Most angel investors operate in the pre-seed to seed to angel stage. While it can never be too early to approach angel investors, it might be a bit late when you’re approaching Series A.
Angel investors are interested across the spectrum, and like to interact with founders from very early on. Even if you are just a couple of founders with an idea, it is always good to keep a couple of angel investors in the loop.
Even if you are not ready for outside capital, keep them ripe with a constant information loop until you require funds. This will ensure warm introductions and potential conversions when you actually start raising.
However, we invest in companies that have 'paying' customers, our funds are not for prototype development or ideation..
No. We can not predict the future of business, we can only understand indicative trends and models. However, our founders are the ones who are trailblazers of the future. We look to learn from our founders and their experiences.
Of course our investments tend to hover around Software, Platforms, EdTech, HealthTech because of our mandate to fund frugal investments that work for a better India. However, that is not where our quest for learning ends. If you are creating a business that aims to solve Indian problems frugally, and differently- we would like to hear from you!.
What is our decision making process?
We like a large addressable market
We like a wide moat created by way of using tech or a unique product/service as a critical component, with product development largely done and a strong business model
We like companies that are gaining traction (current traction of at least 5-7 lacs) by using their finances frugally
We prefer at least two co-founders that have prior startup or domain experience and complement each other with a diverse skill-set
We prefer businesses where the unique model can assist the founders to leapfrog competition irrespective of deep pockets present in the ecosystem
We like to operate in the angel stage where the valuation and fundraising is in our comfort zone.
We look for a compelling insight into the industry you operate in. We like to see what our founders understand about the market or a need that others do not. We like to understand the right to win in the category, and how can you stay ahead of the competition.
We prefer companies with traction of at least Rs 5-7 lacs MRR because early customers are the biggest validators of a business idea. We prefer founders to get their funding from their customers (i.e. revenues) because that is the biggest data point and strongest credible source of information that we, as outsiders, can analyze.
We like companies with strong margins which helps solidify their value proposition over time. We also prefer finances being frugally used to squeeze every single penny for sustainable growth. We like creative thinking and meaningful go to market strategies because we know focus works.
No. We invest in companies across India. While we will definitely have some concentration in Mumbai and Bangalore, we are interested in companies across the country. In fact, we do have a soft corner for founders from Tier 2 & 3 towns. You can read about that in our blog.
What is our investment process?
This varies from company to company, but there are basic steps that we follow. But the basic premise is that the lesser the time we take to arrive at a decision, the higher the conviction we have to feel. We sometimes follow a company for months, but we also sometimes move from introduction to funding in a week!
Generally, this is what founders can expect
This can be either a warm introduction or a cold email.
We prefer to have reference material sent beforehand so we can better prepare for the meeting.
Your first meeting/phone call will be typically between 45 mins to 1 hour where the analyst will speak to the founder.
We have an extremely lean team. So it is most likely that the analyst will be the decision-maker and primary point of contact even post the investment
During the call, we like you to answer a few questions that give an insight into your business, your team, the market, and your approach
Most of our ‘passes’ occur within 24-48 hours of the initial meeting
If you’ve made it past the first round, you will most likely meet our CIO for a frank and honest conversation
This is very informal and a chance for you to understand us better
We encourage you to ask questions, ask for references of current and former founders in our ecosystem about us; And we return the favor
If we have some discomfort, we follow up via email or phone calls until our discomfort gets resolved
If we develop a good understanding of the person, idea, and business- we encourage you to meet our investor
Typically more than half the founders that meet our investor get funded
After you’ve met all the stakeholders in the investment decision process, we typically debate among ourselves
We discuss the opportunity with a view of coming to a conclusion of accepting or passing
Typically this takes less than a week.
We will give you a quick no if we are not interested, but we reserve the right to take as much time to build conviction - we believe it is a marriage, not a fling!
While ideas are easy to describe, the conviction behind them is not. We value referrals from people we know and trust. This includes our team, fellow angel investors, angel investing platforms, other entrepreneurs, founders of our portfolio companies, former founders we worked with, etc.
Warm introductions get a quicker response. However, we have come across interesting companies even via cold emails. Direct emails via Linkedin are also a major source of deal flow for us. We are happy to entertain both warm and cold introductions equally.
What are our investment terms?
Typically we like to invest between Rs 50 - 75 Lacs in a new company. Having said that, we have gone both higher and lower in some cases. Currently, our average first cheque is approx Rs 75 L. We are pretty serious about supporting our companies with follow on funding, hence we reserve equal amounts of cash for follow on funding as our initial investment.
If we are not the lead and also do not enjoy Board Observer status, our cheques will be limited to Rs 25 L.
No. We do not have any strict ownership requirement. However, we like to have enough stake in the company to make sure we can be meaningful participants given our time and resources.
No round is too small for us. The average size of the round we participate in is approximately Rs 2-3 cr. However, we also invest in rounds as small as Rs 50 lacs, and as large as Rs 5 cr.
Startups are fragile organizations whose valuation can not be determined by traditional cash flow models. Hence there is no science behind the true valuation of a startup.
Given our ticket size and ownership requirements, we like to participate in startups with pre-money valuation anywhere between Rs 6 - 15 cr. However, we have also invested in companies above and below our sweet spot. Your value proposition has to be significantly strong for commanding a higher valuation.
While we are happy leading a round, we are not the lead investors half the time we invest. We have a track record of partnering with experienced seed and angel investors and funds. For us, having our interests aligned and protected, and having a meaningful stake is paramount.
We have found that it is in the best interest of startups to have an active lead investor. Having said that, lead or no lead, we are ready to support our startups.
No. We would explain, but we find Brad Feld explains it better..
No. We do not take Board Seats. But we request that the founders grant us a Board Observer status- freeing up the Board for founders, institutional VCs, and independent members.
We prefer companies to have their affairs in order before we enter. Some of the standard CPs that we require are-
Formal incorporation of the company and any of its allied businesses in one single entity, or its subsidiaries (if being run under personal names)
ESOP set up pool prior funding
36-month KMP & founding team compensation plan. We have some views on fair founder compensation which you can read on our blog.
All intellectual property, websites, domain names or technology to be transferred in the name of the company
Agreement on format and period of Monthly Information Reports to be shared with us. You can read about our preferred communication pack in our blog.
Alignment on broad direction. We expect-
1-pager from the founders that summarizes achievements, milestones and key operating metrics that we should track
Key priorities for funding and plan for reaching operating breakeven
Monthly progress review calls, MIS to be shared prior to the call.