How Retail Investors Can Start Angel Investing?

Last Updated on Oct 3, 2022 by

For a long time, retail investors have preferred stocks as their investment option. Everyone looked into cryptocurrency choices with the rise of Web3, but due to their complexity and lack of institutional backing, investors are once again looking for more reliable investment opportunities.

With the increasing start-up culture in the country, retail investors are now eyeing to diversify their portfolios in start-up investing and be part of the success story of the brand by being Angel Investor.

Table of Contents

What is angel investing?

An investor can invest directly in a small business through angel investing. Typically, it occurs through shared networks where you are familiar with and confident in the founding team.

But there is a limitation to this. Not everyone has the time or resources to network and identify a resource that runs a start-up and is seeking funding. In addition, not everyone has a sizable chequebook to sign on for such kinds of investments.

Consequently, a way for new platforms has emerged due to the growing interest in start-up funding. There are now investing platforms that enable individual investors to participate in start-ups; one such platform is Tyke.

Some of the most successful angel investors in India are Rajan Anandan, MD of Sequoia Capital, who invested in LBB, Instamojo & PopXo; Anupam Mittal, CEO of Founder Group, seen on Shark Tank, who invests in Tech and healthcare businesses; Sandeep Tandon, Co-founder of FreeCharge, has invested in fintech companies like RazorPay, Inc42, Unacademy and more.

Generally, angel investors are well-informed entrepreneurs who know how to read up about the business and pick the opportunities with a better rate of return. Angel investing platforms help retail investors by doing all the background research through a due diligence check.

How to become an angel investor?

To directly answer the question, here are the options.

One of the common routes is to invest in the companies founded by your friends and family.
Making a group of angel investors who can collectively evaluate, review, and invest in start-ups. Such groups are called angel groups.

However, choosing these routes requires a significant investment of time in researching startup companies and possessing a high-paying cheque that can be written off. And that’s not all; you also need to have a wide circle of contacts from which you might get deals.

All this doesn’t sound feasible for investors not in the business and investment domain. Addressing this issue, angel investment platforms were introduced in the market to offer a single platform for investors and start-up owners to pool the funds for the firm.

Before onboarding them, these platforms conduct a background check and due diligence procedures. One of the benefits of angel investing platforms like Tyke is that you don’t need a lot of money to invest. You can invest as little as a few thousand and get access to the startup’s quarterly report so you can learn more about its progress.

Positives and negatives

Depending on the type of investor you are, you must specify your investment plan. Suppose you have a lot of money to invest, for instance. In that case, you can consider diversifying your portfolio by funding several businesses to improve your chances of making a good return on investment.
You must be familiar with all Indian regulations governing angel investments.
While making angel investments can be very profitable, there is risk involved. Angel investing is viewed as risky, especially considering its unproven nature. Investments are more like bets on startup development and future predictions. Furthermore, diversity in a portfolio can help to reduce this risk.

Conclusion

The number of angel investors has increased significantly during the past 4-5 yrs. Consequently, it has become one of the primary funding sources for numerous businesses. The famous TV show Shark Tank also motivated investors to diversify their investment portfolio in the start-up industry. Additionally, expanding the Indian business ecosystem due to more start-ups has led to economic growth. So if you are thinking about becoming an angel investor, there could not be a better time than this!

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Purav

I'm Purav, Co-Founder & COO at Tyke, my aim is to be a pioneer in educating, networking and investing in the start-up ecosystem. Angel Investing was just limited to HNI & Ultra HNI's in India, I wanted to shatter that and make it accessible to millions of Indians. Apart from work, you can find me playing football or exploring food from around the world.