Go to Angels!
Apr, 2009 | Opportunity Careers

Starting a venture go to Angels !

Ashish Sinha has been working for an IT firm for the last seven years. Recently, he was promoted as project manager. Now he has ten people under him, a cabin to himself, and perks that make his wife smile often. But as he drives to office every morning, he only thinks of the day he will start his own business. He wants to set up a factory to make cosmetics for the rural markets. He has approached friends and family, but an investment of Rs 70 lakh is rather huge for them. And venture capital firms only prefer to invest large sums of money.

A few years back, Priyanka, co-founder of Hungry Bangalore, was in a similar situation. She, too, didn't know where to go or whose door to knock for a little sum of money to expand her business. Now she has six people investing in her business. 'Angels' she calls them.

Angels, also referred to as business angels or informal investors, are people often with a good entrepreneurial record who put their money in start-ups. They may put the money as a group or in an individual capacity. And they are different from venture capitalists in that they invest only in seed or early-stage companies, that is when they are still a concept, with an investment size usually between Rs 50 lakh and Rs 2 crore.

The Indian Angel Network (IAN), Mumbai Angels, and Chennai Funds are among some of the angel investor groups in India.

While angels are quite accessible, they need to be approached in a sophisticated way. Dropping in to say 'hi' just won't help. The first stage of introduction is telling the angel investors about the business plan. This could be done on the email, as well. Angels receive a lot of business plans, but only a handful make it to the next level.

If a business plan finds favour with any of the angels, the entrepreneur gets called in for an 'elevator pitch'. Saurabh Srivastava, co-founder, IAN and chairman, Infinity, says an 'elevator pitch' is the actual time one gets on an elevator - ten minutes at the most. That might appear to be very little time to introduce the idea, "but if you can't then you are confused" points out Srivastava.

And it isn't mandatory for entrepreneurs to make a presentation in person. "We only ask locals to come for an elevator pitch." Outsiders have the option of making a presentation over the phone. A Kolkata-based group made a telephonic presentation to the inventors. "We want to package coconut water," a voice said over the phone. There was a mediator, too, on the phone to clarify any point that was not understood by the angels.

"I quite like the idea," says Pradeep Gupta, chairman, Cyber Media Group, also an IAN member. "I am curious to know how they will package and distribute it." It's the technology part of the idea that's excited Gupta. As long as there is something novel being presented, the angels are happy.

So if the elevator pitch is a success, the team is then asked to come for a full presentation. In fact, the Mumbai Angels' website has a helpful FAQs section on how to prepare for an elevator pitch.

"A good entrepreneur would do his homework well. It is enough to have stars in your eyes," warns Srivastava.

"To my mind," says Priyank Garg, IAN member and director, Advance Valves, "an entrepreneur should walk the fine line between reality and new reality." Having a vision is good, but how that vision will be executed is what investors want to know. In fact, that forms an important basis of the presentation.

But at each stage of the presentation, the angels give their feedback. "That's a big advantage," says Priyanka of HungryBangalore. Here's where she feels an angel's role is more critical than a VC's. "They actually take the plains to sit through your business plan and guide you. Questions they asked, pretty tough ones, I must say, gave me a direction."

Sure, there have been instances of people dropping off just before the elevator pitch, and quite a few after the presentations as the feedback was harsh. "We give honest feedback. If we feel there's a lot more ground to cover, we say so," says Srivastava. Some come back with a better plan, many don't. "This is a good test to find out if they can stick it through. But they do go home wiser," he says.

Unlike their predecessors, the present generation to entrepreneurs likes to take risks - with a fair number of them a bit brash and smart-alecky, too. "Never start a business for the money. Money is a by product. Ideas are dime a dozen." Srivastava's words serve as a caution.

He says if he had some advice from an established entrepreneur when he was starting out, he would have done much better. "We are here to mentor you."

For business angels, who invest in companies when they are still ideas, the balcony, "I would take orders there."

When orders started pouring in, it was time to expand and set up a call centre. This was possible only with some investment. Finding an angel investor was a long, circuitous route. At one point, Priyanka was disillusioned. "But Ritesh cheered me up."

By this time, Priyanka had quit her job, and was fully devoted to the venture. When her parents learnt about it, they asked: "Who in their right mind will quit a well-paying job to start a business?" Her friends had to pacify them.

Priyanka got to know about the Indian Angel Network (IAN) through Krishnaraj V, director, Marketics. "Perseverance pays! The members were helpful." Ranjan Ananda, MD, Microsoft, is one of the six investors in HungryBangalore.

Now there are 12 people in HungryBangalore and it gets 50 to 60 orders a month. But Priyanka's happy about something else, too. "Now, my father calls me up for advice." And she's the youngest of three sisters!

"Ideas are a dime a dozen. The world is full of smart people. It's all about the people!
- Saurabh Srivastava, co-founder, Indian Angel Network