What should you really have ready before approaching me as an angel investor?

I had a very interesting conversation with many of the GOAP members when they were in Bangalore over the last few days. After 10 days in India, they had heard from over 150 founders, entrepreneurs and had multiple perspectives on what’s the startup scene like in India.

A couple (Paul Singh, I’m looking at you) of them really pushed me to fund more companies in India, mentioning that most entrepreneurs said angel investors were a) far and few between, b) were offering onerous terms (i.e. 35% for $250K) and c) were taking too long to make decisions.

As an entrepreneur I can relate to the feedback. There are very few “good angel” investors in India since angel investing in India is relatively new. There’s a lot of education required to get angel investors to understand the risks, rewards and objectives of investing. I do have another perspective though, and I summarize first.

Fred Wilson on “How much to burn…”.”Basically he and Dennis worked for nine months without any pay and built V1 of Foursquare all by themselves for basically no money other than their time which they were not charging the company for.”

Basically the point I want to make is “The bar has been raised dramatically for what gets funded even by Angel investors“. I want to make sure entrepreneurs internalize this.

1. If you are looking to get funding for an eCommerce company, please dont tell me “We spent the last 6 months building the platform and now are going to start getting transactions”. Show me 3-6 months of transactions trending up and to the right. I get 3-5 of these types of proposals every week. Nothing different, in any of these plans except for the category they picked.

2. If you are building a Saas application, show investors the working prototype instead of a PowerPoint of the screenshot. Share the daily unique visitors, # of free trials and # of converted (hence paying) customers.

3. If you are building a iPhone / Android / mobile application, let us download the app, play with it, instead of sending us a Balsamiq screen capture. Show me how many downloads have already happened, how my users are actively using it and what your approach to building the app(s) is going to be next.

Like most of you, I have a full time job. I unfortunately dont have the time to evaluate every plan that is sent my way. If I see traction, then I can even spend some time to evaluate the company. In the absence of that I have to go with how well we know each other.

P.S. I dont like to invest in certain sectors – I dont like the education vertical (have not figured out where in the value chain you can make money), healthcare (overall), real estate and anything related to radio, TV and news media.

I would love to invest in more entrepreneurs, but I just dont have the time to learn and do due diligence, since this is not my full time gig. If you can please help me out, with more effort on your side, then it makes the process easier for us both.

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16 thoughts on “What should you really have ready before approaching me as an angel investor?

  1. Akhil

    Hi Mukund,

    This is exactly what we as entrepreneurs look for from an investor – short, practical guide that saves times for all. Thanks for sharing..

    Reply
  2. Shyam Somanadh

    Not sure if it is mentioned elsewhere, but this post would be so much more valuable if you could specify which sectors you do like to put money into and the size/equity equation of the investments.

    Angels in India are a varied mix and I can only guess that is a critical difference between the ones in the valley. The ecosystem is very nascent here and that does lead to a higher proportion of opportunists flocking to it. As more experienced hands, like you, spend more time here, it will change, but it does require a lot more of work.

    Reply
    1. Mukund Mohan Post author

      Shyam, will detail the sectors and some size/equity metrics I have seen / done in another post. Thanks!

      Reply
  3. Pingback: The changed landscape for angel and venture funding in India « Be a Force of Good

  4. Sandy

    I’m not sure I understand this – You need angel investment when u are looking to build the initial prototype. If I have already built a product and can show you a few months of growth/revenue why do i need you ? i will go to an institutional investor for growth capital

    Reply
    1. Mukund Mohan Post author

      Sandy, good point. See http://bestengagingcommunities.com/2011/12/19/the-changed-landscape-for-angel-and-venture-funding-in-india/
      As I mention there, you are welcome to go to an institutional investor, but certain types of deals are just not interesting even after all this work to an institutional investor.

      I am sharing what I am observing. Right now the quality of deals I am seeing is very high, so in my eyes “two guys and an idea” alone is low quality and easy to filter out.

      Reply
      1. Sandy

        Thanks for the updated post. I do understand that building a proto before you get to an investor is the new mantra but what you say here seems to me more like a Indian trust thing and relevant to angels in India alone. Am i talking crap ? The typical angel in the valley even today helps build the product, get traction. To most of these companies the next round of financing is usually a very large round required to really really scale the co …So its more like – angel, big VC, IPO unlike the series A, B, C, Mezz, IPO we have known all along. I have taken a very simplistic and bookish example just as an illustration. The India specific thing about not wanting to give money to a “non-family” or a previously successful guy may be driving this – In any case its good for you as an investor :)

      2. Mukund Mohan Post author

        You make an excellent point re: angels in Valley. But we are not the valley, we are in India. I think its a demand and supply thing. I know of only 2-3 *full time* angels. Rest are full time businessmen who made money in other fields, with some angel interest. The main reason they invest it to get a return, not to be “cool angel guy”. They most likely dont have too much to offer because of a lack of time.

  5. Bipin

    Unfortunately, we need more full time angel investors in India. The way it plays out with angel investors is that since there is a non-existent M&A scene in India, most companies either need to follow up the angel investment with first round of institutional capital or slowly die. And this is where angel investors can really help make a contribution.

    Reply
    1. Mukund Mohan Post author

      Bipin, the full time angel investors is a point I hear from many entrepreneurs, I am not sure really if that will happen anytime soon. It is not too rewarding (financially) and most angels I know are not ready for the social reward alone.

      Reply
    1. Mukund Mohan Post author

      Deepshikha, thanks for your note. I dont like training / education related ventures at all. So I am not the right person to talk about your venture unfortunately.

      Reply
  6. Sumanth Raghavendra (@sumanthr)

    Mukul,
    If these are your criteria for making an investment, you should seriously reconsider referring to yourself as an “angel investor” – IMHO, you are just an “investor” and the angel prefix essentially mandates a “leap of faith” that you clearly don’t seem to be amenable to taking!
    Nothing wrong in your approach – it is your money/time after all – but by definition, an angel investment carries a certain risk profile that doesn’t require demonstration of traction a priori…
    Just my 2c…
    Cheers,
    Sumanth

    Reply
    1. Mukund Mohan Post author

      Sumanth, good point. I agree with you. I have done investments with 2 guys and an idea, but I dont see the point in doing them any more since there are better opportunities for my time and money.

      Reply
  7. Amit

    Sir, I am working on an Idea, based at Augmented Reality which aims to redefine the experience of shoppers. I hired two internees for building its prototype and would get done soon. Now I would require mentoring and financial support to take it to the next level.
    My idea got appreciation in some of the big competitions (43 North, where I got awesome feedback from all the three reviewers, but didn’t select me as they thought it’d require more capital upfront) and even it got selected in YC startup School London this year(event is on 26th July).

    I do have some mutual friends who can introduce me to you as well, on my request. But I wanted to know your take first on that idea.
    Would you be willing to get more details on what we are doing and want to do further?

    Reply
  8. mamitkumar20

    Sir, I am working on an Idea, based at Augmented Reality which aims to redefine the experience of shoppers. I hired two internees for building its prototype and would get done soon. Now I would require mentoring and financial support to take it to the next level.
    My idea got appreciation in some of the big competitions (43 North, where I got awesome feedback from all the three reviewers, but didn’t select me as they thought it’d require more capital upfront) and even it got selected in YC startup School London this year(event is on 26th July).

    I do have some mutual friends who can introduce me to you as well, on my request. But I wanted to know your take first on that idea.
    Would you be willing to get more details on what we are doing and want to do further?

    Reply

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