In the business world, angel investors are sometimes compared with actual angels, sent to help the start-ups that could not otherwise be funded. These guardian angels of innovation are responsible for bringing many new ideas and thoughts to life.
It gave us immense joy to welcome IIT-Delhi alumni for a panel discussion on Risk and Rewards of Angel investing hosted by School of Inspired Leadership, Gurugram on 22nd August. We were blessed to listen to the insights of all the four panellists such as Pradeep Gupta, Chairman Cyber Media Group, Alok Mittal, Co founder & CEO Indifi Technologies, Yogesh Andlay, Board Member and Dhruv Nath, Director at Lead Angels Network & Professor at MDI.
The discussion on angel investing revolved around the following questions throughout the session:
- Why should one invest in a start-up?
- How do angel investors add value to a start-up?
- What are the common mistakes done by angel investors while investing in a start-up?
- Apart from entrepreneurship, what other criteria’s does an angel investor look for while investing in a start-up?
- What are some of the qualities of a right entrepreneur?
“Investing money in a start-up has a potential to yield significant returns, but it’s not risk-free.” There is no guarantee that a company will take off or fail.
An essence of the session has been captured which revolved around the above statement:
Investment should be done purely by seeing the problem and the solution being brought to the table by the entrepreneur. Start-ups that spot an addressable market that can be exploited or disrupted, with lucrative outcomes, have greater chances of securing investment. It is always the back calculation that happens in order to secure a good investment.
Yogesh Andlay, Board Member at SOIL and Pradeep Gupta, Chairman Cyber Media Group also highlight upon some of the factors that are looked upon while investing in a start-up, such as the market size, execution capability, learning ability of the team, technology base in the product, financial strategy and chance to diversify. They also state that “Reality of a start-up valuation is always a guess.” With entrepreneurs there is no formula but, pure gut.
The moderator of the session Dhruv Nath, Director Lead Angels Network & Professor at MDI also states that start-ups come and sometimes are dejected because of the valuation being low. The first round of funding should always be looked from the angel’s point of view.
Mr. Yogesh also highlights upon some of the mistakes in angel investing:
- The judgements might go wrong while investing in a start-up
- It is all about taking risks
- Emotion based decisions
- Wrong choice of entrepreneurs
An entrepreneur should have the persistence and must be poachable, but not pushed away by everything. Being persistent wins half of the battle in the journey of entrepreneurship.
It was encouraging to learn the challenges and rewards associated with angel investing and the questions being put up by the audience. Making a decision as to whether you should invest in start-ups is one that needs to be made by understanding your gut, financial needs, requirements and expectations. It's undeniably an attractive proposition - particularly when you consider many are eligible for the Enterprise Investment Scheme and the numerous tax reliefs available - but it's without doubt a higher risk/higher reward strategy.
One should take time, do research and accept advice - it is what successful business angel investors do.
We were extremely glad to have IIT-Delhi Alumni association at SOIL to provide the students with rich and interesting knowledge about Angel Investing that rose from the discussion.
By: Surbhi Takkar & Anjney Sangal
PGPM - BL
Class of 2019 - 20