Angel Investment Guide - A new asset class and portfolio for HNI/ SME Owners

Angel Investment Guide - A new asset class and portfolio for HNI/ SME Owners. Angel investments in Indian companies have entered a golden period. Despite the volatility brought in by the pandemic, angel investments in India saw a 20-22 percent increase in the year 2021-22. Touted as one of the earliest equity investments in startups, here is a simple guide by Compliance Calendar that traces the value of angel investments for both the investors, often high-net-worth individuals as well as the receivers - small and medium companies.
 
Deciphering the funding jargon - Seed funding, Angel investment, and Venture capital funds

Shark Tank India, has popularised financial jargon and brought it to the larger consumer landscape. While we often hear of these investment styles, many of us may not know what they signify.

Angel Investors usually are those investing in the first round of funding for a startup. They have the highest potential for gains and bear the most risk since the company is still in very nascent stages.

Seed funding refers to a round of raising money, which may also include angel funding, and often be larger in its financial and investment outlook. The seed round may also involve diluting a larger portion of equity if it involves many angel investors.

The next stage is called Series A Stage, where a large venture capital fund, banks or debt fund companies may begin to invest in the company.

Every subsequent stage of equity investment from here on, is called Series B, C, D and E.

Why should your SME business consider Angel investment?   Angel investors are individuals with a large financial base who invest their money into a promising startup, hoping to make large gains by way of their early investment in the company.
Here are a few advantages of having an Angel investor on board:

Finding a strong capital base: Having an Angel investor in the early stages can help arrange a financial base for putting your business together. Whether it’s money for building prototypes, testing software, or setting up a factor, an Angel investor can bring in much-needed funds.

Proof of trust in the company: An Angel investor on board can strengthen your pitch for further rounds of investments. It motivates other investors and gives out a strong message of trust in the future of the company.

Mentorship: While advising our diverse clientele at Compliance Calendar, we often notice founders and entrepreneurs facing dilemmas in operational and financing decision-making. An angel investor can be a helpful source when a business is in need of neutral expertise from the outside.

Other than these, a well-connected high net worth individual may also help you find potential suppliers, establish marketing channels and expand outreach.

Compliance Calendar’s Guide for High-Net-Worth Individuals - Sectors with promising angel investment in India include:

Technology: India's technology sector is booming, and there are many startups in this space that are in need of funding. With schemes like Production Linked Incentive for electronics, semiconductors, Make in India, and Atmanirbhar Bharat, areas such as artificial intelligence, blockchain, and cybersecurity are particularly promising.

Healthcare: India's healthcare sector is also growing rapidly, with India becoming the vaccine maker of the world. There exists a novel opportunity for investments in areas such as telemedicine, digital and rural health, and medical devices.

Education: With a large and growing population, India has a significant need for education and training. Startups in the tech space are well-positioned to address this need, and there is a growing demand for funding in this sector.

Fintech: India's financial technology sector is rapidly evolving, and there are many opportunities for investment in areas such as mobile payments, lending, and insurance.

Sustainability: As the India@47 vision becomes increasingly focused on sustainability, there is a growing need for startups that are focused on environmental and social impact. Startups in areas such as renewable energy, waste management, and sustainable agriculture are in need of investment.

Angel Investment - Tracing the Process in India for Investors and Companies

Finding potential investments:

Angel investors can find potential investments through their personal networks, referrals from other investors, online platforms, or attending startup events and conferences.

In the tech-age, a small or medium business can lookout for an investor anywhere - from leveraging one’s network on LinkedIn, to personal contacts on Instagram, every contact is a possibility to reach the right investor.

Initial screening: Once a potential investment is identified, the angel investor could do an initial screening of the startup to determine whether it fits their investment criteria. This may include reviewing the business plan, financials, and market research.

We typically advise our startup clientele to be prepared with key metrics of their business for their pitch deck - such as their vision, financial and operational plans, market scope and analysing competitors.

Startups Funding has been the initial fuel to run your startup and right knowledge can help you to tap funding from initial investors easily. You are always recommended to speak to an expert who has been on the CapTable and know how to crack your first cheque.

Due Diligence: Once the startup passes the initial screening, the angel investor will conduct more in-depth due diligence to assess the potential risks and returns of the investment. This may include reviewing legal documents, talking to customers and suppliers, and conducting market research.

- A startup must be abreast of laws applicable

Negotiating terms and formulating a term sheet: Once due diligence is complete, the angel investor will negotiate the terms of the investment with the startup, including the amount of funding, equity ownership, and any other conditions.

Investment closing: If both parties agree to the terms, the investment is finalised, and the angel investor will provide funding to the startup based on the term sheet.

Businesses must note that the term sheet is a temporary and non-binding document. The financial repercussions of any equity structure must be discussed thoroughly with a financial expert___________________________________________________________________________ Connect with our highly qualified team of chartered accountants, company secretaries and lawyers, to get the best financial advice on angel investments for your portfolio. For any queries, feel free to reach out at info@ccoffice.in or connect at +91 9988424211

Angel Investment Guide - A new asset class and portfolio for HNI/ SME Owners

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