetsVenture, advises keeping a separate fund aside that one is willing to lose when starting to invest as an angel.     

Unlike the public markets, where the purchase and sale of company shares take place on exchanges open to all, activities in the private market often take place in close networks. Hence, access to deal flows and quality is crucial to succeeding as a private market investor. This is also where platforms like LetsVenture play a key role, featuring more than 32,000 startups. 

Angel investors should also network within the ecosystem to stay updated about the upcoming deals. For instance,  Abhishek Nag, Partner at Lightspeed and angel investor in fintech unicorn Open, received his first few deals as an angel investor from former classmates and colleagues.. 

Veteran investors vouch for backing the right team and the founder over the business, especially in early-stage startups. They believe the right founder who can persevere will find their way. 

‍(Explore Learn by LetsVenture a destination portal for lessons across stages of angel investing and free resources)

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