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by Rajen Kumar

No Escaping Social Media

Running a magazine concentrating on issues of small and medium enterprises and managing with limited resources is a like living life on the edge. In this rush of meeting deadlines,...

Special Reports

Apr 2012

EMRC, Brussels Associates with SME WORLD as its New Media Partner

EMRC has promoted business partnerships with the developing world and has organised dozens of business forums in key decision-making cities, such as Amsterdam, Rome,...

Money

Angel Investing & The Indian Angel Network

SME WORLD Bureau
Sep 2010

Angel Investing is a new phenomenon in India but has been prevalent for decades in more developed entrepreneurial eco systems, like the US. Entrepreneurs who have created large successful companies and created disproportionate wealth for themselves (and their teams), understand the power of entrepreneurship.

Highest Risk

They usually prefer to continue creating new ventures but after having done first one or two ventures, they do not normally like to take executive roles / CXO positions. They therefore seek to participate as a financial investor, provide strategic inputs and sometimes even provide operational direction to founders / entrepreneurs who are starting up. This angel investing is an alternate asset category in an investor's investment portfolio. Angel Investments are of the highest risk category in an investor's portfolio but also provides for the highest gain when investments succeed. Hence, to reduce the risk on his investments, an angel typically invests in a number of ventures so that he spreads risks as he knows that only a few of his investments will give him a bumper return, but enough to cover the losses of all his other angel investments and give a good return to his overall portfolio.

To further mitigate the risk, he co invests with other angels as that helps him to individually invests a lower amount as well as the venture gets its complete round of investment from the group of angels. Hence, angel groups start to get formed and collective investments, leveraging each other's domain expertise and networks combine to add huge value to entrepreneurs, far beyond the financial investment.

India’s First

The Indian Angel Network (IAN) is India's first, largest and fastest growing business angel network. Currently it has 125 members from across India & overseas, comprising the who’s who of successful entrepreneurs and CEO’s as also leading institutions such as IBM, Intel, Sequoia, etc.

IAN has operations in multiple locations across India, is a co founder of the World Business Angels Associations and has special relationships & partnerships with the country’s science & technology labs/institutions, defence research labs, incubators, angel groups, VC & other industry associations in India and abroad. In 3+ years it has invested in 22 ventures across multiple sectors in India & overseas. IAN has already had 4 partial / full exits and the last exit gave its investors 5X return on their investment over a period of 15 months.

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SME WORLD, spoke to Ms. Padmaja Ruparel of Indian Angle Network recently–

How did the idea for angel investment originate?

India's entrepreneurial eco system is very nascent. Startups usually invest all the money they can garner from their savings, family and friends and after that have no place to get funds of Rs. 2 to 4 crores. Banks need collaterals and VCs in India come in at much higher level. Hence, this very early stage financing is what is required and is the critical gap being filled by angel investors.

How the IAN gets networked in India?

The investor members of IAN are high profile, successful entrepreneurs / CEOs and are very well networked in India and overseas. The members leverage their networks to grow and help IAN. Secondly, IAN has built a very dynamic media strategy and brand which brings IAN closer to entrepreneurs throughout the country.

How much investments have been done in the network of IAN so far?

As many as 22 investments have been done. The average size of an IAN investment is Rs. 2 crores.

What criteria IAN has to bring a new investor in the IAN fold?

We welcome angel investors from around the country and the world. Successful entrepreneurs, CEOs, industry leaders, etc. who would like to invest in startups are welcome. We would like our investors to actively engage in diligencing deals, mentoring entrepreneurs, engage in various activities of the Network. We do need a recommendation from our current investor members, listed on our website www.indianangelnetwork.com

Which are the sectors or segments you are focussing for angel investing?

IAN is sector agnostic: we are open to any sector where scaleable businesses can be built. We are however, size specific: we explore opportunities which require up to US$1mn, though we are open to co investment.

There is a perception in some quarters that angel investors could interfere with the management and growth strategy of an enterprise they have invested in. And this may be one of the reasons as to why angel investment has not become a viable funding option for SMEs in India. What is the truth? Your opinion.

Angels are people who have "been there, done that". They have run companies and can provide strategic inputs and operational direction. However, they do not want to become CXOs or participate in the executive management of the company. However, they can add tremendous insight to the growth strategy of the company and help the company to network around the world to help the growth. Also, angel investors invest in a number of companies as that is the way they derisk their investments. Hence they usually do not have the time from focusing on one business as they may still be running their own businesses/ companies, as well as helping their numerous angel investee companies. And, if their investee company is doing well and growing, they would be happy to relax and have their investment grow !

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1 Comments >>

LopezJessie24

25 Jan 2012 (16:31:09)

If you're in uncomfortable position and have got no money to move out from that, you will have to receive the loans. Just because it should help you definitely. I take collateral loan every single year and feel good because of this.

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