I have heard speakers, panelists and entrepreneurs saying lack of angel financing as a major gap in the Indian entrepreneurial ecosystem. At Canaan, we have always tried best to participate in the start up ecosystem. This year, we are contemplating to initiate a dialogue with angel investors in a more systematic manner. In this regard, I would like to reach out to angel investors on this forum for suggestions on the nature and form of this dialogue.
I would also love to hear challenges faced by angel investors while making investment decisions or working with companies. They can be in areas of deal sourcing, regulatory visibility, network in corporate groups, working with the companies after investment etc.
I would also request start ups to send me names of their own angel investors with contact address and I would reach out to them individually. Keep viewing this forum for more on this and you can write me at email@example.com
- Onion Rs65/kg, Petrol Rs65/litre, Beer Rs65! - January 19, 2011
- NEN Program for Women Entrepreneurs - September 3, 2010
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There are 2 ways to address this problem:
1. Educate entrepreneurs that with the small budgets they have, to generate some validation, however small it may be.
2. Educate investors on how to asses a prevalidation startup
This is better for angel investor..
On a related note, to the VCs here: Would you buy an angel investor out when you invest in a company? Example: If you like company X and I am an angel investor in it – I got in say 10% at a post-inv-valuation of 2 cr. Now you want to invest at a pre-investment valuation of say 15 cr. – the company needs 5 cr., but you want a greater stake than 25%. Will you consider buying my stake (it will be worth 1.5 cr. at the same valuation)
Reason I ask is that most VCs seem to shy away from this in India – questions range from “why is someone else earning money on this deal” to “no one gets an exit till we get an exit” and what not. But if angels aren’t going to see the shorter end of deal flows (they could stay longer voluntarily) they aren’t likely to invest. If you want liquidity at the angel end, you gotta provide exits that shorten the angel funding cycle. Apart from that it compensates the lack of control when VCs take over.
In the stock market, it’s widely known that traders and arbitrageurs provide liquidity that’s much needed, so that when the longer term investors come to buy or sell, there’s someone on the other side. But arbs don’t keep their trades too long – if you told them they had a 1 year lock in on any trade, you won’t see much of them. If VCs would like more angels to kick-start companies, then they need to demonstrate their willingness to buy out angels. This is fairly common in the US – I’ve heard it’s not quite so in India.
(I’ve been out of the process long enough to be a dinosaur, so please correct me if the ecosystem evolved rapidly meanwhile)
Its lack of maturity and risk appetite for both entrepreneurs and angels.
Even in the west a huge amount of capital is wasted before the vertical shows some successful exists. take for e.g. social-networking.
@mukul, can you share how many _real_ early stage companies has conaan invested in ?