What attracted you to angel investing?
Around 2008-09, I funded some professionals who wanted to start their own digital agency (Interactive Avenues was sold to global advertising giant IPG in a blockbuster valuation in 2013). At that time I didn’t know it was called angel investing. Later, I formally started making such investments. I have put in $3-4 million, about Rs 20 crore, in 70 odd companies so far. Many of them have gone to do great things. Some have failed, some more will. I think 20 out of the 70 will never make it.
How do you make these investment choices?
You become a top angel investor by the number of investments you make, not by the returns. That’s what I see everywhere, this one’s made so much investment. You don’t have to be smart, you just have to spend a lot of money (Laughs). Jokes apart, timing is everything. Being early in the digital startup game, a lot of things have become intuitive. They come from experience and observation.One gets a sense of what works, what technologies are ripe and how the market is tilting. If you are not betting on ideas that have a high chance of failure, you are playing it safe and are not going to make disproportionately high returns. From a hundred companies I look at, 85% I swipe left and of those I swipe right, I invest in only two or three.
How do you deal with failure?
You have to accept that some companies will fail. This is part and parcel of the game. If the investment has gone sour, it has. I don’t expect anything from the entrepreneur. In one instance, an entrepreneur said, “Look, the company is not working out. I am taking up a job in another company . I will return all your money over the next 12 months from my salary.“ I asked him why he wanted to do so. He said, some of the other investors had been asking for the capital. This surprised me.We are not giving a loan but doing venture funding.
If making investments is all about timing, exiting too is. How do you ensure the right time?
The ideal exit is when the company has taken off and is worth a billion or is going public. As an angel investor I can stay invested forever. I don’t have the obligation of returning money to limited partners. The other exit will happen through mergers and acquisitions, which we are starting to see in the Indian startup space.If you have a good relationship with the entrepreneur, you can see the writing on the wall. I have a portfolio approach and the exits take care of themselves. I don’t chase exits.
What would your advice be to someone who wants to be an angel investor?
(Laughs!) I would advise them not to get into it. Right now, the market is overvalued. Everyone thinks that they have invested in companies that will disrupt the market. You can’t come on the scene and expect to see the best deals. It is important to know which ones to pick. You must be prepared to lose a lot of money . I suggest that they join a network like the Indian Angel Network initially and do their first few investments through these networks. The other day I met someone, who gave me a business card, which read `angel investor’. He said that he had made about 24 investments in the last six months. That is scary . It is the glamour that is attracting people. If you get caught in the wave, it is easy to write a lot of cheques and not make returns.
How do you see the entrepreneurial space changing?
This is the decade of `democratization of entrepreneurship’ in India.Today , there is believability and there are role models like Bansals and Agarwals. Fathers don’t think twice to have their daughters married to an entrepreneur. Once, a founder of one of the companies I invested in told me, that his girlfriend’s father would not allow her to marry him because he was an entrepreneur. This has changed.