Angel investing in India is broken. Here’s how AngelList wants to fix that.

Photo credit: AngelList.

Angel investing in India has grown popular in recent times, but it’s still a scattered process. Unlike in the United States – the mecca of all things tech, startups, and funding – very few angels in India are themselves tech entrepreneurs, which means they are often in the game only for the money. China has its own problems as well.

AngelList, founded by Naval Ravikant in 2010, is hoping to change that. The Silicon Valley-based company helps entrepreneurs and investors connect, building a network where they can collaborate with peers and experts across the world, drawing on each others’ expertise and experiences. It also has a jobs service where companies and candidates can connect directly, without middlemen.

“Angel investors in India are not happy because they aren’t seeing good exits,” says Utsav Somani, AngelList’s India head of operations. “That is the primary concern most of the people have. About 60 percent of the angel investors of the current crop in the country have only been investing in the last two or three years in a super accelerated way, and they are waiting for liquidity.”

In August 2016, the company announced that it will let accredited investors create funds to invest in Indian startups. (Accreditation works differently in different countries: in India, the Securities and Exchange Board of India (SEBI) defines the terms).

Angel investors are not happy because they aren’t seeing good exits.

AngelList hasn’t officially rolled out its syndicate in India yet, but the country is already the company’s second biggest market in terms of numbers for talent searches, Utsav says. There have been 500,000 “matches” so far on its sites and apps. A “match” is when a company and candidate connect; it doesn’t necessarily mean someone was hired.

Utsav says the company is still working out the legalities of operating in India, but that it’s on track to launch officially this year.

More than 4,000 angel investors from India are registered on its site. There are 750 active angels and about 450 VCs, Utsav says.

A standing criticism of the Indian startup ecosystem is that there aren’t enough investors around. This means that, once startups are rejected by major VCs, they have few options left. Most entrepreneurs don’t think of going to the bank at all, for various reasons. If AngelList’s business model is successful, it could provide a healthy alternative to entrepreneurs. The company’s product lets any accredited investor create a “pop-up VC fund”.

See: Can’t eat paper profits: India’s startup ecosystem has a vital cog missing

This works best for an investor who may find an interesting startup or a particular sector that she wants to invest in but only wants to place a relatively small amount of money into it. She can then act as the “lead” in a syndicate and pitch to other potential backers – individuals with investable money – to pool in. It will be her responsibility to figure out whether the startup is worth it and to find extra money – but AngelList will carry you through the financial aspects of the process.

Learning from peers

Photo credit: dedivan1923 / 123RF.

New model