Contenu connexe Similaire à Angel Investing Made Easy, Shanti Mohan, Bangalore (20) Angel Investing Made Easy, Shanti Mohan, Bangalore2. © Copyright LetsVenture.com | All rights reserved
Agenda State of the Angel Investment in India
Angel Investments 101
What is Angel Investment? Why should you do it?
How do you make a return?
How do you evaluate a startup?
Deal Dynamics
Valuation
Process
Primer on Term Sheets / SHA
How do you get started?
Syndicates on LV
Pitches with analysis
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State of seed/Angel
Investments
2012 Deals and Roughly between 120-150 deals
Networks (IAN, Mumbai Angels, Hyderabad Angels,
Bangalore Angels) etc contributing to guess estimate of
30-35% of the deals
Median investment value for Seed/Angel investment: 1.5
CR
Roughly 50 deals between Dec-Mar 13
Rise of the institutional first cheque (Blume, Kae,
firstcheque, Harvard, 500startups etc)
Start of incubators
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State of seed/Angel
Investments
2013
• Slight slow down (Impact of Section 56 ?)
• New players (including incubators) starting to deploy
funds
• RISE of the incubation model (today approx 50+
incubators)
• Accelerators working on batches 2 & 3
• HOT sectors (not including consolidation): Healthcare,
Education
• LetsVenture Founded in Sept 2013
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State of seed/Angel
Investments
2014
• India story becomes strong
• 31 global funds enter the India market
• VC’s actively playing in early stage (IDG, Sequoia, Accel,
SAIF)
• LetsVenture completes 23 deal in end of first year, with
6.5m being committed online
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What we learnt in the last
1.5 years (2014/15)
• New persona of angel investors have emerged
• Entrepreneur turned investors
• Second generation family business owners
• Global Indian
• Corporate MNC
• Online investing is on the rise (LV is India’s largest platform
for startup funding)
• Early Stage investing will include Tier 2 cities, angel groups,
micro funds and early stage VC’s
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Why Angel Invest?
Support Entrepreneurship
Leverage your knowledge and connections
Develop an alternate asset class
Make Money
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Who is an Angel Investor?
Strong Passion for entrepreneurship
It is nearly a pseudo entrepreneurship
Bring value to the startups
Anyone with Surplus capital which can be invested
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What returns can you expect?
2/3 of startups fail world wide
75% of the angel investments do not make returns
Very high risk / High Return Game
India, still a young eco-system. Not many data points…
Some reports show a return of 3x – 22x
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How do you exit?
Since you own equity in the venture, only when you sell
equity to someone else, you make money
You do not make money on dividends / profit share
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Typical Curve
0 2 4 6 8 10
Valuation
Year
Seed
Round
Angel
Round
Series
A
Series B
Series
C
Bridge
Round*
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Typical Curve
0 2 4 6 8 10
Valuation
Year
Seed
Round
Angel
Round
Series
A
Series B
Series
C
Bridge
Round*
Return*
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When ?
Idea in a slide
Prototype Ready
Customer
Traction
Paying Customers
Product-Market
Fit
Multiple customer
segment
Business Model Fit
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Startup Life Cycle
Ideation
POC / Beta Launched
(MVP Stage)
Early Revenues / Early Traction –
Steady Revenues
(Product Market Fit)
What:
- Validate a real customer need
- Identify a real pain point to be
solved
- Articulate the value proposition
How:
- Talk to Potential customers
- Ask for Feedback
- Network, network and network
- Eventually follow your vision /
gut
What:
- Fast Market testing of a
product or feature to get
qualitative or quantitate
feedback
- Find your early adopters /
customers
How:
- Be Lean
- Focus on providing value to
your customer
- Use validated Learnings /
Pivots and iterations to move
towards PM fit
- Borrow or Steal
What:
- Product/market fit means
being in a good market with a
product that can satisfy that
market.
How:
- Customer are
buying/subscribing
- There is referral traffic
Finding Problem / Solution Fit Finding Product / Market Fit
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Milestones & Raise
Milestones/Stage Age Revenue
Raise
Amount
From Whom
1 Venture Launched 0 – 0.5 0 5 – 25 L Self, Friends, Family
2 Beta Product Launched
B2C : Product used by real customers,
customers
B2B : Good Customer Pipeline, 1-2
trial
0.5 – 1 yr Small 25L-75L Self, Friends, Family,
Accelerators
3 Stable version
Regular Customer growth
1 – 1.5 10 – 15 L per
year
50 L – 1.5 Cr Self, Accelerators, Seed
Individual Angels
4 Product- Market fit found
Strong & Consistent Customer Growth
Clear Product & Revenue for next 2-3
1 – 2 yrs 20 – 50 L per
year
1CR – 4 Cr Individual Angels, Seed
Venture firms
5 Business Model Fit found
Clear growth Path for next 3-5 yrs
Consistent growth in paying customers
Potentially breakeven
1.5 – 3 2Cr – 5Cr per
year
3 Cr – 20 Cr Venture Funds
Note: The values in the above table are indicative only
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Fund Raise Stages
Ideation
POC / Beta
Revenues /
Scale / Growth
Finding Problem / Solution Fit
Finding Product
(Service) / Market Fit
Finding Business
Model Fit
Bootstrapped/ Friend
and Family
Angel, Seed Funds ->
VC Rounds (A,B,..)
Revenue /
Traction
Time
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Typical Raise
0 1 2 3 4 5 6 7 8 9
Seed
Round
Angel
Round
Series A
Series B
Series C
Product Market
Fit
Business Model
Fit
Bridge
Round*
3CR – 20CR
5-25L
25-75L
50L-1.5CR
1CR – 4CR
50L-1.5CR
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1. Passion, Purpose and Integrity
2. People don’t buy what you do but Why you do it!
3. Chemistry (with Investors and among the founders)
4. Ability to execute
5. Coachability
6. Complementary skills
7. Skin in the game
8. Think BIG!
Team
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1. What problem are you trying to solve?
2. Is the product / idea disruptive or innovative?
3. Is there differentiation that is unique and difficult to replicate?
4. Product Traction
5. Is the market large enough and growing?
6. Is the business scalable?
Product and Market
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1. Does it match my investment thesis? Can I add value?
2. Who else is investing?
3. What are my exit options?
Lead or Follow?
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- Startups with well rounded team to execute innovative ideas, gain quick customer traction, build defensible market
position, and ability to scale.
- Product companies with differentiation and ability to go global
- World class technology centric internet products
- Early Stage companies with proven traction and new business models
Investment Mantra: Heard from Angel Investors!
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Key is to develop one or two
specific points why will this
startup succeed
(Investment Thesis)
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When not to Invest
Exit Discomfort
Founder Discomfort
Business Discomfort
Structure Discomfort
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Valuation
Your business is worth what somebody is willing to pay for it..
Valuation at Early
Stage more of an
Art than Science
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Pre-Money = the value of your company now
Post-Money = the value of your company after the investor put the money in
Definitions
1Mn 2Mn 3Mn
=+
Investment
Pre-Money
Post-Money
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Valuing an Early Stage Startup
1. Supply and Demand
2. Your Industry / Sector
3. Other Factors specific to Your Business!
4. Finally, Understand ‘Equity Planning’
4FACTORS
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Supply and Demand
Patented technology
Exclusive market partners
Improved Traction
How many more Angels / VC’s willing to invest?
Before you start Fund raise, make sure your business is perceived as ‘new’, ‘unique’, ‘exciting’
Are you a ‘Me-to’, ‘commodity business’ ?
Supply and Demand
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Each Industry / Sector has unique Valuation Dynamics
Study valuations of similar startups in your space
Study exits that happened in this space (acquihires, M&A)
Study EBITDA (earnings before interest, tax, depreciation, and amortization)
Understand growth metrics in your industry
Understand growth metrics
Industry / Sector Dynamics
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Stage of the startup
Will you survive the next 5 years?
Cost to grow the business (Customer Acquisition cost, Technology costs)
Scalability of the business (global versus local play)
Founding Team Profile
Advisory Board / Mentors Involved
Other factors Specific to Your Business!
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Try and get term sheets from multiple investors
How many investors are willing to invest?
How desperate is the Entrepreneur?
Think a valuation that gives your Investors 10x!
Founder Vesting
Understand the details of a Term Sheet (some parameters could impact the value of your startup!)
Liquidation Preference (could tilt outcomes on exit)
Dilution (and anti dilution)
Option Pool (on pre-money or post money?)
Finally …
42. Letter of Intent which investors sign before
Share Holder agreeement
LetsVenture has a standard term sheet
After term sheet signed, Share Holder
Agreement (SHA) is the legal document
signed
Shared issued to you, post money in bank
and SHA signing
What is a termsheet?
43. 1. Liquidation Preference (could tilt outcomes on exit)
Participating or Non Participating:
Non Participating (as per LV) – Investor gets to take
participate pro-rata.
Participating: Takes his money out and then
2. Anti dilution:
Taken money at x valuation. If there is a down round,
given to investors (full rachet) – broad based weighted
compensation.
3. Option Pool (on pre-money or post money?)
4. Board Composition
Look for 1 director,
1 observer (not recognized by Indian law) but a backup if
not be available
Understand the
details of a Term
Sheet
(some parameters could
impact the value of your
startup!)
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The Funding Process
Listen
to
Pitches
Verbal
Commitme
nt to Invest
Term
Sheet
SHA Closure
Legal DD
Fix
Issues
Financial
DD
Drop
Issues
too
serious?
YN
All Ok?
Y
N
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Others
Legal & Accounting Fees
Mostly all investors put the burden of the legal fees on the
entrepreneur
No Shop
This prevents entrepreneurs from shopping around with
other investors while the dialogue is on. Time period can
range from a few weeks to a few months.
Due Diligence
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Getting Started
Set aside a “forgettable” corpus
Make a portfolio of ~10 investments over 2-3 years and possibly
~20+ over 4-5 years
Lean on experienced angels to get started with
Invest in your area of expertise
Help the startup without being over bearing
Meet the founders, spend time with them
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Investment Thesis
Your theory of investment
Examples
Product Companies with differentiation and potential to go global
Both niche & mass products / services startups with potential for emerging and
developed markets
Invest in ventures which work towards bringing a change in the social sector
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Lead Investor
Typically an investor leads the team in a syndicate. A lead investor has the following
major tasks
Setting up the terms of the deal
Help Build a syndicate
Possibly take a board seat and help run the company
Facilitate next round of funding
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Post Deal Management
Good to build a rhythm of a monthly review / quarterly report
Provide them help without being over bearing
Exercise patience when startup founders are not taking your suggestions
Open Doors
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Quick Tips
Get started by participating in syndicates
Network with experienced investors
Invest in the area of your expertise
Develop relationships with the entrepreneurs
Allocate corpus
When in doubt, do not invest!
In the end, go with your gut!