Angel Investing 2.0 - will Angel Investing go online in India?

The last one year has seen a huge surge in angel investing in the Indian startup ecosystem. As a platform that has now become the largest marketplace for startup funding; we have been witnessing how the ecosystem has evolved over the last 18 months. In early 2013 when LetsVenture was founded, startup funding was traditionally done through offline networks and fundraise was challenging; our intent was to make fundraising faster and efficient for the founders.

We are still trying to understand how angel investors decide to invest, what works for a startup and how we can continue to make this process efficient, and easy. However as tech entrepreneurs building a marketplace for angel investing, not i-bankers trying to provide investment services to angel investors, we believe that most aspects of angel investing will go online in the next three to five years. What does that mean?

Takeaway # 1: Startup fundraising is becoming time and process efficient

The first startup that raised 250k on LetsVenture in December 2013 closed their round in 10 days. They had five investors from outside India whom they had not met personally – discussions were closed on a Skype call and commitments were confirmed. Fast forward to April 2015 - we completed our first one million dollar deal on the platform. The entire commitment process took eight days. There were 25 investors from all over India and globally who listened to an online pitch of the startup. Fifteen investors committed online without a face-to-face meeting.

Takeaway # 2: Balanced play of online + offline efforts to ease the fundraising process

For anyone who has been an angel investor, we know how the offline interaction is important when you are deciding to ‘lead’ or be an active invetsor in a startup. We believe angel investing can never completely go online. Finding a lead investor still remains largely offline – in India and globally.

A successful marketplace always has elements of offline and online engagement, based on the market you are trying to address. Are we disrupting the angel investing space? I personally think strong words like ‘disruptions’ are ways to glamorize an entrepreneur’s effort in the early days. To understand disruption, one has to revisit definitions of marketplaces and platforms.

When we build a marketplace, we co-create it with market leaders. We take offline services online and then create business model or technology innovations around it. Only after network effect and scale sets in, can we create disruption. When eBay started, it was hard to believe that selling and purchasing will go online. And now it’s ‘normal’. Very soon we will see ‘angel investing online’ as ‘normal’ too.

Takeaway #3: The new angel investor will break barriers and change angel investing in the next 3-5 years in India

We will soon see the emergence of a new profile of angel investors investing in India startups—the global Indian who is keen to participate in India’s growth story, the entrepreneur-turned-investor who understands how to build businesses in the new age economy, the second generation global citizen from family businesses, and the senior management of MNCs who missed out on the entrepreneurial journey. Forty percent of investors on LetsVenture are first-time investors, people who are not new to ventures but did not have an easy route to start investing in startups.

We also see almost every emerging tech and Tier-2 city creating its own small angel group―a trend which could result in more localized startups being funded in spaces that could be very city specific. Whether these will result in large business being born in smaller cities is yet to be validated.

By the nature of what is emerging in India, an online marketplace is helping to create a level playing field for angel investors. Whether it is someone in the US or someone in Manila, or Australia, or Ludhiana or Delhi, everyone has a way to view what entrepreneurs are creating in India. Online webex sessions allow all investors to participate in one session in the comfort of their offices or homes, be part of a larger community that is engaged in evaluating and make an informed decision.

Takeaway # 4: Active angel investors want personalized deals

As an online platform, analytics in the backend is being developed to offer personalized recommendations to angel investors based on their sector preference, their investing preferences and the social circles they invest with. This helps with faster deal closure as the probability for a startup of finding an investor who might be interested in investing is way higher.

We recently organized the first Angel Summit of India - LetsIgnite. A lot of interesting insights came out of the conference. Here is what Naveen Tewari, Founder and CEO of Inmobi, and an active angel investor, said in his keynote address.