Abhishek Rungta

I started exploring angel investing sometime around 2009. And it was never about investing or building assets/wealth. I have seen its evolution from “want to be part of this journey” to a “desirable asset class” over the last 14 years. Some learnings:

1) It’s not an asset class as early investors have literally no signal on the business to decide except for the Founder. It is more about investing in the founder – i.e. more about the ability to spot the sector of the future, identify talent, and backing with emotion.

2) You need to decide if you want to pick your deals or invest through institutional structures or take a middle path of syndicates.

If you want to pick your deals, it will take a lot of your time to meet founders, generate deal flow, understand the industries, build and update your thesis, support the founder (when asked for), and do paperwork. But, this is the real fun part of it. If you are not doing this, I wonder why you do angel investing?

If you want to go through institutional entities, it is just like another instrument like mutual funds, AIF or PMS; just with a lot longer lock-in, and higher risk (most funds don’t even return the capital!). In fact small cap PMS of the public market may do better.

If you are going through syndicates, you get a little bit of fun of angel investing with better probability of success with filtered deals. It can also be a good starting point if you are absolutely new to this field.

3) You must diversify your portfolio. I suggest at least 20-30 investments over a 5-6 year period.

Do not let success or failures of  companies get to your mind and distract you from your core profession.

4) Keep a horizon of 10-12 years. You may get an exit before that, but it may very well take over a decade to see the first rays of success.

5) Have a thesis, and keep evolving it with your experience. Which sector and problem statement looks like the next big opportunity, and why? Unless you have a view of the future, what are you investing in? The fun is about playing a role in building the future.

6) Three imp things that I look for in a startup before writing the first check are:

– sector that I believe will grow
– founder (several factors – objective and subjective) and founder-market fit
– problem statement, how big it is, and how it creates real sustainable value

I also end up investing based on a few close friends’ recommendations, and the basis of emotion as well.

7) Enjoy the learning – I have learnt more from discussions, experiences, and research that I did to understand the pros and cons of a business model; than many books. You learn about people, behavior, consumers, industries, technology and a lot more. You never realise when they shape your thinking and positively impact your business.

8) Privacy – It is crucial that you protect your privacy as there is a lot of public interest and media glare around angel investing.