22 Oct 2022
An angel investor is a private individual who provides financing to startups, usually in exchange for equity. Angel investors typically use their own personal net worth to finance investments, as opposed to a venture capital firm which uses an investment fund. Angel investors usually receive convertible debt or ownership equity in exchange for their investment.
What Are the Characteristics of a Good Angel Investor?
The best angel investors are those who are committed to the startups they invest in and exhibit empathy, engagement and encouragement during the businesses' growth. They are able to provide trustworthiness, good decision making skills, high integrity, patience and the ability to support and challenge entrepreneurs.
If you have these qualities and are interested in becoming an angel investor, do not hesitate to reach out to startups.
What are the benefits of being an angel investor?
The benefits of being an angel investor include having a positive impact on society, gaining a return on investment and becoming a mentor to young entrepreneurs. Angel investors often feel a sense of satisfaction from knowing they helped a business succeed. They may also get to be involved in interesting and innovative projects at the cutting edge of technology.
22 Oct 2022
Why invest in startups?
1. High Return
The potential high return on investment is one of the key reasons why people invest in startups. The world of startups is an exciting and fast-paced one, with the potential to generate high profits. Whether you are investing in a startup to help it grow or simply hoping to cash in on its success, there is no doubt that the potential return on investment is high. You have a chance to invest in the biggest and the most valuable companies of tomorrow which are being formed today. And there is no way public investors are going to be a part of this explosive growth of their value creation.
2. Portfolio Diversification
Any sophisticated investor investing in a portfolio of alternate asset class should considers direct early-stage investments in private companies. By investing in a range of different startups, you can spread your risk and protect yourself from any one of them going bankrupt. This is important, as no one can predict which startups will be successful and which will fail. By investing in a variety of them, you can ensure that your portfolio remains healthy even if one or two investments go bad.
3. Keeping up with the World
Investing in startups is also a way to stay ahead of the curve and keep up with the latest trends. By investing in young, innovative companies, you can ensure that you are always on the cutting edge of technology and business. This can be crucial for businesses that want to stay ahead of their competitors and remain competitive in the global market. Advancement in technology is accelerating at an extraordinary rate that is turning everything upside down and you may not want to miss the train.
4. Joy of Giving Back
Another reason to invest in startups is the joy of giving back. Many startup owners are passionate about their work and are driven by a desire to make a difference in the world. When you invest in a startup, you become part of this community of innovators and visionaries who are working to make a difference in the world. This can be an incredibly rewarding experience and can help you feel good about where your money is going. These new businesses create new jobs which help in the economic development of the nation.
Networking is another great benefit of investing in startups. When you invest in a startup, you become part of its network of supporters and advisors. This can be a great opportunity to connect with other entrepreneurs, investors, and business leaders who can help you grow your own business.
22 Oct 2022
What to Look for Before Investing in a Startup?
How to Select a Startup to Invest In?
When you're looking to invest in a startup, there are a few key things you need to keep in mind. Here are a few tips to get you started:
1. Do your research. Make sure you have a good understanding of the business and the market it's operating in.
2. Look for a team that's experienced and has a proven track record.
3. Check out the product or service and make sure there's a market for it.
4. Be realistic about the potential returns. Don't expect to get rich quick.
5. Understand the risks involved, and make sure you're comfortable with them.
If you can answer these questions, you're on your way to making smart investment choices.
The Qualities of a Promising Startup When you're looking to invest in a startup,
there are a few key qualities you should be on the lookout for.
First and foremost, the team behind the startup should be strong. The founders should have a clear vision for their product and be able to execute on their plan. They should also be passionate about their work and have the drive to see their company succeed.
Another important factor is the size of the market that the startup is targeting. Is the market big enough to support a business? And is it growing? The startup should also have a competitive edge in the market, whether it's through its technology, its pricing or its unique selling proposition.
Finally, make sure that the startup is generating revenue and has a solid business model in place. There's no point in investing in a company that's not going to make money back. So do your research and make sure you're putting your money into a winning proposition.
The Team Behind the Startup
When you're investing in a startup, one of the most important things to look at is the team behind it. Do they have the experience and expertise to make this company succeed?
And don't just look at the team's experience—look at their track record too. Have they succeeded in the past? Failed miserably? There's no guarantee that a successful track record means they'll be successful again, but it's definitely a good indicator
You'll also want to take a close look at the team's chemistry. Are they working well together? Or are they constantly butting heads? The last thing you want is for a startup to implode because of internal strife.
So, before investing in a startup, take the time to do your homework and make sure the team is solid. It could make all the difference in whether or not your investment pays off.
The Opportunity the Startup Is Capitalizing On
When you're looking at a startup to invest in, one of the most important things to consider is the opportunity the company is capitalizing on.
Is there a market for their product or service? Is there room for growth? Are they addressing a need that isn't currently being met?
These are all important questions to ask, because you want to make sure that the startup you invest in has a good chance of success. You don't want to put your money into something that's doomed to fail.
The Product or Service the Startup Offers
When you're looking to invest in a startup, the product or service the company offers is one of the most important factors to consider.
You want to make sure that the startup is targeting a market that's big enough to sustain itself, and that it has a product or service that's innovative and meets a need that's not currently being met
You'll also want to look at the team behind the startup. Are they experienced and do they have the skills needed to make their vision a reality? And finally, you'll want to make sure that the company is well-funded and has a solid business plan in place.
If you can check all of these boxes, then you're on your way to investing in a winner!
Stage of business
When you're looking to invest in a startup, it's important to understand the different stages they go through. A startup will typically go through three stages: Pre-seed, Seed, and Series A-C.
When it comes to selecting a startup for investment, it's important to pay attention to more than just the product. You need to make sure that the company has a solid sales channel in place so that the product can reach the hands of the customer.
A good distribution channel can help reduce operational costs, generate leads and sales, and build brand equity. It's also important to make sure that you can develop and sustain relationships with customers.
To set up a channel sales program, startups should find partners and measure the success of the program. This way, you can be sure that the company is headed in the right direction.
Size of Investment
When it comes to selecting a startup for investment, it's important to do your research. You want to find an investor that is a good fit for your company and understands your financial goals.
But you also need to be realistic about the risks involved. Startup investments are usually illiquid and high risk, so make sure you're comfortable with that before you make a decision.
There are a lot of things to consider when investing in a startup, so take your time and do your homework. The payoff could be worth it in the long run.
22 Oct 2022
Why it is important to build a startup portfolio
An angel investor is someone who provides early-stage funding for startups in exchange for an ownership stake in the company.
One of the best ways to do this is by building a startup portfolio. By having a portfolio, you'll be able to lessen the risk associated with startup investment and get a better understanding of the industry as a whole.
In this article, we'll discuss why every angel should build a startup portfolio and how to go about it.
What Is a Startup Portfolio?
If you're an angel investor, or even if you're just thinking about getting into the startup game, make sure you build a portfolio. It's the best way to increase your chances of success. You might be thinking, "Why do I need a startup portfolio?" A startup portfolio is a collection of startups that you've invested in. You don't need to invest in hundreds of startups, but you should have at least 20 to 40 startups in your portfolio.
Why is this important? Well, it's important because you want to have a diverse investment base. You don't want to put all your eggs in one basket, right?
That's why it's important to invest in startups from different domains and at different stages. This will help you reduce your risk and increase your chances of making a return on your investment.
Why You Should Build a Startup Portfolio
When you're an angel investor, one of the hardest things to do is to know which startups to invest in. Out of the hundreds (or thousands) of startups that are out there, most of them are going to fail. You just don't know which ones will succeed. But that's okay. Because investing in startups is a numbers game. The more startups you invest in, the more likely you are to hit one that's going to take off.
The historical returns have shown that 50% of the startups of your portfolio will eventually fail. 20% will return the original investment. 20% will return profit 2-3 times of the investment.9% will return a profit of 10 times the investment and 1% will return a profit of more than 20%.
That's why it's so important to build a startup portfolio. By spreading your bets among a bunch of different startups, you're increasing your chances of hitting one that's going to be a home run. And it's not that hard to do. You don't need to invest a ton of money in each startup. You can start by investing a few thousand through ezeseed platform, that can still add up to a lot if one of them takes off.
How to Build a Portfolio
Select an amount you want to invest every year. Generally angel investors go for 10% of their free cash flow income every year. Keep an horizon of two to five years to keep invested. Select startups from various domains. Invest a small amount in every startup you want to invest in and keep a tab on their progress. Ezeseed provides a dashboard to every investor to keep the updates of the startup in their portfolio. Invest a higher amount in the startups that are performing well in your portfolio in the next rounds of funding for optimal performance.
Building a startup portfolio is a smart way to spread your risk and increase your chances of hitting it big. So if you're an angel investor, start building your portfolio today. But don't just invest in any startup that comes your way. Do your homework and only invest in companies that you believe in. With a little luck, one of them will be the next big thing.
22 Oct 2022
Where do you find startups
Once you have decided to build a portfolio the next question arises, "Where do I find good promising startups?" There are various ways to connect with startups, some of them are as follows.
1. Angel Groups
Angel groups are composed of local angel investors who invest their own money in early-stage companies. They typically have a screening process for evaluating companies and often invest in multiple companies at a time. They generally have an invite only policy for angel investors to be a part of their group with an entry barrier in terms of high investment.
2. Online Platforms
Online platforms like ezeseed can be a great way to find curated startups. Ezeseed is an online platform that connects startups with investors. It democratizes the angel investment process for anyone who aims to become an angel investor. The investors can start with small amounts to explore the space initially.
3. Startup Networking events
Networking can be an excellent way to find startups if you have contacts in the startup community or if you’re willing to put in the time to attend events like startup weekends or pitch contests or business plan competitions. These events offer ample opportunity to investors to meet new startups.
22 Oct 2022
Due Diligence of Startups
Due diligence is an important process that helps to assess the viability of a startup before any investment is made. There are different types of due diligence and includes a review of financials, operations, and management.
When looking into investing in a startup, it is important to do both legal and financial due diligence. This means making sure that the company is on sound legal footing and that their financials are in order. Full name, date and place of incorporation, registered number, registered office and accounting reference date, copy of the certificate of incorporation memorandum and articles of association etc are some of the documents required. Additionally, you want to be sure that the founders are honest and have a good track record.
When considering investing in a startup, it is important to perform a business due diligence to assess the company's viability and potential. Key questions to ask include: -What is the product/service and does it have a market fit? -What are the funds being used for and are they asking too much or too little? -How do they envisage future funding rounds?
It is also important to conduct a market due diligence to assess the competitive landscape and potential opportunities/threats.
When assessing a start-up for investment, it is important to do a thorough review of the company's technology. This includes investigating whether the technology is standalone or relies on other technology, and whether it is or can be protected by IP rights. It is also important to assess how quickly technology trends are changing and whether the idea can gain a foothold in the market before newer technology overtakes it
It is also important to assess the management team. That includes their skills, experience and competitiveness.
Does all this sound overwhelming to you? Ezeseed is here to help you find and do the thorough due diligence for you. This helps angels focus on what's important - making wise investments and create wealth.
22 Oct 2022
Exit Opportunities (how to make money) in Startup Investment
The basic aim of investing in a startup is to make big money by investing in the big companies of tomorrow and have equity against your investment. That long wait and the risk you took will be worthwhile if a successful exit happens and you have made capital gain on your investment. You sell your equity to the next buyer and earn on the basis of the valuation of the startup.
Let me explain with an example. Suppose you had invested INR 10 lacs in a startup whose valuation was INR 1 Cr at that time. So you hold 10% equity currently. After 1.5 years the startup's valuation becomes INR 10 Cr so your investment value also becomes 10 times that is
INR 1 Cr. At this time the startup raises another round of INR 3 Cr from another VC or investor. At this point you can either take an exit or stay in the company. If you choose the former and decide to exit, you sell your equity of 10% back and take 1 Cr as your return on investment. If you choose the latter and stay in the company, you can exit in the upcoming rounds at higher valuation.
Various Scenarios of Exit Opportunities
1. Acquisition by a larger company One option is for the startup to sell to a larger company. This can provide you with a good return on your investment. Generally, the larger company may buy the startup in order to acquire its technology or other assets.
2. Bought out by a later investor When a startup raises another round the new investor buys the equity from the existing investors.
3. Soft landing with a competitor If a startup is unable to find a buyer but is still operational, it may be able to find a “soft landing” with a competitor. In this scenario, the competitor will buy the assets of the startup and integrate them into its own business. This can be beneficial for both parties involved, as the competitor will gain access to new technology or products and the startup will be able to continue operating without having to shut down completely.
12 Dec 2022
Does investing in future businesses excite you? And why should it not be? It gives us a chance; to be a part of history in the making, to be a part of the future, earn exceptionally high returns,to be a mentor, to be a change-maker. But every big thing comes with risk, and startup investment is no exception. Historically speaking, nine of the ten startups fail! But does that stop us from investing in such a lucrative asset class? Absolutely not! We find a way to hedge this risk and invest in startups strategically and continue our investment. Applying the law of numbers is the best strategy to mitigate the risk of losing your investment. There are different types of startups. The more startups you invest in, the chances to invest in a winner increase.
The first step in a startup investment strategy is to build a diversified portfolio - startup stage diversification, sector diversification, geographical diversification, and demographic diversification. The second step is to invest a small amount initially in these startups and then invest a more considerable amount in the winners of your portfolio.
And the third step is to keep learning and being updated.
In this post, we will discuss the first step, startup portfolio diversification.
The highest-risk startups are early-stage startups. And the highest returns also come from angel investors who invest in these startups. A portion of your startup portfolio should contain early-stage startups who can give you nimble returns and provide agility to your portfolio. They can give you more options in exits, like a future round, merger, or acquisition. The later-stage companies are more focused on bringing an IPO, so exit opportunities are limited and time-consuming.
Every sector responds and performs differently under different conditions. Who would have predicted the boom in edutech and health tech? And who would have expected the sudden low performance of the hospitality industry or restaurant sector in the recent past? It implies that every industry has risks and rewards, and the trends are often unpredictable. A well-balanced, robust portfolio can give you an edge and required resilience.
Why invest in startups of Tier 1 cities only, when you can invest in startups across India? The startups from Bharat are solving problems of Tier 2, Tier 3 and rural areas and are catering to larger masses. Why not invest in these startups as well? The macro and micro economic changes can affect your startup portfolio performance, and this geographic diversification can help you connect with a large market and hence higher returns.
A diversified team can bring in intangible benefits. India, a land of diversity, can add to the startup performance; it can connect to the bottom line, build a better image of the company, and prepare the company to face various challenges and threats by bringing in varied perspectives. It has been found in multiple studies that teams with at least one female co-founder performed 63% better than male-only teams, while racially diverse teams performed 35% better than their industry peers.
Also Read: Why it is important to build a startup portfolio?