Starting a venture can be a very difficult, and a capital consuming task. While it takes a lot of time to flourish securely and successfully, it also consumes a lot of money in the process. Therefore, many entrepreneurs are cash strapped, always on the hunt for finding ways to infuse capital into their venture. In short, what they require is a miracle, or a miracle in the form of an Angel.
This Angel, sans the wings, is simply a wealthy individual/individuals willing to invest in a company once, at its earlier stages. In exchange for a stake in the ownership of the said company, often in the form of preferred stock or convertible debt. Many may also recognise them as informal investors, angel funders, private investors or seed investors. Angel investors are perfect for small businesses which do not require a huge amount of capital, for this type of capital can fill the gap between the money that founders have received from friends and family, and the venture capital they hope to secure down the road.
Initially, it was not a popular method of seeking investments because not many were aware of it. It was a rather discrete form of investment, the investors were silent partners and did not publicise their funding. But that aspect is now changing, with more and more people talking about it. This has led to the emergence in certain trends, that are fueling more and more interest in Angel investing, making it more than simply a fad.
Some of the trends we have witnessed have been discussed below:
- Professionalization- With the popularization of Angel investing, more and more Angels are taking Angel investing seriously. This is excellent, because it has also led to the rise of forums to help professionalize Angels, and provide them the resources to help them understand the entrepreneurial ecosystem.
- Formation of Angel Groups- This is in many ways an extension of the first trend. With many individuals taking this seriously at a professional capacity, it has led to the formation of groups of Angel investors, making it easy for entrepreneurs to find them, as opposed to hurtling around trying to find investors with the limited contacts they had. For investors in India, one such Startup accelerator is India Accelerator, a seed stage accelerator program, that helps startups to grow.
- Portal Syndicates- This is a rather interesting trend. While groups are being formed, with accredited portals, there are also inter-group syndicates growing parallel to the aforementioned growth. An entrepreneur in mutual agreement with a group of Angels on a deal, can also choose to syndicate the resulting term sheet with other groups. This is beneficial to both the investor and the entrepreneur, as the investors only have to invest a lower amount in terms of time and effort, and the entrepreneur gets the money they needed.
- Changing Entrepreneurial Practices- With change in times, what once existed has ceased to hold paramount importance. Many do not want to work in a large corporation- they do not want to spend all their life in one dull, drab office. They are also not clueless anymore, and are aware of financing options, and are in control of the staging of the capital, and the valuation at which that capital is raised. This would explain why many of these new age startups prefer Angel investing, as it allows them to bring investments in smaller tranches, helping the company to achieve milestones, and hurtle their company to the top.
In India, there is still a long road ahead, to catch up to the size and vibrancy of Silicon Valley’s Angel ecosystem, but the process of catching up is hastening with passing time. It is not just organised Angel networks, but also hundreds of executives and entrepreneurs who have taken to Angel investing. This has caused a great shift in paradigm. VCs are allocating a small part of their funds for seed stage funding now, owing to growing interest. This means that the number of deals will definitely increase.
One of the great benefits of Angel investments is that they are sector Agnostic, and focus more on the size and proportion of the company. They are also incredibly courageous and do not let a failure or two deter them. Therefore, one can safely thank their stars with the number of portals that offer Angel investment.
For Startups in India who are looking for an Angel, iAngel is an excellent network of Angels under India Accelerator. India Accelerator offers support in other aspects of a business too, such as Mentoring, Financial and Legal counsel, ensuring that a startup’s business relationship does not end at Capital.