6 Common Myths About Angel Investors in India

The term "angel investor" has become popular in the Indian startup scene. It is now used interchangeably with financial support and even success. Angel funding has risen dramatically in India. This is due in part to well-known investors like Rajan Anandan, Anupam Mittal, Sachin Bansal, and Sanjay Mehta, who have put a lot of money into new businesses. 

Angel investing is becoming increasingly popular among residents of tier-II and tier-III towns in India as a result of the success of unicorn companies such as OYO, CRED, and Razorpay. 

This growth is very exciting for entrepreneurs who want to start their businesses, but it also shows how important it is to debunk common myths about angel investors in India. If these misconceptions are not cleared up, they could prevent worthy startups from getting the funding they need to grow in this thriving entrepreneurial environment.

Debunking the 6 Myths About Angel Investors in India

The Indian startup ecosystem is growing by leaps and bounds, with entrepreneurs and investors alike seeking opportunities to be part of this growth story. However, several myths surround angel investing:

Myth 1: Only Tech Startups get Angel Investors

While it is true that technology ventures have garnered significant attention and funding, angel investors are not limited to any specific industry or sector. In fact, they invest in a wide range of businesses, including healthcare, agriculture, consumer goods, and more. 

Angel investors in India look for innovation, scalability, and potential for growth, regardless of the industry. This diversity in investment interests enables startups from various sectors to find the support they need.

So, don't think that angels won't be interested in your non-tech startup just because it's not in the trendy sector at the moment. There are plenty of angels who are willing to invest in all sorts of businesses.

Myth 2: Angel Investors Only Operate in Metro Cities

Historically, angel investing was largely concentrated in metropolitan cities like Mumbai, Bangalore, and Delhi. However, this myth has been debunked in recent years. As the startup ecosystem has expanded and gained traction across the country, angel investors are now actively seeking opportunities beyond the metros. 

Tier-II and tier-III cities are witnessing a surge in angel investments, thanks to improved connectivity, digitalization, and the government's efforts to promote entrepreneurship in smaller towns. This geographical diversification of angel investors has widened the playing field for startups nationwide.

Myth 3: Angel Investors are Only Interested in Profits

While it is true that angel investors aim to make profitable investments, their motivations go beyond monetary gains. Many angel investors are seasoned entrepreneurs or industry experts who bring not only capital but also valuable knowledge and mentorship to startups. 

Angels often have a genuine passion for nurturing and supporting new businesses, driven by the desire to see innovative ideas succeed. Angel investors may prioritize long-term growth and sustainability over immediate profits, recognizing that building a successful startup takes time and effort.

Numerous factors influence investment decisions, explaining why prominent investors often favour lesser-known startups over established ones. While high-revenue companies grab attention, angel investors don't exclusively seek them out.

Angel investors also consider their personal growth timing in the business deal. An often overlooked aspect is that angel investors can sell their holdings to others for a profit. Hence, a startup must demonstrate strong potential to ensure investors retain their shares' value in the market. 

Myth 4: Angel Investors Only Fund Profitable Startups 

Another misconception that people have is that angel investors only support startups that have already achieved some level of success. This isn't entirely accurate. While it's certainly more straightforward to secure angel investment when you have a track record of success, it's not impossible if you don't. 

In reality, most angel investors are willing to take a chance on an early-stage company if they have faith in the team and the business model. Some angel investors are commonly associated with funding early-stage startups, but this is not an absolute rule. While many angel investments occur during the initial stages, angel investors can also participate in later rounds of funding, including Series A and beyond. 

Myth 5: Angel Investors Are Always Hands-On

While some angel investors actively engage with the startups they invest in, providing guidance and mentorship, not all investors take a hands-on approach. Angel investors vary in their involvement levels, and their roles can range from being passive financiers to active advisors. 

People often think that angel investors want to take complete control of a business and make all the big decisions. But, this isn't always true. In some cases, investors and founders might have a formal agreement where investors also become part of the organization's advisory board. The relationship between angel investors and founders can vary widely.

Startups and angel investors often discuss and define their expectations and the extent of the investor's involvement during the negotiation process. Angel investors are important for India's startup scene. Besides giving money, they can provide helpful advice and guidance to new entrepreneurs. 

Myth 6: Angel Investors Are Difficult to Access

Angel investors may have been hard to reach in the past, but this idea is quickly falling apart. With the growth of startup accelerators, incubators, and networking events, entrepreneurs now have better chances to meet potential angel investors. 

Online platforms and angel investor networks have also emerged, making it easier for startups to showcase their ideas and attract investor interest. Building a robust network and a compelling pitch can significantly improve the chances of connecting with angel investors.

Ending Note

Far from the persistent myths and stereotypes, the Indian angel investment scene is vibrant and diverse. Angel investors want to make money from their investments, but they are also passionate about new ideas and want to help startups that show promise. 

Entrepreneurs need to know how angel investing works and take advantage of the opportunities in the growing Indian startup ecosystem. By busting these common myths, we can make it easier for startups and angel investors to work together, which will help the entrepreneurial spirit in India grow and thrive.