How many times have we seen on Shark Tank that founders end up choosing an investor, whose deal is worse in terms of valuation, but much better in terms of mentorship and synergy? The fact is, most founders are ready to compromise on their valuation for the much-needed knowledge and network of the investors. Let’s discuss a bit about the ways in which you can contribute beyond the CAPITAL that you bring in:
Knowledge Benefit
There are 2 forms of knowledge you can provide viz. Hard Knowledge and Soft Knowledge.
Domain expertise translates into Hard Knowledge, i.e. knowing in-depth about a specific field of business. For eg. Consider you’ve been successfully running a food & beverage company for decades because of which you’ve developed a deep expertise of managing and growing consumer brands. In that case, you’re in a great position to add value to B2C startups. Take for e.g., Jitendra Gupta (Ex-PayU, founder of Jupiter- neo bank and Citrus payment solutions) has invested in 75 rounds out of which 44% have been in the Fintech domain.
Functional expertise translates into Soft Knowledge, i.e. the capability to manage the business. For eg. Consider that you’ve been in the helm of affairs of several companies as their marketing head and CMO. In that case, you can guide startups with their marketing efforts. You’ll relate this with Aman Gupta, co-founder and CMO of BoAt Lifestyle and one of the renowned sharks at Shark Tank India. Most of his investment pursuits at the show revolve around opportunities where he can provide marketing mentorship to promising consumer brands.
Network Benefit
You can play a role in assisting the entrepreneur connect with key customers, key suppliers, strategic partners or explore other geographies or you can help the startups to access the next round of funding or help execute a trade sale exit (acquisition). For e.g. a B2B SaaS startup, that makes software for the banking sector will be keen to have you as an Angel investor if you’re well connected with banks and financial institutions.
Credibility Benefit
You may be so highly reputed such that your investment in a startup would automatically imply that the venture/product/tech is of high quality and worthy of doing business with or investing into. Take for e.g. Sachin Bansal & Binny Bansal, co-founders of ecommerce major Flipkart, invested ₹3 Crore each in EV startup Ather Energy’s seed round, at a ₹37 Crore valuation. Thereafter, Tiger Global Management (also early investor at Flipkart) and Hero MotoCorp invested huge amounts into the startup’s subsequent funding rounds, and today it’s valued at ₹5,000 Crores +.
Find answers to other questions relating to Angel investing in India:
This article is a part of the Jun'24 edition of our Startup Newsletter. Here's the complete publication:
