Name:- Shakshi Yadav

Course:- BBA V Semester

Section:- D

Enrollment No:- 08035101720

Subject:- Entrepreneurship Development

Faculty’s Name:-Dr. Anil Kumar Grewal

WHAT IS MEANS BY ANGEL INVESTORS? EXPLAIN
THEIR NATURE AND ROLE.
What is an angel investors?

Angel investors are wealthy private investors focused on financing small business ventures in
exchange for equity. Unlike a venture capital firm that uses an investment fund, angels use
their own net worth. Compared to venture capitalists, angels may also be more patient with
entrepreneurs and open to providing smaller dollar amounts for a longer time period. But they
do want to see an exit strategy at some point where they can pocket their profits, typically
through a public offering or an acquisition.

An angel investor is typically an individual or a high-worth individual investor who provides

funding or financial support for start-ups in lieu of a stake in ownership in the company. They
are usually among the family or relatives of the entrepreneur. An Angel investor is also
designated as a business angel, informal investor, angel funder, or private investor who
invests between $25,000-and $500,000 in the start-ups. Most investors and banks are hesitant
to invest at the initial start-up stage due to the high unforeseen failure risk.

Angel Investor Involvement

Apart from investing money, angel investors share their knowledge at critical stages.  They
help start-ups take their initial steps. Most angel investors are executives, or they have well-
versed industry experience.

Contrary to the popular belief that an angel investor is a high net worth individual, most of
them are not even millionaires. Typically, they earn $50,000 to $100,000 a per annum.
In recent times, there has been a huge spike in the number of angel investors, and one of the
reasons is angel investors are not solely motivated by pure monetary returns. Angels look
forward to a founder who has a drive and passion for his business to tap the huge market
opportunity that they have identified. They aim to mentor and financially support another
generation of entrepreneurs and make use of their experience and network that can increase
the likelihood of start-up enterprises survive.

Importance of Angle Investors

 An Angel investor plays a vital role in the development of the economy by

providing the risk capital which contributes to economic growth and
technological advances.
 They are more focused on the commitment and passion of the founders and
the larger market opportunities that they have identified.
 To some extent, early financing of start-ups has become more dependent on
angel investors, as they provide loans at relatively easier interest rates, unlike
venture capital. The venture capital funds demand aggressive revenue growth
quickly and are not able to accommodate a large number of small deals. The
traditional source of start-up and early-stage financing-bank lending is limited
due to its risk level and handling costs.
 Angel investors make a prominent difference between a start-up’s success and
its failure. Most of the time, they are the first and foremost investors.
 Further, professional angel investors look for defined exit strategies or
acquisitions or initial public offerings (IPOs). Due to the least interest in
giving their money back or generate any return
 The effective internal rate of return for a successful portfolio investor range
from 20% to 30%. This is beneficial for the investors and for entrepreneurs,
who are the primary sources of financing. Hence makes angel investment
perfect for entrepreneurs who are financially struggling during the initial phase
of their business.
What percentage want Angle Investors want?
The more money an angel investor gives your business, they more they’ll expect a bigger
return on investment (ROI). The ROI expectation varies between angels and the specific
investing opportunity. It’s not uncommon for an angel investor to expect a 30% return on
their money.3
 
Angel investors will have a ROI expectation in mind as part of their exit strategy. This is the
point in time when they sell their equity in the company to make up their initial investment
and any profits.
 
Be aware that funding from venture capitalists will have a higher expectation for ROI.
Because these kinds of firms are giving significantly more money, they’ll want to have a
larger percentage of profit.
Advantages of Angle Investors
 One of the biggest advantages of the angel investor is that financing from
angel investment is much less risky than taking loans. Unlike loans,
investment capital does not have to be paid back even if the business fails.
 Angels can meet the capital needs of start-ups.
 Angel-funded companies generate a large number of jobs.
 Often angles reinvest the returns from the portfolio.
 The wealth created out of angel investing is spawning in a greater number of
companies.
 Angels bring portfolio expertise such as business acumen, vertical expertise,
director service, and financial experience.
 They differentiate between job creation and wealth creation
 Angel-funded firms are likely to survive at least four years and raise additional
financing outside the angel group.
Disadvantages of Angle Investors
 The primary disadvantage of using angel investors is losing complete control as an
owner.
 If compared to venture capital, it is quite hard to find a suitable angel investor.
 Business Angel provides less structural support than an investing company.
 Angels rarely make follow on the investments.
  Further, there is a possibility of malpractices in angel investing as well.

Nature of Angle Investors

1) They Are Not Just Committed to Raising Capital: -The strongest angel investors
that I have worked with are committed rather than merely interested in the business
that they invest in. These angels exhibit empathy, engagement and loads of
encouragement during the formidable years of a fledgling start-ups growth.
Interestingly, I have found that investors who exhibit these characteristics typically
have prior experience founding and growing businesses. Such angels have start-up
blood running through their veins, want to stay close to the start-up game that they
love, give back to the vocation that ignited their souls and provide direct benefit to the
vibrant, innovative, growing start-up ecosystem in their community.

2) They Are Proactive Network Activators: -In order for a start-up to succeed, the
CEO needs to be able to recruit and retain the best talent. The talent includes new
employees, new strategic partners, advisors, board members, potential acquirers and
even new investors. Angels that open up their Rolodex (or function as “Archangels")
and make warm introductions can make a big difference when it comes to start-up
business growth. One direct way to assess an angel's connections is to ask them about
past deals they have done, conferences they attend and potential partners that they
would be interested in putting you in contact with. Another way to assess an angel's
experience is to use online directory platforms, such as gust.com and angel.co. These
platforms allow you to research, connect and pitch to reputable, connected angels. In
addition, you can check out a potential angel investor's online presence, blog,
connections and followers on LinkedIn, Twitter and Instagram. One of our strongest
angels/mentors consistently made warm introductions to leading CEOs and business
leaders in the industry.

3) They Push for Brand Awareness: -Brand momentum is a product of mass and
velocity, and start-ups inherently have a low mass and require high-velocity partners.
The recent growth on online and social media sites allows news to spread
considerably faster than in past years, and angel investors can play a supportive role
to the companies that they invest in by spreading the company news via their social
 media channels (Facebook, Instagram, LinkedIn and Twitter). One way to encourage
partners to spread the company news is to tag them in company posts and send them
links to recent news stories directly and ask them to share.

4) They Provide Financial Capital: - Last but not least, a rock star angel investor puts
their money where their mouth is and actually writes big checks.

The support of a few rock star angel investors can mean the difference between a
company’s success or failure. Be selective in the angels you work with on your
journey. The strongest angels are committed, empathetic, encouraging and engaged.
They stand by the entrepreneur during difficult times and work to overcome setbacks.
They maintain open communication with the entrepreneur and proactively make
valuable introductions from their network. They are committed to helping you spread
the great news about your brand and company products. Finally, they write big checks
so the entrepreneur can focus on the most important aspect of the business -- the
business itself.

Sources of Angle Investors

 Angel List: An online platform that helps business owners find investors.
 Angel Investment Network: An online network with over 279,000 investors.
Business owners can create a profile and promote their business. If there are interested
angels, they’ll invest.
 LinkedIn: Professional social networks, like LinkedIn, can give you a direct way to
contact an angel investor.
 Local business groups or schools: Check local business schools or organizations in
your area to see if they can put you in touch with an angel investor.
 Family and Friends: - One of the most common sources of funding to generate
instant capital is family and friends. New business ventures might have the risk of
failure, leaving an impact on those who have invested in the business. The risk
associated with the business is quite necessary to be upfront.
  Wealthy Individuals: -It includes individuals like doctors, lawyers, and others that
have a net worth and are willing to invest around $500,000 in return for equity. This
process can be done verbally through local chambers of commerce and the like.

 Groups: -Angels operate as part of an angel syndicate (a group of angel investors)

that accordingly raises its potential investment level. A professional syndicate team
chooses the investment option where funds are to be invested.

 Crowdfunding: - It is a form of an online investing group., Crowdfunding involves

raising funds from large groups of individuals who invest amounts as small as $1,000.

 It is very important for entrepreneurs to think before accepting an angel investment.

Qualities and benefits that it is bringing to the table besides money, such as expertise
in business, contacts, and managerial skills. It’s also important to have a
comprehensive business plan in place. As a small business, you’ll need it to secure
financing from lenders or investors.

How does it work?

At the early stage of start-ups, business angels represent a bridge between self-funding,
sourcing capital from family and friends, or getting investments from venture capitalists.
Angel investors have higher net worth and broader business experiences that can help the
businesses they fund. After angel investors invest in a start-up and receive their equity,
they assume an advisory role in an organization, promoting the business's expansion and
growth.

In most cases, business angels invest in industries they are familiar with. Such trends
make angel investors an excellent networking resource for start-ups. Angels are well-
connected and refer start-up funders to other investors as the business matures.

How do Angle Investors help Businesses?

1. Interest-Free Funding: -Businesses get funding from angels without the

requirement to pay interest. However, an angel investor seeks an ownership stake
in the company after investing. Typically, ownership stake ranges from 10% to
30%. When the business thrives, an angel investor reaps more. However, if the
 company fails, angels don't get back their investment money. The more capital
angels invest into a business, the more money they demand.
2. Angels Bring Valuable Knowledge to a Business: - Angels get a stake in a
company or business and work to see the business succeed. Therefore, the role of
an angel investor goes beyond offering capital to mentorship. Many angel
investors in India are seasoned investors and provide expert support, guidance,
and connections to a company. Experiences, resources, and insights of an angel
investor into a business promote the growth and expansion of ventures.
3. Angels Enhance Business Discipline through Scrutiny: - Business angels
conduct thorough scrutiny before and after investing. Angel investors are cautious
and keen not to lose their money. Business owners have to make sound business
decisions to avoid losing angel funding and other support. Therefore, through
external scrutiny, angels help to promote business discipline.
4. Flexible Financial Backing: - Angel investors spend their wealth to fund
businesses, which makes them negotiable. Start-ups or entrepreneurs can get a
small amount of money from angels at different stages of the company. The risk-
taking ability and funding flexibility of angel investors make them the best
funding source for start-ups.

How much do Angle Investors usually invest?

When you're calculating how much capital you require to get your business off the ground,
keep in mind that angel investors typically invest anywhere from $25,000-$100,000. The
upper limits of what an angel investor will provide in capital is $500,000. If you work in a
technology-based industry, you'll have access to a larger number of angel investors as well as
a higher average of investment, which is typically around $120,000. There are other
industries like the food industry where the average is closer to $20,000. The amount of funds
you receive also depends on the exact angel investor or group of investors that you work
with. For instance, the Tech Coast Angels group provides start-ups with investments of
anywhere from $50,000 to $1 million.
The amount of capital that you receive can vary by the current development stage and needs
of the start-up as well. Let's say that you work in the bioscience industry and have already
created a viable medical product that you would like to expand. In this scenario, your start-up
will most certainly receive a higher investment than a start-up that only has an idea for a
viable medical product. Larger investments will come with higher requirements when seeking
such an investment. If you're looking to obtain $300,000 in capital from an angel investor,
your product or business should be much more stable than that of a start-up seeking only
$25,000.

Some Angle Investors in India

1. Rajan Anandan
Managing Director – Sequoia Capital

Managing Director of Google India and an MIT graduate, Rajan Anandan has been one of the
most active angel investors in 2017. Currently investing in start-ups spread across India and
Sri Lanka, Rajan is also the co-founder of Blue Ocean Ventures, the first seed fund in Sri
Lanka. By his own admission, Rajan prefers to invest in B2B start-ups owned in partnership.
However, he doesn’t rule out serendipity at play either! So, try your luck pitching to one of
the most promising investors (and an active angel investor at that!) in the country. 

2.Anand Chandrasekaran

Director – Facebook
He is the former Product head of Snapdeal and is currently the Director at Facebook. Yahoo!,
Bharti Airtel and Wink are few of the big names he has worked with. A Stanford graduate, he
made six angel investments in 2017 and twenty in 2016.

As of now, he has made a total of 30 investments in the marketplace, bringing him credibility
and recognition as one of the most active angel investors in India.

 Major Domains He Invests In: Consumer internet, B2c and p2p Marketplaces,

Fintech and SaaS
 Past Investments: Lets Venture, Fynd, Inner Chef, Instalively, No Broker, Wooplr

 3.Sandeep Tandon
Co-founder – Free Charge

Alumni of Harvard University, Sandeep Tandon is the Co-founder of mobile wallet Free
Charge and the managing director at Tandon Technology ventures and Infinix Healthcare.

In 2017, he invested in 23 start-ups including in online lending platform Zip Loan and the
fashion and store discovery platform Fashalot.

Quite an active Angel Investor in the community, he also serves as a mentor to various
technology start-ups.
  Major Domains He Invests In: Internet Services, FinTech, Healthcare, Education
 Past Investments: Razor pay, Inc42, Table hero, Unacademic, Fabelio, Remit ware
Payments, Pocket Aces, Zip loan.

4.Ratan Tata

Ex-Chairman – Tata Industries

Chairman- Tata Industries, and a vivacious industry leader, is also an active angel investor in
India.

He has mentored and profiled a number of start-ups, ventures and businesses with
investments, advice and much more.

With names like Urban Clap, Xiaomi, Moglix and Snapdeal under his hat of expertise, he is
touted as one of the major players in the angel investment community.

 Major Domains He Invests In: Technology Sector, E-commerce, Affiliate Sectors,

etc.
 Past Investments: Xiaomi, Urban Ladderm Nest Away, One97 Communication,
Snapdeal, UrbanClap, Your Story, Tracxn, Abra, niki.ai, Moglix, Tea box, ClimaCell
Inc., GOQii, Lybrate, Crayon Data, MadRat Games, Cash Karo, Qikpod, Bombay
Hemp Company, Dog Spot, Invictus Oncology, Boll ant, MUrgency, Idea Chakki,
Print line Media (The Print).