| Angels start early to create value & wealth: Padmaja Ruparel
'Angel investors must invest in early stage businesses which have the potential to create disproportionate value and a Win-Win outcome both for the investor and the Start up Entrepreneur' was the Mantra shared by Padmaja Ruparel, President of Indian Angel Network to the members of Ludhiana Management Association-LMA . Ms Ruparel has been in the Indian entrepreneurial eco system for the last 15 years and founded India's 1st & Asia's largest angel investor network, with more than 350 investors across 10 countries,.Padmaja has also been awarded as one of the 'Top 50 Most Powerful Women in Business by Fortune India' and '30 Most Powerful Women in India by Business Today.
'The session Angel Networks & Early Stage Investing was orgainsed with the objective of generating interest in Angel Investing, understanding its intricacies and offer a platform for mentoring start ups to high net worth investors with a strong operational experience at senior positions.' explained Chetan Pahwa, Chairman LMA Angel Network a vertical of LMA.
Padmaja believes Angel investing – wealthy individuals who invest in and mentor start-ups – has changed from being a hobby a decade or so earlier to a serious business. Angel investors spend more time nurturing the companies they invest in and their networks have sprung up across the country. To top it all, in the last three years, says Padmaja, the government's focus on start-ups has really changed. 'The train has started to leave the station. There is a push, there is an encouragement, there is this whole culture of start-up which has helped in different ways,' she adds .Outlining the immense potential for Angel Investing, she cited IT and Software Sector, where in a period of 30 years, 90% First Generation Entrepreneurs have created value of more than US $ 250 Billion. There is a lot more venture capital and private equity money available for start-ups in the country now than a few years ago. However, what needs to change is that a lot more money has to be invested in the early stages – seed and angel – if the ventures are to survive and the ecosystem is to flourish. She dispels the notion that angel investing is confined only to the tech sector and points out that it is spread across sectors and geographies. What has also changed with angel investing is the realisation that it makes sense to diversify your portfolio to spread the risk and that it is better to invest in a group so that the strengths of each member of the group can be leveraged.
Padmaja maintained that the Need for Angel Investing arose as Banks were not able to lend money to Start Ups, due to their inability to offer collateral and Venture Capitalists were not interested in funding ideas which were low capex. Further the Banks or VCs were perhaps not interested or able to address the hand holding and mentoring requirement of a Start Up. Padmaja also shared that as far as IAN- Indian Angel Network was concerned their focus was on identifying start ups that address the basic needs and also generate jobs, as jobless growth was the biggest threat to development in the society. She further elaborated that to IAN, promoters and ideas that addressed the needs of Bharat, would be more attractive and interesting to invest as compared to very high capex ideas that looked at the nice to have requirements of the upper class. This was backed by the sheer numbers and the growth prospects of stories that were looking at our very large middle class. She clarified that to her Angel Investing was no Rocket Science, but just Pure Business Sense and Common Place Thinking. She insisted that need sectors like Agritech, Sanitation, Health Care and Irrigation were of special interest to them, due to their immense potential.
Padmaja shared the maxim of IAN to be Higher the risk-Higher the Reward, but this would not mean that Risk Mitigation Strategies were not being followed. The risks of network and the angel investors were being managed by ensuring that investments were diversified across sectors and geographies. Further reference checks were done before investment, and for this a domain expert or a person from the same geography would be the source for information. IAN pursued a very Robust Selection Process wherein the parameters for selection were the 3Ps i.e Proposition-Idea its differentiation, Promoter-Integrity & Capability and Peer Investing-agreement by angels in the network. Though these processes were elaborate, still the quantum of risk in angel investing was very high and perhaps that was also the reason why the return on investment was also attractive. She claimed that as compared to other networks, their failure rate at 15% was much lower because of risk mitigation, due diligence and sustained hand holding at multiple stages by the Network. She further elaborated that the first round funding at early stages is done by the Angel Networks, but post that funding in the subsequent rounds is delayed due to which Start Ups either slow down or reduce their strategy thereby either under-performing or losing out on the opportunity.
Though it was highly satisfying for Angel Investors to fund Start Ups, it was perhaps as important for them to time their Exits. An effective Exit Strategy would ensure good returns and also release funds for subsequent funding. To facilitate a Timely exit, IAN was using higher level Data Analytics and also monitoring the Funded Start Ups on an ongoing basis. Padmaja attributed her success to continuous engagement with the Start up, through various initiatives like a seat on the Board of Directors, being guided by at least 2 domain experts, mentoring for building scale and strategising, regular connect with the promoters, monitoring statutory compliances, periodical operating reports and also helping the ventures invested at all levels by identifying suppliers, getting customers, complying with government regulations. Padmaja was also enthused by the response of domestic angel investors and Start Ups who were now focussing on developing products for the domestic markets, as compared to earlier times when the emphasis was on product development for the overseas market in general and US in particular.LMA President Kamal Wadhera proposed a Vote of Thanks to Ms. Padmaja Ruparel, with the hope that this Awareness Session would be a strong foundation to a close association between IAN-India Angel Network and LMA Angel Network, for promoting the spirit of Angel Investing in the Region. Dr. Paramjit Kaur, General Secretary, Dr. Sandeep Kapoor and Mr. S.S. Bhogal also spoke during the Seminar.