To gain an insider’s view on the angel investing scenario in India, Divya M. Chandramouli from The Smart CEO caught up with co-founder, Sasha Mirchandani.
Take us through the inception of Mumbai Angels and the vision behind establishing the network?
I began as an Angel investor back in 1999 but decided to take a break in 2004. I was also reluctant to invest large amounts of capital for short periods of time. After a short hiatus, my good friend Prashant Choksy and I decided to join an angel investment club but were surprised to see that none existed in India. So, we created the Mumbai Angels in 2006 as a two-member strong organisation. Today, we have over 85 members and there are many more, waiting in line.
Our vision behind establishing the network was to plug the need that entrepreneurs have for capital in India. Most entrepreneurs start with a small seed capital of close to Rs 25 lakh. At the early stage, several venture capitalists are hesitant to invest in them while banks need them to produce collateral. This is where angel investors step in. If you look at the U.S., the seed stage investment network has a greater presence than the venture capitalist network, in India, that is hardly the case.
What is your approach on an investment, your modus operandi?
On a monthly basis, we receive proposals by the hundreds. We have a panel that draws up a shortlist and presents the same to our pre-screening committee. This includes full time employees and even enterprising interns that we have on board from some of the most globally renowned institutions. The shortlist is further narrowed down to 24 – 26 companies from which four are invited to make a pitch in Mumbai. This process is repeated every 45 days.
For those companies making a pitch to our panel of investors, we provide them with a structured template and they are asked to adhere to a time limit of 15 minutes. The pitch is followed by a question and answer session; post which, the investors who are interested exchange information with the company. The period of due diligence can last upto 40 days after which the interested investors are requested to hand over their investment cheques directly to the company. We are not a fund and follow a direct investment policy where individual investors receive equity of the companies they invest in. We also insist that there is one representative from the investor’s side who is a part of the receiving company’s board of directors. The Mumbai Angels network receives no commission in this process. We are here to help create an able platform and we do this for free.
Do you follow a hands-on approach with the companies you invest in?
We do take an interest in the companies, though we do not do so on a daily basis. We are these to open doors or help with strategy as and when required.
How long are angels willing to wait to exit an investment? Do angel investors typically exit their stake during an IPO or company sale?
Typically, we are looking at a time frame of about five to eight years. There are investments where we have exited earlier, from anywhere upto a year or three. As for the exact time of investment, we would like to leave when everyone else does.
What is the greatest benefit to an investor, being a part of this network?
SM There is huge benefit for us as we have individuals with varied backgrounds who come together, through the network. These individuals have immense experience that we can leverage. There is also the potential of cracking more deals using the strength of the group. Personally, it has been phenomenal; otherwise I would not be here.
Take us through your association with some of the most interesting companies you have backed?
One of the most interesting companies we have invested in is InMobi (previously known as mKhoj). This was a company that kept changing its game plan. They began with the idea of mobile searches and explored the option of going mobile with business deals. They changed their plan one final time and established a mobile platform for advertising. We liked them and made an investment of $ 500,000 in them, where I was one of the investors. In a span of three years, their performance was superb and we were able to exit with 25 times our capital. I still have equity in the company and take active interest in their performance.
According to you, which sectors are the hottest to invest in?
As we have investors with varied backgrounds, we invest across sectors. We take care to see that sectors we invest in are not capital intensive.
At present, the angel investors’ community in India is fairly small? Do you see the numbers growing in the coming years?
There is no choice, if this community does not grow and encourage entrepreneurs, India will not move forward. My father grew his business by relying on the sale of his real estate. In today’s times, there are very few individuals who can afford to do the same. If angel investors do not provide capital at the seed stage, where do these entrepreneurs go?
Your advice to young entrepreneurs who are looking to succeed?
You are in the right place at the right time so thing big, dream big and get going.