Angel investors are interested in investing in startups and business ventures and do not fear winter funding.
With over 50K firms in various growth stages, India is one of the top startup centers in the world. In 2021, the Indian startup ecosystem was booming, with up to 42 companies becoming unicorns and 11 companies going public, providing early-stage investors with significant gains. Angel investing has become more appealing to India’s cash-rich investors as a result of these changes. Over the past few decades, angel investment has expanded as the allure of profitability has made it possible for it to become a key source of funding for many firms. This has encouraged innovation, which leads to economic prosperity. There is less danger when you receive cash from an angel investor than if you take out a small business loan, which is the main benefit. Unlike loans, the money you get from an angel investor is not subject to repayment because they receive stock in return for their investment. Angel investors are frequently seasoned investors with a long-term perspective who are aware that they might not see a return on their investment for a while. In addition to looking for investment opportunities, many angel investors also seek personal opportunities.
Angel investors specialize in offering financial support for small-business owners and entrepreneurs in the beginning and beyond using their own money. These investors may make the difference between an idea succeeding as an empire or failing to take off. For those who have been closely watching the startup environment, the previous few months have brought terrible news in many different forms, including funding winter, slowdown, and recession. Of course, some of India’s most experienced angel investors view these as nothing more than passing trends. They advise aspiring and inexperienced angel investors to tune out the noise and be prepared for the right deals.
Entrepreneurs with experience who are familiar with the level of risk associated with starting a small firm are frequently known as angel investors. Angel investors, unlike banks, aren’t hesitant to spend money on a business idea that has potential. The founders now control terms and valuations thanks to the 2021 Indian startup funding boom, which altered the market for investors and founders. In 2022, with a slowdown in the world economy and an emphasis on cost-cutting, investors will have more clout because funding has dried up and entrepreneurs are scrambling to find money to extend their runway. However, that is mostly a phenomenon that affects growth and late-stage companies that have a lot of investor exposure and a huge scale that requires continuous funding infusion as many of these organizations are loss-making. However, evidence demonstrates that seed funding has increased. According to the half-yearly Indian startup funding report for 2022, there were more seed deals than there were growth-stage and late-stage agreements put together. The primary reason why angel investors shouldn’t consider economic cycles is because they are investing at a very early stage, and by the time the firm has gotten that initial traction or momentum, the market has probably already flipped from down to up. Ritesh Malik, the founder of OYO-acquired Innov8 and an angel investor in over 100 startups, asserts that the fundamentals of angel investing are unchanged despite the global recession. Any brief pause won’t be a problem if any angel investors stick to the guidelines of spending modest amounts in numerous firms and keeping a long-term perspective. However, angel investors must be willing to make deals even when others are not. There may be some industries that are more affected than others, and in that case, it may not be a good idea to invest there.
The goal of angel investing is to increase the size of the portfolio such that the winners can cover the losses, which are bound to occur in every portfolio. This means that the deal flow must not change and that an investor cannot opt to stop investing for some time.