“An idea is worth almost nothing, execution is worth everything”
With the startup ecosystem expanding exponentially in India, new forms of funding options are cropping up in the business arena. Angel-Investing has been around in India for more than a decade, and more than 5000 businesses have successfully started their operations, and have recorded above average growth-rates.
During the last few years, the market demands as well investor expectations have changed drastically, along with the portfolios of start-ups. To delve into the universe of start-ups in India is a mammoth but it is safe to say that there have been quite a few shifts that have been observed. On one side, the portfolios and the cesspool of entrepreneurs & start-ups are diverse. On the flip side, angel investors are getting more specific and finicky with their investments.
Randy Lubin, a successful entrepreneur who sold his business in the US to giant software corporation, Jive says,
“ It is after all, another person’s hard work and effort. Angel Investors take careful steps to ensure that their investment is lucrative and beneficial. Therefore, their fastidious attitude about start-ups is validated. Safety is a must-have for them.”
The past year, India has seen a largely fractioned growth in the number of start-ups. Food & technology start-ups are most in number, observes the Indian Angel Network, one of the largest databases where start-ups & angels interact with each other.
Being a mentor for Stanford GSB & IDEA’s five top start-ups, Randy remarks on the differences in the start-up circle in India & San Francisco. He says “In India, the product market is not a growing market. Rarely do you see start-ups that pitch products; India is a hub of service start-ups. Off late, I’ve seen media start-ups as well as food start-ups that have gained a lot of recognition and have attracted funding.”
Start-ups which have anything novel and innovative to offer can receive funding anywhere between 1.5 lakhs to 80 lakhs.
This brings the question, What is expected of start-ups? Is it product innovation, reliability or the team’s portfolio?
Angel Investors, when asked about what they look for, agree that their top priority is the team. They state that “Your team is the first thing that angel investors look for. How the idea is brought from being just a possibility to hard reality depends on the team working on it. The people working on the venture make all the difference between a success and a failure.”
Angel investors usually look for the traction and chemistry within the team. The larger the team’s diversity and portfolio, Angels usually have the confidence that the team has enough skills to survive. In Manish Singhal’s (A prominent Angel Investor) expert columns, he writes
“Prior experiments with entrepreneurship are always beneficial as it brings a startup mindset and the experiences to the mix. An important skill that investors look for is the team’s ability to sell/market their product or service. Technology centric teams may tend to overlook this important dimension, however even a great product/service needs to be marketed well to get the initial traction.”
“While it varies with each investor, many Angels care most about the team. They want to invest founders who have a good history together, are knowledgeable about the problem they’re trying to solve, and have the grit to slog through the startup grind. It’s crucial to establishing a good rapport with the investor – they’re betting on you, more than the initial idea or market.”
As for the next criterion, Manish points out that the product is the next most important thing on an investor’s checklist. Is it innovative? Is it helpful? How scalable is it? These are a few questions that start-up entrepreneurs should definitely have answers for, before approaching an Angel.
It is noted by many entrepreneurial researchers that in India, the most successful startups are those who offer either of the following:
An innovative product that the market has never seen Or A service that makes the lives of people much easier
Do Angel Investors look specifically for these start-ups? No, both Randy and Manish explain. Most of the angel investors look for start-ups that show promise, even if their product/service isn’t a breakthrough in the market.
BlueGape is one such start-up that raised 1.3 Crores last May, through eight different Angel investors. It was reported by the founding team that these investors took an interest for the company after looking at a profile and a video pitch of Bluegape at LetsVenture. The ranges of investments go from INR 2 Lakhs to INR 40 Lakhs each.
Bluegape is a startup that is a two-and-a-half years-old that was incepted out of a hostel room at IIT Kanpur. Initially, they sold personalized posters. Soon, the founders realized that people enjoyed creating the products that they love; be it about TV shows or games.
This led to the premise of founding the company
“Why not just grab their rights and give people ready to pick stuff?”
While BlueGape’s story sounds rosy, there have been several concerns about the authenticity and “dictatorial” regimes that are set by Angel investors. Randy asks start-ups to approach them with a pinch of salt, and after a lot of research.
He says “ In America (and this may also be applicable to India), there are tons of angel investors and they range from seasoned investors to recently wealthy. The angels I’ve interacted with – investors in Meetings.io – have been incredibly helpful with advice and introductions. There are even ‘super-angels’ that can individually make investments well over $100,000.
He concludes by saying
“I’ve heard horror stories of unprofessional angels becoming a big pain for founders but haven’t experienced it first hand – make sure you check an investor’s reputation before taking their money.”