Loading ...I thought it might be useful to post this excerpt from a reply I sent to one person who contacted me as it may help entrepreneurs understand when it makes sense to approach the Band of Angels
“Please note that I do not sign NDA’s. The Band of Angels requires executive summaries in a particular format which is attached. Generally the Band looks for businesses that have high barriers to entry and can grow to be large. The exit valuation has to be well north of 100 crores. The band will generally take 25-33% of the equity of the company for its investment of 50 lakhs to two crores. In some cases where the company is more mature but yet not ready for a VC round the band may find other co-investors so that the total amount invested could reach 5 crores. The Band seeks to provide advice/mentorship in addition to money so its members are likely to invest in businesses where they have expertise. The quality of the management team is important. The band is very selective and funding may never close or take time. Generally however if an angel agrees to sponsor a company to present to the full band the company gains a lot by interacting with the angels even if the angels choose not to invest.”
Thank Sanjay for your inputs.
We wish to build the next Yamaha but on the lines of Aston Martin.
We need VC funding for homologation, and import of engines and wheels to get the operation running. Our prototype will be ready for demonstration by Sep 30 ‘06.
Gurdeep,
I have no idea of VC’s who maybe interested in a motorcycle project. Your funding strategy should depend on what you aspire to build. Do you want to build the next Yamaha, Kawasaki, Hero Honda or Bajaj Auto ? Alternatively, do you want to get acquired by one of the big guys. Once you have a plan you can see what combination of financing is right and from whom?
Depending on your location you may want to network with TIE, Angels, IVCA etc. to get advisors etc. who may help you fulfill your dreams.
We are looking for venture capital for our motorcycle project. Our prototype of 250cc V-Twin engine sports cruiser is almost ready. Please guide us abour VCs interested in the auto sector.
There is no oficial website. As per the fouding members, they want you to be resourceful enough to get yourself introduced to any one of the members.
Frankly, thats how funding happens. Nobody has time to take a look at plans submitted though website, or so i have been made to believe.
Could someone please tell me the URL of the official Band Of Angels India Website.
This is the best blog EVAR! Great tips guys.
Great !! awsome informations provided. Mr. Sanjay, I want to know more about “Band of Angels India” and their criteria for fnding a venture. where, in the cyberspace can I find the Angels of THE BAND OF ANGELS. please let me know the source of information.
Please let me have the format of the executive summary that BoA requires. If possible please forward it to me at- drpankaj28@gmail.com I would be obliged
Thanks
Dr. Pankaj.
The comments here are very interesting and relevant. SureV I hope this convinces you that if BOA makes a 50X return it would not be way out of line. The entrepreneur will do even better which is the way it should be.
When to raise money, how much to raise and from whom are important questions for entrepreneurs. It is important to keep your valuations reasonable so that you can close your round quickly and move on to the task of rapidly increasing company value.
As in most cases it is important to put yourselves in the other persons ( angel investors shoes.) In India if you invested in say IndiaBulls or Financial Technologies just a year ago after they were public companies you would end up making 10X returns in one year.
On a pure risk reward basis it is very hard to justify angel investing in India as the failure rates could be high and most entrepreneurs do not aim to build elephants. This will get better with time and in the meanwhile rather than buying paintings I personally prefer angel investing.
well, agree with some of what madhu has said, though a 20-25% rule is misleading. there are few ways to look at how VCs might value an early stage deal:
1. what is the company likely to be worth 3-5 years down, and based on cost of capital, time frame, and failure rate (hence risk), what is the expected rate of return, and how much of the company does one need to own to make that return. (see example above in my prior post)
2. at what level of absolute money potential, will the VC have enough incentive to spend time and effort in building the company. This is the closest where the 20-25% rule comes up. It is more relevant for active VCs than passive. A good benchmark to keep in mind is that if, for a $100million fund, the firm is going to make 20 investments (assuming 2-3 partners) and return $300millionto their investors, then on an average, they need to be able to make $15 million per investment in absolute terms after accounting for future dilution and failures.
3. what is the competitive landscape from funding perspective, valuation of comparable deals that have happened; valuation in public stocks if there are any comparables, etc. This helps establish a zone of comfort and an understanding of potential exit value in a given space. The size of addressable market, potential market share, and net profit margins can also help get some sense of the exit value that a startup may be able to command.
4. On an aggregate, will the entrepreneur get hugely diluted — if yes, this signals a risk. As I had mentioned above with reference to saratoga venture tables, it is typical for founder and management to be below 20% at time of exit — this is normal, and not “huge dilution”.
5. Teams with great track record signal lower risk, and may thus get higher valuations (besides the fact that these deals will also be driven up due to competition)
Discounted cash flow is very tricky for early stage businesses, and become more useful as the business starts having a decent operating history (at least 2-3 years). Prior to this, DCF may be used more as a cross check and sanity check rather than as a valuation driver.