By guest authors Irina Patterson and Candice Arnold
Irina: What can investors do to be more successful?
Amit: We need to devote more time to the companies we invest in. We need to give them more customer references. Early-stage companies lack a lot of things that angel investors or successful entrepreneurs can bring them.
On average, all investors in Mumbai Angels have more than fifteen years’ experience in running their own businesses as Indian CEOs or in large companies. There is a lot that we can bring to the table. There are, obviously, time constraints, but slowly things are changing.
Irina: What do you think angel-backed entrepreneurs could do to make themselves more successful?
Amit: There are a lot of people who spend too much time on business development, marketing, and product development, and a lot of this is very internal to a company. They can actually tap into the vast resources of an angel network that is available. One thing can lead to another and lead into the growth of the company.
The other thing they can do is actually look at opportunities for how they can contribute to future entrepreneurs by sharing their experiences, either by blogging or by creating video channels about their successes, failures, and so forth.
That is something they can do to contribute to the entire ecosystem. When the entire ecosystem improves, it feeds into itself. If I become successful and I help five other people become successful or at least avoid failure, I am actually contributing to everybody.
Irina: What are your challenges as an angel?
Amit: As an angel, I personally find it very, very tough to say no to those entrepreneurs who don’t get the opportunity to do well because of lack of funds or because of their lack of skills.
As you rightly say, there are thousands people who come to us. Maybe seven to eight people actually get the investments. I find it tough to say no to them, identify a few gaps in their companies, and then make them realize what are the things that have to be done to fill those gaps. That is a huge challenge.
There are a few people who take no as a personal offense. But my job is not personal. I need to convey a decision which may have nothing to do with my personal choice.
If there are a few angels who have decided not to invest, then it is their decision. If there are a few angels who have decided to invest in a company, then there is a certain thing that you need to do. For me, there is a challenge in getting this all together.
Say a company comes, and it is lacking in operations or customers, or maybe the technology part or the team part. Then, how do you tell them, “No, we cannot do this.” Or, “We should not do this.” How do we take them to the next level so that they are eligible six months or maybe one year down the line for funding?
If I write a check for $500,000 – probably in the lifetime of a company – they would need easily $20 million, $30 million to do well and take it to the IPO level at a stock exchange.
So, in writing a check for $500,000, you should add on to it by giving customer references, networking, guidance, and sharing your experiences. That is a part of investor education.
Entrepreneur education: Telling them no, guiding them on to the next steps, ensuring that they don’t die from getting a no from a Mumbai Angel. That’s one challenge.
The other challenge is investor education. Angel investing should not be seen as just another asset class or a portfolio class for making money. It should be seen as how to support the ecosystem and how to achieve the vision that you started with.
Irina: Thank you, Amit. Very inspirational.