The other day I was listening to a co-founder of a Start-Up pitch his company to a group of about 70 Angel investors. I’m a “Virgin Angel” investor, but I’m really excited about this type of investing. I believe this next decade is going to belong to Start-Ups in India.
I have spoken to a number of experienced Angel investors in India and abroad and I could come up with 7 key reasons why High Net Worth Individuals or successful entrepreneurs should consider being an Angel investor.
The rewards are many, assuming you can check yes to these basic caveats: Personally, you must be willing to lose your investment money, should have a portfolio strategy, and use good investment practices. This high risk, high reward kind of investing isn’t for everyone. Typically 8 out of 10 investments fail.
- Potential Financial Returns – A US study found that the overall return on 1,100 plus angel exits was 2.6 times the money in 3.5 years, or about 27% gross Internal Rate of Return. Not bad compared to other types of equity investments. Even so, it’s important to look into the details. More than 52% of those exits lost some or all of the investment and 7% provided nearly all of the returns.It would be interesting to get similar India relevant research. While the Indian Start-Up and Angel scene is relatively young, as the ecosystem continues to develop and evolve we will see more success.This means that angels need to start with a strategy to make multiple investments to minimize risk and increase the chance of good returns. Typically Indian Angels should also educate themselves on good angel investing processes via events, reading and networking with experienced angels.