As an entrepreneur, you’ve probably heard the phrase “angel investor network” a lot during your pre-seed capital period. While you may have a concept of what angel investing is, it is easy to get confused with the many financing options available in the market. We will go over all you need to know about angel investment and how it works in this blog article.
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What exactly is angel investing?
The Angel network is a method of financing in which a wealthy individual investor or group of investors finances a startup in its early stages in return for stock in the company. These high-net-worth individuals frequently refer to as angel investors or business angels. Unlike venture capitalists, who utilize investment funds to finance firms, angel investors in India fund early-stage enterprises with their own money.
Most angel investors are accomplished entrepreneurs with knowledge of the field in which they are investing. In addition to funding, they should contribute mentoring, networking, relationships, and business expertise. They also assist entrepreneurs in becoming familiar with other investors in preparation for future investment rounds.
Why do angel investors make investments?
Angel investors are a link between friends and family and the next best source of finance venture capitalists. It also implies that they are involved in a company from the beginning and are willing to take a more significant risk.
The following are some of the reasons why angel investors in India invest in startups:
The first step is to pay it forward. They want to give back to the startup community by sharing their knowledge with new businesses. Angel investors are known to have worked in executive positions in companies, and some of them own numerous businesses.
Venture Capital and Angel Investors
So, how do angel investors in India differ from venture capitalists?
If you’ve made it this far, you’ve probably deduced a few things:
- Angel investors provide less capital than venture capitalists.
- Venture capitalists are more demanding of a company’s equity than angel investors.
- Unlike venture capitalists, angel investors support younger, less established enterprises.
- Unlike angel investors, venture capitalists want a greater return on investment.
- More than venture capitalists, angel investors work with and coach company founders.
Of course, there are certain exceptions. There are undoubtedly venture capitalists who love mentoring company owners, and there are indeed angel investors who want to avoid becoming too involved with the business owners they invest.
Best Angel Investing Platforms
AngelList India is a deal syndication platform that connects accredited angel investors with Indian entrepreneurs. AngelList, headquartered in Silicon Valley, entered the Indian market with the debut of its Syndicates platform, which enables angel investors to finance high-growth firms alongside other venture capitalists and angel investors.
2. ah! Ventures
ah! Ventures is India’s first curated, sector-agnostic and largest fundraising platform for early-stage entrepreneurs collecting financing of up to USD 10 million. They have an extensive network of 3000+ investors, which includes 2000+ angel investors and 1000+ institutional investors and fund/family houses. Ah! Ventures has invested in 85 companies. Kandee Factory raised $15 million on June 1, 2022, their most recent investment.
3. Mumbai Angels network
Mumbai Angels is a central early-stage venture investment angel investing platform. With 200+ startups, 100+ exits, and next-round investments with an IRR of 35%, the network has one of the most solid portfolios in the nation. The platform has 700+ investors in 60+ worldwide locations. Their average investment ranges from USD 70k to USD 272k. Mumbai Angels has invested in 185 companies. Spardha raised $80 million on June 9, 2022, their most recent investment.
4. Chennai Angels
Chennai Angels (TCA), originally known as the Chennai Entrepreneurship Trust Fund, was founded in November 2007 to promote entrepreneurship by developing and mentoring future generations of entrepreneurs. Chennai Angels have invested 64 times. FREED raised 210M on May 5, 2022, their most recent investment. The benefit of being a TCA investee is that, in addition to high-quality mentorship, investors may guide entrepreneurs through the fundraising life cycle and open access to high-quality clients and partners.
5. Business Catalysts
Venture Catalysts is a fully integrated incubator that provides investment, coaching, and networking opportunities. It invests $500K to $2MN in each firm and offers incubation assistance for 18-24 months. It is one of India’s major early-stage players, with 4500+ angel investors scattered over 36 locations in six countries.
6 Risk Factors Involved Investing with Angel Investor Network
Angels are wealthy people who fund businesses with stock returns, often in the form of a convertible note.
1. Loss of control:
When you give up stock in your firm, you also give up some control. Angels often have a voice in how your firm handles, and if they disagree with your actions, they may sell their shares.
2. High expectations:
The Angels often anticipate a return of 3-5x their investment. Therefore, they will have high expectations of you and your firm. It may pressure you to deliver, and if you don’t, people may lose trust in you and your company.
Angels often want to be engaged in the day-to-day operations of the companies they invest in. It may be a lot of effort, and it can be intimidating if you need to prepare.
4. Limited resources:
Because angel investors sometimes have a limited amount of money to offer, you may not be able to obtain as much money as you need. It might put a lot of pressure on you to spend your money wisely.
5. Special talents and connections:
Angels often have an extensive network of contacts and are well-versed in your business. It may be an excellent resource, but it can also be challenging to live up to.
6. Sell-side pressure:
Angel investors may ultimately wish to sell their interest in your firm to another investor or you. There may be a lot of strain, and it can be distressing if you need more preparation to buy them out.
When it comes to investing with an angel investor network, there are a few things to consider. The first step is to research and ensure that you understand the procedure and what is expected of you. The second step is to be clear about your objectives and what you intend to accomplish by engaging with an angel investor network. Finally, you must be okay with the dangers associated with this form of investing.