1. Is angel investing meant for everyone?
Angel investing or venture capital is not meant for those –
- having surplus only for a short period of 3-4 years;
- sitting on a large proportion in illiquid assets;
- having low trust or belief in entrepreneurs and fear misappropriation of funds;
- worried about failure of a few portfolio companies to return the invested capital;
- looking for stable income as dividend or profit share on regular basis;
- planning to meet expenses of a key event from the returns of angel investments such as child education or marriage;
- already over-leveraged without adequate asset backing;
VC or angel investing should be a preferred choice if the person –
- believe innovation creates temporary monopolies that lead to abnormal profits;
- believe that good businesses reward with disproportionate returns although it may take time of 5 to 8 years;
- wish to mentor a start-up entrepreneur and celebrate every win of our start-ups;
- believe our first generation entrepreneurs can take a lead in changing the world;
- wish to express your love for humanity by creating productive jobs;
- you have arrived in life and wish to give back to the society for your success;
- can be at peace on the principle of “seed-it, watch-it, reap-it”.
2. What are the aspects that HNIs should keep in mind before plunging into investing in start-ups?
Angel investing is about domain expertise, deeper understanding of entrepreneurial mind-set, offering entrepreneurial freedom while coaching them to stay focused on fulfilling their business vision, and engaging, supporting, & collaborating in the initial business modeling phase. Angel investors need to be as passionate about their start-up, as is the entrepreneur, while investor should not be sentimental about it.
3. How should Angel Investor approach their portfolio to maximize returns?
The risks are extremely high in the funding a start-up. During initial phase a start-up goes through every possible risk from people, technology, market, or customer validation. The only way to manage such risk is to build a portfolio of 10 plus start-ups. This does require significant time to manage the portfolio as well as an art of betting big on some ideas.