Updated: 4 days ago
What's the investment mantra of Angel Investors?
In this episode, we interview Chandrashekar K and Amit Kumar, both angel investors, to ask them about their investment mantras. The Webinar was organised by ah! Ventures as a part of "Investor talks series" and I hosted the event.
VIDEO TRANSCRIPT (autogenerated)
00:00:02 Dr Saurabh Bhatia We're going to start the webinar now. Very good afternoon to all of you. I am Dr. Sato Badia and I'm going to be your host for investor doc series started by Avengers. Today I have two guests with me, John shaker and Kumar who will be providing us with their pearls of wisdom. We already have, enough attendees. So, I, I request to introduce themselves and maybe you can share, let's start with you.
00:00:35 Chandrashekar Oh, for this wonderful opportunity. Thank you. Thank you to all ventures and a very good afternoon to all of you. I bet app's truly a pleasure being part of this panel. My basic qualification is, in finance. I'm a chartered accountant and I have multiple other qualifications, both in finance and management areas. I started with ExxonMobil was with them for four years. From there, I went to KPMG and my last stint as an employee was with Yardley of London. Yardi of London was just one brand, but we had almost 40 brands in the portfolio was UK based. And, I chose to stay with them for almost close to 10 years. Reason being, I was also responsible for a mandate besides being the group Ft. And, the m&a gave me a phenomenal opportunity to meet a lot of bankers venture capital firms, the hedge funds, the private equity guys, a lot of law firms, which is where I learned.
00:01:29 Chandrashekar How do you structure a transaction? How do you even say no? How do you look at different consideration or not? And I think that was phenomenal. With this group, I did almost 11 acquisitions and four divestments. The last thing I did was selling the group to Leanne farm, which is a billion dollar Hong Kong based group. This all happened in December, 2012, but as early as 2000 level, somewhere the entrepreneurial bug bit me and I was financing my chances to become an entrepreneur. I was super glad, that I'm the sale happen because that led me, to the journey of being an entrepreneur. After six months of transition, I started a new wall in June, 2013 and otherwise, advisory foam. And we have two verticals. One is Edmund de buy-side or sell-side, and the second is fundraise and we are sector agnostic. In the last seven plus years, we have been doing transactions across various segments.
00:02:20 Chandrashekar I know this session is all about angel investment. Let me come back, to when I become angel investor. It was end of 2017 and I know lunged or took that courage, to become angel investor invested in a business in over chat operations, both in us and India, health tech, unfortunately got busted, but that's okay. You know, because that's how you learn. Then, 2018, I invested in a couple of businesses. And then also Mr. Denote angel fund 2019, did some direct investments, strangely 2020, which we call as a COVID year. I did many more investments and continue to do investments. What I'm trying to tell this, I'm.
Not doing my investments enough faced manner. I'm going to stop that. That's my. How about you?
00:03:09 Amit Kumar The extended checker. I think it's a fellow chartered accountant, so good to have somebody on the panel of the tableting on it as well. That's the qualification that I have, honestly, I've never done things which typically do, and that's the reason most of the people say that they don't believe that I've done may see it, but then I give them, give my membership number to them. They go and check on the internet and then they typically believe so started as a risk management professional in the year 2002, 2003, when I did my CA and started my own firm or the work with a management consulting firm for a couple of years, and then moved on for about 10, 11 years. I always feel in 10, 11 years is the time when you typically need to reinvent yourself or also to experiment in life. If you have done decently well in life, by the way.
00:03:55 Amit Kumar That is what happened in 2014, when a couple of friends of mine was starting a company called just by life, that was into B2B. What would I manage today? And we also attempted that way back in 2015, loved taking risks. That probably is also shown in the way I love formula one. I love playing tennis. I've been a national level tennis player. So I'm typically very adventurous. That's why I came on this side of the table, no inkling of how to raise funds, what startups are all about, took up the CFO position of the company. And, God was very kind, the times were good. I think that adventurous streak continued and we raised $30 million in 2015. That is part of series a and Russ in fact, the highest cities in the country in that particular year and probably second or third highest in Asia, because we raised money on an idea and that particular experience in startups to begin with, I think it really unlocked the more adventurous or sending me when I think I began fearless.
00:05:00 Amit Kumar I thought that if you can think big, even achieve big, but things obviously sometimes don't go as per plan in 2017 because of pivoting repivoting. As they always say, the idea may be great, but the execution really matters. We always thought we are out of time. In 2017, I quit in Jan or I think March 17, being the CFO. You're the first one to know what's there in the bank account. We were trying to raise our second round of funding, but unfortunately the company folded up in November 17, from there, since I love building businesses and help people build businesses, I helped a friend of mine, build, an SME consulting practice, right from a turnover of seven clots. At that one time they were doing executive coaching and I told him that's not a scalable business. We got into SME consulting and about one and a half years time scale that business from seven to 25 pounds of turnover.
00:05:53 Amit Kumar Then, I always believe, although you're a profitability should be there or at least the path to profitability needs to be there. And, that was not in sync with my partner. I told him you can continue the business. I think I'm going to be going and trying something new again, because if the basic values attitude, philosophy does not matter that you will learn, never cannot work with anybody. So, RBG harsher, the founders of our vendors have, I've known them since a long time. In fact, I've known them since the time were not even married. I had that crazy share of crazy parties. We got together, to take our ventures from where it was a couple of years ago to what it was there today or what it is here today. And, angel investing for me, obviously since I'm a part of our ventures come say naturally, not as a company, but today, individually also have about 10 investments in about, six, seven months time.
00:06:47 Amit Kumar Because once you start investing, you just love doing that because you love your ecosystem. We are a part of the third largest ecosystem in the world, extremely proud of that. I think I'm privileged to be a part of this ecosystem overview.
00:07:02 Dr Saurabh Bhatia Thank you. You're already getting questions about those crazy parties that you mentioned. Maybe you will give out your phone number at the end of the webinar.
00:07:12 Amit Kumar A hundred percent.
00:07:15 Dr Saurabh Bhatia Great. Thanks a lot guys for joining. The kind of, particularly you have in your profession and career is like mind boggling. I'm sure that the entire set of attendees today are in for a treat. The main topic for today is what is your investment mantra? So, it's a huge topic. It can be uncertain two minutes or probably you can take up half an hour, but at the same time, I'll probably start with John shaker. I request him to, share with us that when he starts thinking of investing, what are the, that goes mantra or mantras that he keeps in mind.
00:08:00 Chandrashekar I must admit that know agent investment is addictive, so we don't worry about it. I'll be just heard from him, but also it just gives the feel that I guess there is an adventure. If you are not risk averse, you will love the journey. I think quickly, come to mind, I've always believed that angel investment as a marathon. I've never done a one day to look at short-term returns. I've given a timeframe of five to eight years. That's why I know I want to be bold as a BitSight, I mean, it's something that you have to put in your system if you want to be an investor as angel. I think patience is required because building anything solid, anything worthy takes time. So angel investment is a longterm bet. It's definitely not a short-term net and to build a good portfolio also takes time. That's number one second is I think, how I started angel investment.
00:08:52 Chandrashekar I think I was, looking at the play money that I had, which is the excess cash I had. I started looking at, how can I, use that money into an alternate investment asset. That's all another confidence game that I should become angel investor. I was fully aware that funding any startup is like, paying an expensive, you should fee because, you're paying yourself, pinch a kid. I was fully aware of that, but of course the belief was also that no one will take away all the sins that he committed on agent investment. I think that was the greatest, belief I had probably that's the month, which I continue to believe over a period of time. What I've done is I've been trying to focus on each and every investment as if that's the only one I'm going to do. I think that gave me a lot of discipline that gave me the confidence to space myself by my seven items of investment.
00:09:44 Chandrashekar And, I don't get carried away. Whenever I hear news about a particular sector or industry, saying that it gets going and also great. I'm not in the moment of blame. I keep telling myself, that, if something is moving big, I'm not going to, get a simply you attached to that. Rather not let me apply the science part, which is basically the data, because we are all, because I'm at this that I can save it all. All the CA communities we'll be looking at data big time, the market, big time. The art is basically finding the right or the amazing at all on those. Co-founders looking at, how cohesive they are. I think what does happen during, there's investment journey is that I become very, intuitive, rather than impulsive because palletize the hotel talk, like whenever you look at an opportunity, there was this herd mentality, or maybe, it must at night, but I think over a period of time in a board and the herd mentality, I looked at, who was the lead investor? If there was a syndicate, who was a syndicator? I think that gave me a greater understanding of how you invest, which means from FOMO, which is the fear of missing out.
00:10:50 Chandrashekar I became a Jomo, the joy of missing out it's okay. I think it must where I'm comfortable. That was a month. Or I know that I developed that also helped me to diversify my investments. The last thing I would like to add, is, initially when I started, I was very finicky about valuation. What I mean by that is if, the valuation in my mind and it was high, I would say no, but I think over a period of time, and I realized that if there's an opportunity, which I feel is good, and let's say the validation appeared high. I mean, validation is something that nobody understands, it's an art and science. If there are validation even appeared, I was telling myself not to say no, but probably look into it in a much more deeper because probably the potential game could be exponential. I think that's what has happened with many of the super angels will always, had that panache of, attracting the right investment and probably not making the big girl.
00:11:47 Chandrashekar You don't want to, I'm going to stop there. So thanks up for that.
00:11:54 Dr Saurabh Bhatia Just one quick question on what you said, as you said that, you are not really going to go with the wave and you are no more than Twitter. Does that mean that you will be open to, non wave kind of investments even at a time when a particular sector is not doing particularly well? Particularly? Well,
00:12:17 Chandrashekar The answer is yes, because, engine investment, is definitely adventurous. And, if you're only trying to bet on things, which we are looking at, the mainstays a pain that I don't think angel investment is something that one can get into engine must is all about, looking at something and believing the disruption, something, that is going to create a wave, probably, in the future. And they, don't not at the moment. I don't want to get carried away by the existing, in a, whatever wave is happening. Probably look at opportunities that, which are at the moment, but I believe, could create a distance.
00:12:52 Dr Saurabh Bhatia Okay. All the founders in the attendee group, please note down John Shaker's name, because if you have received any informal, any comment from any particular venture that this sector is overcrowded, or this sector is not so hard right now, John shaker is the Guidewire approach. Now coming to you and with what is your investment mantra?
00:13:16 Amit Kumar Well, I think, we bet a bit time on the founder. So, so I follow typically the four P or three people in simple if I ever to say. I think, temperature has really put in a lot of things, on the table already, right? The mantra is if I were to recalculate everything, I think everything is there on the table, but yes, you need to be passionate. The first feed that I follow is that if every investment we evaluated, very passionate and right, like it rightly said, if there is a lead or there is no lead, et cetera, it does not really matter. I think it really depends upon, analyzing it on your own. So foot in the full fat passion. And, and please understand the fact that when you say passion, the passion will always be rubbing onto others as well. That is how you're going to be attracting others investments also.
00:14:00 Amit Kumar So very important. That is the first thing I do. I do not just look at one investment and all the opportunity and say, know, this is useless. I don't want to look at it because I as entrepreneurs, I respect everybody. First of all, when a person becomes an entrepreneur, my respect anyways goes up for that person because the kind of risk that person is taking is humongous. It is good that we evaluate everything. That is typically what we do as I went to is also who sir comes to us, whether it is an idea, whether it is early stage, whether it is late stage, we will evaluate everybody and we will reply to everybody. That is very clear in our head that, give that respect. That is very, we say that keep that passion of being in the startup ecosystem all the way, because it is going to be amazing.
00:14:47 Amit Kumar Second important thing. I think, which we continuously need to do, we need to persist by when I say we need to persist is to persist, to get good opportunities. Initially when I also started, I could get excited with every opportunity and it is the buzz and the energy of the ecosystem that basically again, grabs onto you. That is how you feel about, but then over a period of time, you understand that you have only X amount of money and you really cannot invest all the money in startups, because then, there's a possibility that you may lose all the money or you may make 10, 20, 30 hours of it. Having said that persistence is the key that I've always followed that persist with trying to find out good opportunities and deals. Finally, the last period typically is it's always stays with me, is patients. It's not only our investments, but in life also, I'm extremely patient with everything, whether you have done well in life, not whether it is coming to you early, late, but you want to wait for something and investment.
00:15:45 Amit Kumar Obviously when we say the word investment, it selves means patients or else you could be a trader. Now in startup ecosystem, you cannot be a trader unless, and until you are getting some returns or some exit at a very early stage, if you are extremely lucky, you will probably get it. In about one year's time, two years' time. When one of the companies have invested, it's been like four months, they're already talking to me. Do you want to exit now? Because there's somebody coming and putting in good amount of money at a specific valuation, I've told them I'm going to be holding on because I don't want to exit. So, so passion, persistence, and patience are the three words that I think, are there for me. When I look at investing and as January 2nd, rightly put, I have not even put a number of years related to an investment, but even if you go by normal trends, I think you should be staying put at least four, five years to get good returns.
00:16:41 Amit Kumar When you're building a portfolio, you should look at long-term investments. Only audience. I said, it is just trading or you're just in the moment you're playing soccer. That is not what startup investing is all about. Sort of overdue,
00:16:56 Dr Saurabh Bhatia I think so much. Thanks a lot for that. Now, this mantra that you would have told us, this is a good segue for me to ask that now that the founders know that what is your base on which you decide things? The important question that comes up is that, what do you look at when you are evaluating a stock and what do you look for in startups? Is it the idea? Is it the revenue or the valuation? Is it the founder? Is it the pedigree? What do you look at?
00:17:27 Amit Kumar Okay, so let's end Meg. Well, first if that's okay. Again, a three piece to this. I don't know whether, it is just by luck or by chance that I landed in prepared for it. Yeah, but the three people in this also works very well. The first P obviously is people, although, sometime back it was supposed to be product, but until investing per se, I think let's look at people first. My partner has shared, always is a very strong proponent of the fact that the three principle can be people and people in early stage investments. Right? So, but having said that, I believe that team is going to be extremely important in early stage angel investments. If you believe that person or the team or the founders are going to be the ones who can execute the plan that they've shown on paper. Okay. You can have various interactions with them, formal informal, understand whether they have deep knowledge about what they're building, how the market is going to behave, et cetera.
00:18:29 Amit Kumar I think 50% of the battle is typically one. If you have to say the wastage that we give in early-stage investments, if people, I would give at least 50% wastage, which means that the balance to are going to be split between product and potential the other two piece. If the product is strong and when I say product does not necessarily mean it is a product, which you are tangently building, but even if you're building a software, which is solid, if you understand how you've built it and me being a non-technical person, I will just take help from my friends, from my family members who are technical people, and I'm lucky to have a BG as my partner. If I have to bounce off anything with regards to technology, just speak to him and you'll find out whether these people are trying to, love their way away, or are they trying to build something which is obviously an old technology, et cetera.
00:19:17 Amit Kumar So product makes an important, aspect. When I look at investing. Finally, when I look at potential, if that product does not have great potential or potential to scale, because that is what angel investment is all about orals, I would go and invest in gold real estate stock market, if I want a typical average or median returns. I would look at potential if it has got potential to scale, then, I will definitely look at investing in that company. People, product and potential add my three piece that I look. If the people are good, I think, half the battle is won. I think I generally take a decision if I really liked the founders to undersheriff.
00:20:00 Dr Saurabh Bhatia Thanks summit for those three PS first and three PS, but also now we have six PS. I hope somebody is taking notes of all of these PS. Jen chicken now onto you, what do you look at when you are evaluating a startup? and you want to invest in it?
00:20:18 Chandrashekar That's what I just loved water, Because we are talking the piece, I'll add one more thing. In my case, I'm looking at something called the fit, the problem solution fit, which means yes, we need to look at the founder when I say, look, when I say founder and the founder is all about what does, their domain understanding? are they coachable? Are they teachable? Are they correctable? I think, all that, matters alone. For me, the first thing is how will they articulate you the solution, that they are coming up, for the problem that they have defined. I think that matters to me a lot. Why I'm saying this is because I think that is the first curation for one, to understand whether the business can be faster, cheaper, better as the business progresses, because we all discuss about scalability end of the day, that problem solution fit and are truly, helps us understand how scalable the opportunity is.
00:21:11 Chandrashekar The second important aspect for me is this story. I love to hear, what the founders or the co-founding team wants to discuss, in terms of, how they started the journey. The why is very important for me, why they started the journey, the purpose. When I'm telling, when I'm mentioning the word story, I'm not, looking at their communication style or how will they communicate. I want to understand how they are able to tell it, also sell it in their own, no, it's not about, using some, fantastic, innovative communicate. I'm not, I'm looking at a simple communication for me to understand how truly they believe in what they are doing. For me, the problem solution fit and the story is very important. Of course, I look at unfair advantage because I want to see, how well the founder, is in terms of, the other similar businesses, that I can think of, is this father going to be one among, the top 10 or top 15?
00:22:10 Chandrashekar Definitely the market is very important. The market in a growing, let's say, average 20% growth, eight or higher, product. I mentioned about the product. The performance of the product is all about, is it 10 X better in terms of how well it performs, also in all, when it comes to product or service, we are looking at, what is the cost of acquiring the customers? What is the lifetime value of the customer? Because if those are metrics, a much more, in a relevant, it gives a greater confidence. Yes, initially, the LTV by cat may not be higher, but at least if it, if the intention is to ensure that it is on the right side, I think that is motivating. More importantly is, Candace guys, you don't have the confidence to face the competition and not get deterred by it. I always look at, what is the cohesiveness, that is there in the team to look at the competition and also admire the competition because whenever some discussions we have at startups, when they make the statement competition in may, Hey, that actually in all doesn't all go well, but with most of angel investors, because there isn't that competition, if not direct and at the same time, when you're looking at competition, I think the whole idea is what is the market size that we are talking of? Let's say the market sizes, just as an example, the trillion dollar, I think that can accommodate, so many place.
00:23:34 Chandrashekar I think that is a judgment. I'm looking at for me to gain the confidence that yes, it's worth, betting on these guys. How would they hustle? how good, they believe, that they can come with a group mindset, all that matters a lot.
00:23:49 Dr Saurabh Bhatia Thanks Jen Shiga. So, when you were talking about how passionate they are and how involved they are with the concept that the product and it's a solution, I was just thinking of something known as my babies syndrome in which the common issue is that, the founder is so attached to his idea is so attached to his solution, that they are not willing to pivot towards what an investor might be suggesting or which might be also the common sense for a third party, for a neutral party, seeing the market evaluations or the trend in the market. So, Jen checker, how will you, or how do you actually handle such founders who are very passionate about the idea, but at the same time, it also brings in of a distance to pivot.
00:24:41 Chandrashekar A soda. It's so beautiful. Now, when you said that, because if, entrepreneurs are not agile, if they don't understand what is the current situation, and they're not able to pivot, to the situation, then I think, most entrepreneurs would find it difficult just as you said, the baby syndrome, there'll be given, they will just get attached to their baby, not realizing, that, they need to look into waters that reality. I think I, I love what you said. That's why I know I said that when I look at the founders, I want to see how coachable they are, how teachable they are correctable. They are, because if that is not there, that actually, does it all go well with angel investors? I'm not saying that, the agent must have used to be a coach or get someone who says, that I know it all. I'm not saying that, but I think, over a period of time, I've realized that there is something called 33% rule, which is you want to speak only 33%, let the founders and the founding team speak 67% so that you're able to gauge and understand how well they are disciplined in their thinking and how well they're amenable to some of the ideas or suggestions they know that is being thrown at them.
00:25:48 Chandrashekar I think that is something, that truly, determines how well they are capable of pivoting. More importantly, I think if, the entrepreneurs are able to appreciate metrics. When I say metrics, I'm not speaking about the vanity metrics, because unfortunately some of the entrepreneurs, they get carried away by just providing the metrics, which make, the crowd feel good, but that is not the relevant one. I say about actionable metrics, I'm discussing about the specific repeatable metrics and all that they need to demonstrate because that will help them also understand, are they in the right or partisans because numbers don't lie. If your torture data long enough, it will confess to anything that's the reality. I think, if the entrepreneurs, truly appreciate, about, measuring themselves, and this is not just for the heck of, saying that you need to be tuned to numbers. I think numbers definitely don't lie.
00:26:45 Chandrashekar Data is the new oil, as they say. Therefore, I think if they are tuned to that will truly help them understand how to pivot probably that makes it easier, for angel investors or any of the investors to come and work with them. That would be my take.
00:26:59 Dr Saurabh Bhatia Great, great answer, John shaker. I'm, I'm really glad that you answered it in such a comprehensive way, because for the founders, it's important that most of the founders, most of the young entrepreneurs, they are very passionate about it, but it's equally important for them to see, what the numbers and what the data is suggesting and be agile to capture the market, for their respective products. Guys, now that we are halfway into the, into this webinar and, we are all warmed up. I want to bring over one of the questions which has been asked. It's a question which I'm already saying doesn't have any correct answer, but it has been asked a thousand times to everyone. I did tell the, ask the question that, how do you decide on valuation of a startup when there is no revenue, for example, after building a mobile lab. How do you handle that and check it, I'll start with you.
00:27:57 Chandrashekar This has happened to me and one of the simplest approach, which I've bodily, taken as a decision is let's keep it as a convertible round. Let's not, look at the valuation at the moment. Let's keep it as a discovery, evaluation, something, that doesn't all go well again with the engine investors, because when I'm investing, I'm not investing by myself. I also, I know, bringing in others, I'm also part of, few platforms. I need to respect, you know, those. So, if you have to look at the valuation, number one is, can we just look at a convertible, but the second is if you're able to predict some of the metrics, probably the metrics, can lead to our evaluation. For example, based on the number of users, can have a multiplier and ensure that multiplier with a value leads to our evaluation. That that's a good way of even looking at, what should be though, pre-money valuation.
00:28:46 Chandrashekar And, this is where no, I want the entrepreneurs, whether they are able to look at the big picture, do they have the discipline in terms of even understanding one year down the line, three years down the line, five years down the line, where I'm going to because the larger, they're able to think for themselves, that only means, that is a potential. I mean, I'm gonna use the word be the potential that is there for the business. I think to me, the simplest is convertible, which has 100 X, I don't know what VC does. Okay. The safe route, the ICF route. This again, does use a multiplier on some of the metrics. If you don't have a revenue and probably that's a good way to ensure that you're able to come up with evaluation and this is happening in my case, that has happened. I'm sure Norman would, you know,
00:29:32 Dr Saurabh Bhatia Thanks a lot. John shaker, what's your take on that? I think, you guys covered this pretty nicely, the convertible part and the multiplier.
00:29:42 Speaker 3 I would say that also look at what are the typical trends that are going in the market. A lot of things really depend on that if in the similar industry or similar domain in the same sector, if there are some deals, very early stage deals that have happened, or you are typically privy to that. Those are the ones which will definitely, build and also give you a multiplier in terms of the revenue or projections, because there are no revenues, it's only an idea. It's only a PPD that somebody has typically made. The second, I always think there are flavors of the season that are going on, right? So if there are certain flavors of the season today, whether it is, FinTech, health tech, consumer tech, Eva being the flavor of the season again. These are four or five flavors that are currently going on at that point in time.
00:30:28 Speaker 3 It is not only about the fact that how much money does the founder want, and at what valuation it is also upon the fact that if the investors are very keen to invest in that particular sector, and that is where sometimes the valuations, they get derived now valuations, what gender sugar is stored can be based on the revenue numbers into a MultiPlan. I'm talking about market multiplier. We are also talking about the fact there's an Excel sheet that can be made, and there can be a discounted cash flow method, which is the most famous method for doing a valuation. Trust me in real life, what really happens, who needs, the investment to happen more badly does the founder want them, once the money more badly, or the investor is really keen to put in the money that demand and supply when that matters, typically has to happen.
00:31:22 Speaker 3 The valuation is derived at that very point in time. And, I can give you an example and not naming the company though. It's a very recent investment that we have made in that particular space. It's a very hot space at that point in time, any investor went to with just the prototype and we asked for a double digit valuation, nobody questioned the valuation at all in everybody coming treatment, because they want to be a part of something which is disruptive a part of something, which is going to make a big impact in our lives, if not five, 10 years from now. And, they looked at, the pay times, the poison patrons that the company has the look that the founders, whether they have the deep technical knowledge on the product and what their go to market is going to be. Based on that, they had the comfort saying, okay, fair enough.
00:32:10 Speaker 3 This is a very hot sector at this point in time. Let us bet on it at a particular valuation, no questions asked and the deal happened. I, so all in all a very technical answer by temperature and me from a technical point of view or what really happens academically, but in realistically, it is just a demand and supply game over a period of time. You'll figure out that if both of them sit on the table and evaluation is decided, the deal just happens. So what we'll do, so thanks a.
00:32:40 Dr Saurabh Bhatia Lot. I met, founders in the group, the message to you is play hard to get, no matter how much you need the money, be like a duck paddling, like crazy under the water, but appearing like a very calm that over the surface. I think that's the message of it is given how many do you have, let out, let the cat out of the bag. Now you are going to get all the founders are going to play hard to get with you now.
00:33:05 Speaker 3 All the best to them.
00:33:08 Dr Saurabh Bhatia Okay. Thanks guys. So, I mean, I just, redirect another question to you that is these days we hear a lot about lead investor and other investors. A lot of investors say, yes, I'm ready to invest some money, but who's the lead investor and how much is he or she, or they investing. It seems that sometimes we are able to gather, quite a few angel investors, but none of them is willing to put in the money unless, some big investor or so to say a lead investor comes in. So, what is your take on this phenomenon? And, how, what is your advice for founders to, should they just look for big investors who can become lead? What lead investors, or how do they, how should they go about this?
00:33:55 Speaker 3 All right. A lead and follow, or a follower investor. I think this is the term that is being used. I think more in the VC space, to be honest with you and not so much in the engine space, because the ticket sizes are smaller. Having said that a lead investor typically will be the person who probably understands the space better and also has expertise in that particular sector. Like if there was an investment that has to take place in the based on product technical product or something that has been created, I may or may not take the lead investing, whether it is 10 legs, 15 legs, 20 languages. I would really depend on safe people in my group, whom I generally regularly invest with so that they can evaluate that particular sector. If they are taking the lead, I get that comfort as the follower or as a follower or an investor who follows these people to do it.
00:34:50 Speaker 3 Now I have experience in the e-commerce sector, or maybe somebody is building a FinTech product. That is the point where other people depend on our judgment. That is where you need to take a lead to typically figure out if you think that you are going to make an investment, a lot of other people, friends, family, your business partners, et cetera, will follow your judgment. It really depends upon the sector that the investment is coming to, from. So that is one part of it. When it comes to VCs, they have their own fund philosophies, which they clearly follow, whether it is for, with respect to check sizes, whether it is with respect to sectors and whether it is with respect to the fact, even that whether they will only do lead investments, or there will be following investments. So everything is possible. It is a matter of being a permutation combination for every different investment.
00:35:43 Speaker 3 Now, when it comes to the founders, I don't think. They should be only looking for a lead investor because sometimes they get soft commitments from people which itself gives a lot of confidence. For some lead investor to later, come on and invest, right? So suppose you are doing a million dollar investment, and there are people who said that, okay, we are going to be giving you 20 people who will be provided. There is a lead investor because our investments are smaller in comparison to the other guys, because there may be various reasons. We don't understand the space, or they have textiles. They're smaller, et cetera. That is why we are going to be not the lead investors in this case. At that point in time, when that got, when that thing is taken to the other investors, the confidence of the founder is absolutely skyrocketing because at least it's 30% around is soft committed.
00:36:27 Speaker 3 And, and if it is a good name, right? So that makes more of a difference. I don't think so, there should be any kind of a philosophy that any of the founders should follow wherever you are getting a commitment, ladies and gentlemen, just take it because it's always better to have, as you say, a burden hand is better than two in the Bush, and that is the philosophy that you should typically follow as a founder.
00:36:51 Dr Saurabh Bhatia Sorry. Thanks so much. So, so effectively what you're saying is that a lead investors presence gives confidence to the following investors and the presence of following investors gives confidence to a lead investor. It's a snowball effect and everybody's giving confidence to everyone else. Then Jen checker your views on this.
00:37:13 Chandrashekar I'll I'll speak specifically from the engine investment angle. And this is my experience. Of course, I've seen it in the newspapers. That super angels typically are the lead investors, because they are able to put in a, reasonable check sizes and become the leading investor, but I'll share some of the experiences that I've gone. I think one of the reason of being angel, I mean, that's why there's a difference with angel VC, whether it's early stage VC or growth stage or late stage, but there's a difference of angel and a VC. The reason being, I think, angel is, we put our money where the mouth is, which means, we are trying to be supportive to the entrepreneurs because they believe in the entrepreneur. We believe, I mean, as Ahmed said, the people we believe in the founder, we believe in the team and therefore we want to ensure that we are able to offer us support, which means we are not just showing, we are actually executing it by an old saying that we will put the money, typically the seed investment, in my experience that has come at such a early stage, is anywhere between 50 to 75 lacks, ?
00:38:17 Chandrashekar So, so it's like, let's say a hundred thousand dollars or a skinny chip, then that is the case. I think, if we believe that, the idea, I know that the entrepreneur has presented it is non-linear, which means that we are going to see some significant, growth, on their idea, because believe that the entrepreneur is going to explore and not do everything and all that is there in the mind to ensure that he's able to hack the growth that gives us a greater confidence for someone within the angels, to say that, okay, I'm going to put up a significantly higher amount, and let's say, I don't have the domain expertise. I'm going to use a subject matter expert to ensure that not I become stronger, but I've got that ability and the confidence to bet on that particular entrepreneur, because I want to put the money by the voters.
00:39:04 Chandrashekar So I think that is bad. I've seen some of the lead investments happening. This has been my personal experience, and I'm an, Oh, I'm super excited about those guys who are able to, believe in the entrepreneur, put the money, and then ensure that, the entire round is closed because, I mean, I've always believed that if you don't invest at this time, probably that opportunity may never come to you because, the business would have gone for next investments and therefore the ticket size, and it may not even suit you. I think, wants you to be also very of the fact that, it's absolutely, our timing when it comes to angel investment. Also, of course, it's an adventure, you got to do your, calculated measures. You've got to take in all those measured risks, but end of the day, I think we got to understand also that we are betting on a disruptive, in a a business because, we always make, you have the statement, right? Elephants are too large to dance.
00:39:59 Chandrashekar The big corporations are not though they've got all the money, all the might. I think, they do not come with a significant disruptive, they don't mess with us because probably there is, a lot of process or bureaucracy, but that's, it that's fair. All these experiments which are done by the startup, needs to be absolutely looked at it from a different angle, probably one or two of those and other bidding, but, certainly becoming a billions and millions of users. I think that is the name of the game know when it comes to the lead angel. So, yes, it can't be done by everybody, but again, I'll go back to what I've been saying at the beginning. This is an adventure. I think it fits, those who are able to take a bet on the entrepreneur because they truly want to support the entrepreneur.
00:40:39 Dr Saurabh Bhatia So, thanks, John. Actually, what do you say is a good, reading point for a question? take a question, which was asked by Praveen and Praveen is asking that what is the optimal ticket size of investment that a startup should expect from angel investors? So I think he's not asking for the upper or lower limit, but he's asking the optimal ticket size. Probably what he means is, generally what does the average, or what is the mean at which the angel investors can invest? Of course, as you may already mentioned, some super angels can be lead investors and they can invest a bigger ticket size, but in your experience, what is the typical size that a startup founder can expect from angel investors?
00:41:27 Chandrashekar So you have to answer that first. I would, say that, whenever we look at any opportunity, we want to truly understand where the money is going. I think that utilization is of paramount importance. To me, the quantum is not have a greater importance. What is so significant to me is where the money is going to be deployed. I'll give you an example. I think when oil raised the first money, if I'm right, it was $50,000, but let's take a recent example when Jupiter, which is a new bank, they raised the seed money was $24 million. If you have to take out another reason, example club, there is almost $2 million from Ceclia surge. I think, the quantum of the money is, absolutely linked in terms of, why you wanted money for where is the usage. I think that should actually be a very important criteria for the entrepreneurs to look at whom should they pitch to.
00:42:26 Chandrashekar I think if we live in a world where there is co-investment happening all the time, I mean, there are angel platforms which invest in all, along with a VC. I mean, VCs are happy enough also the dangers also to be there. I think it's a mix and match, when it comes to the funding world. I think that is a ideology in which entrepreneurs should always have seen that I should first understand that. Based on that number, then I need to decide whom should I pitch to probably if they want to get started, because let's say they have an alpha, or they want to get a better product. I think maybe you're talking a completely different game, probably a $200,000 or half a million dollar, or maybe even a hundred thousand dollars and it could help them, get to them. I think it's more in terms of, the sub-elements of why I need the money I'll be, but I go to understand, why that money for what, how will it be applied? I think those are some of the key things for me to actually understand why an entrepreneur is asking a certain level of.
00:43:24 Speaker 3 Your take on that, having a lot of, experience as an investment banker. So, what is it, what is the apart from the fact that what John sugar has mentioned in your experience, what has been the typical ticket size? So, when we say typical ticket size, I think what you can say is very broad, but what I'll say, what is happening out of our experience, we have had cases. Now, the example in point is the fact that we have got somebody who wants to raise $3 million as seed capital. Now, how does it matter? Because if the founder is fantastic, the product is fantastic. He's already got a million dollars already from angel investors. What putting in one and a half dollars each, I think it's a different story, but there, we have also cases when people are saying we only need 50. That would be the, at that point in time, 10 people putting in five lakh, rupees, each is again, so difficult to define optimal ticket size, but yes, I'd say what's happening in the Indian investment space.
00:44:24 Speaker 3 Maybe that the 2 million, $3 million or $24 million, what he worked as you had mentioned about Jupiter is because there's a second time founders, successful exhibits, et cetera, both are outliers to be sure, but I think anywhere between two to three growers is something that I would say is comfortable angel investment that is happening on various Indian investment platforms and as individually as well. So, so that is the number that I would agree for it so less than about a half a million dollars.
00:44:57 Dr Saurabh Bhatia I think the message for, the founders here is that, the amount can vary and it can vary drastically based on your business model and a sector. The people you are approaching should be based on that. In general, a figure of half a million dollar is probably the typical ticket size that angel investor or investors as a group, will be able to invest in you. So this brings me to.
00:45:27 Chandrashekar Just quickly add to that. Let me just quickly add to that. Also, I think one of the myths that is right in terms of a particular platform, but I think for entrepreneurs, let's say, the ticket size, just as an example, okay, it's a million dollar or $2 million. I think they should look, I had more than a, more than one platform to ensure that they are able to, present them, two different new set of platforms for them to finish the round. In fact, what's happening, in recent times is a platform itself is able to recommend the deal to the other platform. As I'm pretty sure all that jazz, is extremely well connected, with the other platforms, I'm part of DCA to so many of the platforms. I think this is something, that the entrepreneur should understand that they themselves should pitch to various platforms. There are existing platforms you to also take you to the other platforms and therefore never shy away from asking the question, what's your typical size that you do, but if I need to close it all, would you also recommend you go to the other platforms? I think that's the smartest.
00:46:24 Chandrashekar They often are ensuring that their own disclosed.
00:46:27 Dr Saurabh Bhatia Thanks, John chigger. Thanks a lot. So, probably my last question is going to be, I'm going to ask it now. We do get a lot of companies these days, especially now that COVID has been around for more than one year. You get a lot of companies, which are doing an executing their business online. When it becomes an online business, it is possible to tap not only into, Indian customers, but also into, other English speaking countries, predominantly like UK and us and Australia. Several companies approach us, who have customers abroad and their business is being consumed more in other countries than India. My question would be, what is your take as an investor and how will you facilitate, a company whose business is located india, but in small HIPAA, their revenues are mostly coming from other countries.
00:47:31 Chandrashekar Yeah, I think as angel investor, I think we would only be excited to understand that the business is able to generate revenues from the other countries too. I think, if, let's say the business is structured in such a manner that is an Indian entity and probably an entity and also abroad because probably that facilitates them, to do the transaction much more easily, and let's say there is a connection either in the form of a holding company or subsidiary company, the antibody, and always give the option to the engine, start in terms of where they want to enlist, whether they Indian company or outside. There's something called a lot, is the liberalized remittance in our system or the lumps, which will, there's a cap to that. I think the cap is two $50,000 every year, but, that can still happen and terms of an investment from any jail.
00:48:16 Chandrashekar But, to the question specific, where you asked, how can they also be headed by angels? I think, as Avengers or as angels, we are also connected with some of the early stage VCs, if the businesses that is at that stage abroad, Bailey could always refer to them saying that we want to take a look at this opportunity because the customers are coming in from these regions. If you think you're not as wealthy offered, can you kinda take a look at it? I just give an example. We get, has gone both the UK and India and they brought investors from all across. I'm pretty sure I haven't chosen. I would have investors, also an altar of India. I think it happens all the time. It just, that the particular, set of angels, you don't need to be super excited about that particular opportunity so that they themselves get the confidence, in terms of investment, as soon as the referee, the opportunity in order to either, some of the investment platforms or probably, or the other Rangers outside.
00:49:10 Speaker 3 Thanks John go. Met how is oranges handling this situation? So, as the heat genetic has given an example of, weekends, we also have an arm in the UK and four of our portfolio companies are pitching to UK investors today. So, which also means that, some companies, whether they're generating revenues outside of India, for me, it doesn't really matter revenues or revenues, but in fact, if they are in a sector where in, revenues are more out of India, it's better. It's better for us because at least they're now growing. If a company, which is a B2B SAS, okay, more into enterprise SAS, doesn't go to the U S I think they're missing on something. Trust me, because the us is a much bigger market in that case. It goes companies that are in the portfolio. We would obviously want them to work abroad and, add some fishing.
00:50:00 Speaker 3 Rightly mentioned, it's not just having an arm, but also a VC firms, which are based out of India where we can do that. In fact, we have, we're running a mandate for all the companies, which is based india, but 90% of the business is done in the U S so when they are doing business in the U S then a lot of Indian investors obviously come have come back to us and said, Oh, it is based india, but we are based. We are based india. We want the company to be based india and doing business india. So, as I said, the pieces and philosophy of every investor or VC firm is different, but we have found a couple of use VC firms in the U S we have shown a lot of interesting or great. We have an, we have headquarters in us. We have offices india, but you have found a company because india and doing business in us, this is very exciting.
00:50:43 Speaker 3 It really depends upon, which company wants to go abroad and which company wants to come to India. Finally, who is ready to fund them. I think from an investors perspective, I think all investors, we're very opportunistic people. Whenever we see a good opportunity coming, we'll just take, it does not really matter where the investments are coming from, but yeah. Giving a short answer, yes, we are looking for partners all the time abroad and helping companies that are based india, going abroad, doing business. We help them with investors out of the country.
00:51:20 Dr Saurabh Bhatia Thank you. I'm it. It's, maybe it's time might be another audience question. One of the person, is and, the question is sometimes in the angels ask for next five-year projections did a start up in a very initial stage. How important is it to make a five-year plan? So, I'm going to put it in perspective here that, both of you have mentioned, and even I support that the founders have to be very agile. They, they should be ready to see the market trends. Data should tell them to move left or right. Or which way of the graph they want to. At the same time, the, in your notes will saying, Hey, you don't even have a five-year plan. Like, I don't think you even know where you want to go. You can't be on both sides of the coin. Right. So, asking, so I'll start with.
00:52:13 Dr Saurabh Bhatia What do you suggest, is it, how important is it for you to see a five-year plan from a founder.
00:52:19 Speaker 3 Asking question to do violence against fantastic gender shake a lawyer?
00:52:26 Chandrashekar I think, the answer, from my experiences that I think I always look for the next year at a much more micro level, because for me, I want to understand how the entrepreneur is looking at the market. Do they truly understand, that they are going to be a category winner, or, somebody who's going to really scale up, in that particular segment that they're in, what mode they believe, what modes they carry, how well they are articulating, what is network effect, that they believe in, or that they have, so that all this will help me understand. Can they truly, and think of a bigger number, because sometimes what happens is you find two sets of entrepreneurs, both extreme, one, numbers are absolutely so crazy that they say and then they're obviously not investors, like, the person who has asked the question, sorry, I've heard recollect the name, who may not be well-versed in terms of saying, I don't know, what's the next 12 months you're asking me for the next five years.
00:53:25 Chandrashekar The question is, therefore, what I would want to answer is that at least be sure in terms of your ability to convey how well the mix developments are going to be and give us a vision, you have to have the magic of thinking big. You want to think big. I think that thinking big should also not translate in terms of, how they you're going to execute in terms of, making it happen. That is what we want to hear. That is why sometimes I don't think they look at status. We also want to understand, do they have advisors on board mentors on board, who's going to coach them and who's going to help them, achieve in a way that need to because success is something, that only comes in when it is like a minor foot. I mean, I would say this can't do it alone, but all of us, we don't need the team.
00:54:12 Chandrashekar I think the answer is simple, have at least, the near vision, which is very clear. If you're going to protect the entire five years, please tell us, like, what you believe, that, you, consider this opportunity to because that to us, it would give us a greater impetus, to partner with you. I'm not saying invest to partner with you because Indians are there mainly to support the entrepreneurs. None of the angels know Carolyn in my life, it could be zero, or it could be infinity. Nobody knows. So it's like buying that again. Thanks, Jen. So good on this.
00:54:50 Speaker 3 Well, I have never asked for a five-year projections, but most of the people ask for private projections and people give also because they're DCF typically getting it done less than five years, never gives you a comfortable figure because normally people will not even, break even in about three years time. That's the reason they have to show something in year four and five, so that something is coming up and the valuation looks as a valuation, which can be then negotiated. Having said that I am absolutely, in sync with what Sandra checker has said the first year. You're a hundred percent sure. I think that is where the micro plan, where the monthly revenues expenses and things like that. Whether it is, the number of customers you're going to acquire, or you're targeting to acquire a five, 10% of the market's fine, second year, you can be, I would say 50% of what it is, but beyond two year weren't you are just an extra treat for me.
00:55:47 Speaker 3 It does not really matter. Whatever you put on the Excel sheet, it's going to just remain like that. And, but yes, it helps you to think, because I believe you cannot put things on paper. You cannot achieve in reality, it is not possible. We encourage every founder, every startup whom we even mentor as a part of our first year program is to give me a 12 month budget to begin with. We never tell them, give me a financial model for the next five years, give me a 12 one budget because in every review waiting that happens end of the month or beginning of the next one for the previous month, we look at what you had budgeted for and what are the actions are the variances or the reasons for that if you get into this habit, and a lot of people tell me are either work buddy company got TA corporates do this.
00:56:30 Speaker 3 This is not a thing that we need to do. If you start doing it now, you will get into a discipline more and later when it comes to you very naturally. You are not starting something new today. You may just have a review meeting for 10 minutes because there's no revenue happen and only you have spent money, but at least there's a discipline that has come. So, I always say startups are full of madness, but it's our responsibility as angels to put method to the madness and make them successful. Sort of.
00:57:00 Dr Saurabh Bhatia Thank you. I mean, so guys, we have come to the end point of this webinar. A quick one minute recap from you and, a repeat of what your mantra is and what you are looking for. Starting with Jen shaker. Quick, one minute recap, please.
00:57:16 Speaker 3 Sorry. Can I, can I just ask, tender chicken to answer this question? I think very interesting. Barbara is asked in the chat. What is angel investor sentiment during the second, vape stores? I think it's a very interesting question. What is the sentiment currently? Shaker, sorry. I have, I've just read it in the chat. So this is absolutely fine.
00:57:39 Chandrashekar Yeah. So, so the first wave is the best example, to, allude to the second way. I think the engine misprints have been consistently happening, probably another VC investor claims. They don't have slowed down, but consistently, the angel platforms are extremely active in fact, very much active, during these times I'm pretty sure so because that's what it means, they're so active. So is the case with angel investors. I think it will also move to the second way. It's surprising in this year, 2021, just in four months, there are 12 unicorns here. Can you believe it? There are 12. So, they are one company, you used to be called advent labs. I think, the engine, the spends are definitely happening all the time. It just not, I mean, india, if I remember that are, as a number, I think there are more than 6,500 angels, I that's only increasing.
00:58:32 Chandrashekar I think whether that's the first year was again, where I think there is a tremendous interest to support, the startups, no wonder why India is the third largest startup. It just that the entrepreneurs need to believe in themselves that they're presenting so that no, the angels gets super excited and people of the gym.
00:58:49 Dr Saurabh Bhatia Thank you to the sugar. I mean, would you also like to comment on the same question?
00:58:54 Speaker 3 No, I think that sentiment shared by temperature and I can really share the sentiment. I think we are, we have people looking at all with the silver lining, right? and it is very important to do that when people, are not so happy. A lot of challenges are being posed by the pandemic across the country. Now obviously we are the ones who are taking the maximum beating, but yes, the sentiment is there to invest, to support these startups. I think that is what I love about the entire ecosystem.
00:59:22 Amit Kumar The startup ecosystem, the energy, and to CSM the vibrancy is very infectious. As Jessica said, we have hardly got any angel investors. Today at least we should have had if not a million, but half a million angel investors. That imagined the ecosystem would have gone where not well, but maybe 50 unicorns would have been gone because you have to support these entrepreneurs founders during the early stages. If we don't support them, how are the organizing institution investors then come into picture and then start supporting them? Because, had still, I will feel that a lot of people have gotten into the Aberdeen, even the VCs are now recognizing the fact that they need to be supported at the very early stages, whether it is start, or we are having a hundred X VC, and we have got about seven, eight angel investment platforms, individual angel investors, there, they're obviously unofficial groups.
01:60:17 Amit Kumar I think people are really recognizing the fact that, we are con countries full of a hundred and it is very important to support all of them all the time, not just the beginning. So thanks a lot for that. Last one minute.
01:60:34 Chandrashekar Oh, so if you want to be an agent, Mr. As I say, I know this is a long-term game because it's a marathon. That the first one second, does it all start small, don't start big. Start with channel seven, small ticket size. You don't get the experience, get the confidence space yourself, time yourself. That's the second. And the third is yes. The valuation sometimes may appear crazy, but believe that there is significant potential to gain and that gain could be exponential. Don't look at valuation immediately, look at, what is the prospect? What is the opportunity on hand and then not take the call. Thanks. Last one minute. Recap from you.
01:61:09 Amit Kumar Well, very true. If you want to become angel investor, as I said, it is full of adventure. It is an adventurous journey, your, that the money that you're putting in 102 piece can become zero and it can even become one lakh rupees. It is really dependent upon, well, how lucky you are. As I said, the ecosystem is full of madness. Lot of entrepreneurs coming, a lot of startups, we keep on saying, but like any other investment important is to build a portfolio. You cannot expect that you put one month, one rupee or a hundred rupees in any startup. That startup will be part of pay. If that is the case, then you are extremely lucky people. Angel investors have gotten an 80 X return on their investments. A completely lucky, but if you see all the investors who have got an ATX, they have built a portfolio, they have not bet only one startup and put all the money into one startup.
01:61:58 Amit Kumar So has the risk. You cannot put all the eggs in the same basket. I requesting all the people who want to become angel investors is to build a portfolio of companies. If you have 50 Lego piece, put it in 10 companies rather than putting 25 lacks in two companies to begin with. That's how you begin your journey, small how you begin in the stock market. Sorry. Thank,
01:62:20 Dr Saurabh Bhatia First of all, thanks to all the attendees. We took out time to attend this every night. And, it was because of you that this line of webinars becomes welted and thanks a lot, John shaker and amid for your valuable opinions and also taking our time. And, just to remind you of insurance, keeps doing these kinds of, investor toxicities, as well as the startup grind, which has been on Sunday. Please do stay in touch and keep attending, some of these interesting, events that we conduct. Thank you everyone. And with that, we'll say goodbye.
01:62:56 Chandrashekar Thank you so grateful to you, grateful to Ahmed, grateful to all the attendees and thank you once again. And let's all remain safe. Yeah. Thank you so much. And Jessica, thank you so much for,
01:63:10 Dr Saurabh Bhatia Thank you so much. Bye bye-bye. Thank you everybody. Bye.
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