How do angel investors differ from a VC?
Both Venture Capital Funds and Angel Investors invest on the basis of taking a stake
in a business, but there are some differences
Angels invest in early stage ventures or start ups where they see a potential for
the company to grow, they complement the family and friends' money. VC Funds invest
in later stages of the company - beyond the stage of proof of concept, and at levels
that are beyond the level of angels investing. Even the VC's focused on early stage
investing start at USD 1.5 mn, whereas Angel Investors could start at USD 10,000
and go right up to USD 1 mn.
Venture Funds are targeted by their investors to invest in specific areas / sectors.
Angel investors look at investing in diverse domains, and would consider investing
in any area where some of their members have expertise.
Venture Funds usually have a life of
7 years and most investments are made in the
first 3 years. After the investments are made, VC funds give direction and look
for an exit through an IPO, Strategic sales, M&A. Angel investing continues
- individuals invest as long as they wish. They, however, look at a 2 to 3 year
exit and the most common exits are strategic buy outs / mergers & acquisitions.
The VC funding process is more complex as they are funds and have a statutory framework
within which they work. Angel investing provides for a simpler process as angels
investments are an alternative asset class for individuals and the angels invest
directly in the investee companies.
Angels invest their own monies and are more often than not entrepreneurs themselves.
VC Funds have now adopted a model where they have people with domain expertise /
thought leadership in a sector to advise them on deal flows and then nurture companies.
Does Indian Angel Network have a fund?
No. Indian Angel Network does not have a fund where it invests from. The investments
are made directly by the Network Members, individually or through the member organization.
What is the process for companies to present to Indian Angel Network?
There are two routes for presenting to the Network.
Approaching the Network Members: The primary deal flow for the
Network comes through its members. Network members individually assess funding proposals
that they may come across. Once a Network member recommends an opportunity to the
Indian Angel Network (with no commitment to invest) the opportunity will then be
presented at a detailed monthly presentation.
Elevator Pitch: The Secretariat receives several deals from across
the country. These plans are either referred for Elevator Pitch meeting by Network
Members or may come directly to the Secretariat through the online submission process.
What is an Elevator Pitch?
The Elevator Pitch (EP) refers to a brief presentation given by the entrepreneur to the IAN vetting team presenting their idea or plan. Entrepreneurs who are interested in applying to The Network for funding but who do not have support/sponsorship from the Network Members go through the Elevator Pitch route.
How to apply for Elevator Pitch?
The entrepreneur should provide a brief summary of the business idea / plan in a presentation format comprising 5-7 covering various aspects of the business. The presentation should cover various aspects of the start-up's objective, value proposition, funding requirement, team etc. This presentation provided by the entrepreneur will go through several rounds of iteration at the secretariat to finalize a presentation to the IAN vetting team. Once shortlisted by the vetting team, the entrepreneur is invited to present to IAN members over a detailed presentation.
How does the deal flow once I get shortlisted at the EP?
The Network meeting would be set up every 4 to 8 weeks, depending on the dealflow in the pipeline, when all such shortlisted deals - and all sponsored deals - will be given the opportunity to make a more detailed presentation to the group. Each such presentation would be strictly 30 minutes followed by 15 minutes for discussion and feedback to the entrepreneur. At that meeting, the members should also try and agree whether or not a deal should be progressed. If yes, then the assigned members must try and find a sponsor for it.
How and where does an EP happen? Do I need to travel to present?
At an Elevator Pitch, every entrepreneur is given 10 minutes to present their idea through 5 to 7 slides. This presentation could be done on phone or in person.
The shortlisted entrepreneurs are then requested to present in a detailed, face to face meetings.
What is the average stage of the companies that present to the Network?
The Network looks at start up or early stage companies with a potential to scale. They look at investments of up to USD 1 mn (with average investments of about USD 400K to 600K).
What does Indian Angel Network look for?
Apart from the business plan, the Network looks at some key parameters:
The Network looks for businesses that have high barriers to entry and considerable
The quality of the management team is important. A complementary management team
that possesses multiple skills such as technology, sales, finance, HR etc. is considered
a major asset, with the CEO bringing leadership
The Network seeks to add value by providing advice/mentoring and access to its network
in addition to money; thus its members are likely to invest in businesses where
they have the ability to add such value.
Entrepreneurs who can provide evidence of the validation of their concept and particularly
those who have begun to engage with the market have a stronger proposition.
Failed entrepreneurs are very welcome as the Network members expect a much higher
level of ambition to succeed
Does Indian Angel Network sign NDAs?
IAN does not sign NDAs. IAN shares all plans received by it only with all its members. IAN members and Secretariat team members, in turn, sign an NDA with IAN.
Startups in 13 Sentences
One of the things I always tell startups is a principle I learned from Paul Buchheit: it's better to make a few people really happy than to make a lot of people semi-happy. I was saying recently to a reporter that if I could only tell startups 10 things, this would be one of them. Then I thought: what would the other 9 be?
When I made the list there turned out to be 13:
1. Pick good cofounders.
Cofounders are for a startup what location is for real estate. You can change anything about a house except where it is. In a startup you can change your idea easily, but changing your cofounders is hard.  And the success of a startup is almost always a function of its founders.
2. Launch fast.
The reason to launch fast is not so much that it's critical to get your product to market early, but that you haven't really started working on it till you've launched. Launching teaches you what you should have been building. Till you know that you're wasting your time. So the main value of whatever you launch with is as a pretext for engaging users.
3. Let your idea evolve.
This is the second half of launching fast. Launch fast and iterate. It's a big mistake to treat a startup as if it were merely a matter of implementing some brilliant initial idea. As in an essay, most of the ideas appear in the implementing.
4. Understand your users.
You can envision the wealth created by a startup as a rectangle, where one side is the number of users and the other is how much you improve their lives.  The second dimension is the one you have most control over. And indeed, the growth in the first will be driven by how well you do in the second. As in science, the hard part is not answering questions but asking them: the hard part is seeing something new that users lack. The better you understand them the better the odds of doing that. That's why so many successful startups make something the founders needed.
5. Better to make a few users love you than a lot ambivalent.
Ideally you want to make large numbers of users love you, but you can't expect to hit that right away. Initially you have to choose between satisfying all the needs of a subset of potential users, or satisfying a subset of the needs of all potential users. Take the first. It's easier to expand user wise than satisfaction wise. And perhaps more importantly, it's harder to lie to yourself. If you think you're 85% of the way to a great product, how do you know it's not 70%? Or 10%? Whereas it's easy to know how many users you have.
6. Offer surprisingly good customer service.
Customers are used to being maltreated. Most of the companies they deal with are quasi-monopolies that get away with atrocious customer service. Your own ideas about what's possible have been unconsciously lowered by such experiences. Try making your customer service not merely good, but surprisingly good. Go out of your way to make people happy. They'll be overwhelmed; you'll see. In the earliest stages of a startup, it pays to offer customer service on a level that wouldn't scale, because it's a way of learning about your users.
7. You make what you measure.
I learned this one from Joe Kraus.  Merely measuring something has an uncanny tendency to improve it. If you want to make your user numbers go up, put a big piece of paper on your wall and every day plot the number of users. You'll be delighted when it goes up and disappointed when it goes down. Pretty soon you'll start noticing what makes the number go up, and you'll start to do more of that. Corollary: be careful what you measure.
8. Spend little.
I can't emphasize how important it is for a startup to be cheap. Most startups fail before they make something people want, and the most common form of failure is running out of money. So being cheap is (almost) interchangeable with iterating rapidly.  But it's more than that. A culture of cheapness keeps companies young in something like the way exercise keeps people young.
9. Get ramen profitable.
"Ramen profitable" means a startup makes just enough to pay the founders' living expenses. It's not rapid prototyping for business models (though it can be), but more a way of hacking the investment process. Once you cross over into ramen profitable, it completely changes your relationship with investors. It's also great for morale.
10. Avoid distractions.
Nothing kills startups like distractions. The worst types are those that pay money: day jobs, consulting, profitable side-projects. The startup may have more long-term potential, but you'll always interrupt working on it to answer calls from people paying you now. Paradoxically, fund raising is this type of distraction, so try to minimize that too.
11. Don't get demoralized.
Though the immediate cause of death in a startup tends to be running out of money, the underlying cause is usually lack of focus. Either the company is run by stupid people (which can't be fixed with advice) or the people are smart but got demoralized. Starting a startup is a huge moral weight. Understand this and make a conscious effort not to be ground down by it, just as you'd be careful to bend at the knees when picking up a heavy box.
12. Don't give up.
Even if you get demoralized, don't give up. You can get surprisingly far by just not giving up. This isn't true in all fields. There are a lot of people who couldn't become good mathematicians no matter how long they persisted. But startups aren't like that. Sheer effort is usually enough, so long as you keep morphing your idea.
13. Deals fall through.
One of the most useful skills we learned from Via web was not getting our hopes up. We probably had 20 deals of various types fall through. After the first 10 or so we learned to treat deals as background processes that we should ignore till they terminated. It's very dangerous to morale to start to depend on deals closing, not just because they so often don't, but because it makes them less likely to.