To define angel investing — it is the act in which an affluent individual provides capital for a start-up, usually in exchange for an ownership equity or some other form of a convertible bond. However, what would drive an ‘affluent individual,’ who is presumably well-settled with his finances, to provide support and monetary help to the risky start-ups as a form of investments?
Angel Investing, seemingly an uncertain idea, has more advantages for the people who practice it than meets the eye. For someone who has pretty much settled their own business, it gives them an activity to do and mettle to invest in, apart from their money. Take Ratan Tata, who has an entire empire, and branching out with some capital to smaller business and start-ups is something to keep him busy.
Angel investing also helps in keeping an out-of-touch investor up-to-date with the current trends. The latest start-ups that crop up are the ones cashing in on the latest trends. IoT, Artificial Intelligence, Blockchain, or even booking a stand-by for the ATM line are examples of the current customer needs to be used to start businesses, and involving themselves with these, angel investors make sure they do not lose out on the latest shift in the business pressure points.
It also ensures recognition, for someone who has done his share of work, investing in a new and coming business means a chance of creating impact and getting recognized when they might be at a point where their work cannot expand anymore to do that.
Angel investing is also a way to expand the existing business of the investor, case in point Vijay Shekhar Sharma, founder of Paytm and one of India’s top angel investors, who has numerous investments in various companies and can expand his existing entity to a wider reach and business.
Angel investing can do more good than would meet the eye, and these aforementioned reasons why a person would indulge in it would make it more profitable an activity than perceived.
(Written by Sanjay Enishetty, Managing Partner, 50K Ventures. Originally published on his Medium account.)
But what went right for Snap?How did it manage to ride a successful IPO when investors were being cautious about internet businesses and despite Twitter releasing its disappointing quarterly earning reports 20 days ago? Apart from the positive macroeconomic conditions and dearth in tech IPOs since Alibaba in 2014, Snap planned on a beautiful strategy and executed it perfectly. After tracking the company closely, here are a few points that I believe we can learn from it:
1. Build a big picture“We are a social networking app with our USP being disappearing of photos (by the way, people usually like to store them). We are targeting a user group which is not particularly known for having brand loyalty. Oh, we have a US$400 billion giant tugging at our user base and cloning our features.” vs “We aim to reinvent the camera, a device that has been around for centuries and is now an integral part of every smartphone, that same device which has given rise to several billion-dollar companies. Our camera application clicks around 2.5 billion snaps every day which is roughly around one-third of the world’s population. Oh, the latest device is also wearable.” Agreed. I exaggerated there. But in my defence, the first line is what the founders say. The rest reflect the thought process of investors on listening to that. Snap has consistently referred to itself as a camera company mentioning that they believe “reinventing the camera represents our greatest opportunity to improve the way that people live and communicate.” When you meet people who have to bet their money on you, it is better to sell them on what you could be than what you are. It shows that the founder has a vision going forward and also the kind of market opportunities they can use to achieve big returns.
2. Branding is analogSnap’s preparation to its IPO began with its release of spectacles. It brought its fans out onto the streets and created a treasure hunt equivalent with some writers calling it the best marketing campaign in history. The kind of frenzy and buzz it created made investors take note of the company and follow it keenly. In simple terms, it had created a brand for itself. Branding is a continuous activity. Too often, startups use it solely for customer acquisition and later focus on channels which they think yield maximum returns. If you are running a startup, have some hacks that will make people talk about your offering in their circles. It need not always be an expensive affair. Right from a quirky visiting card to creating engaging content, live and grow your brand.
3. Create FOMO among investorsSnap was the first social networking company to reach London and meet European investors. They released an amazing video which talked about its philospohy, beginnings, culture, and the future. Throwing in information like “60 percent of the 158 million users create content everyday,” “users open apps 18 times per day on average,” and “users spend 25 to 30 minutes in the app every day” make an investor think about the kind of upside to the investment and push their own doubts to a corner (if-someone’s-coming-back-to-the-app-18-times-these-guys-are-doing-something-right kind of feeling). The recommendation from marketing executives from Universal Studios adds to the credibility and showcases the revenue opportunity. Most of the time, entrepreneurs let investors dictate the terms of the conversation. However, a founder owes it to his business and team to get the best possible value from investors. Reaching out to a large group of investors can help you refine your fundraising strategy, communicate your business model effectively, and create a positive vibe in general. These meetings might not translate into investments but they may help in building your company’s presence and show that the team is willing to take questions and challenges head-on.
4. Bet on your core audienceEighty-five percent of Snapchat’s 158 million daily users are between the ages of 18 and 34. One of the important points investors saw was that the younger generation doesn’t watch much TV, is paying for OTT content, are tech-savvy enough to install ad blockers, and hence, the only way to reach out to them via advertisements is through social media. Despite naysayers, the company noted in its S-1 that it’s focused on boosting the monetization of its specific user base by sparking more engagement, not by courting older users. And yes, to support that fact, Snap had a seven-fold increase in revenue in a year. Add to this the facts that worldwide advertising spend will grow by 18 percent from US$652 billion in 2016 to US$767 billion in 2020 (Snap mentioned this statistic quite a few times on their S-1) and that millennial users tend to spend, and you have shown your investors how your core audience can bring in the market to your doorstep. This teaches companies to bet on a demographic and ruthlessly optimize to suit your products to that one. Get your product market fit, identify who your customers are, and make them into loyalists while improving your offerings. Once you create loyalty, you can explore different groups more and increase your market presence. Snapchat has built an ecosystem around its offerings and has successfully showcased its plus points to investors.
What are your key takeaways from Snap’s IPO? Please share your views.(Originally written for Tech In Asia, by Uday Marepalli.)
Startup India is PromisingI sat through investor pitches by founders with prior experience from the corporate world. I judged the pitches of engineers, engineering students and MBA students having revenue Startups. I reviewed some exciting idea pitches by high school students. For a country that has more than 66% of its population aged below 32, this is a shot in the arm. India has become a breeding ground of tomorrow’s job providers. There are only a few Unicorns in India. It is a matter of time before some of the current Startups turn to a blessing of Unicorns.
The Proof is in the RevenuesIt is also a trend that a set of founders find funding as the magic pill that solves all of their problems. They think a term sheet is a validation of their business idea. The true validation happens when these engineer-turned-founders understand what job customer wants done and make a product that customer hires to get that job done. Clayton Christensen all the way. Revenues are the true validation of any idea.
Indian Startup Hype CycleMillions invested in eCommerce Startups during the past few years blinded some founders that investments are the panacea. This is the reason why Startup wave in India is going through its own hype cycle. It is nearing the trough of disillusionment now. The good news is that it means an upward slope of enlightenment will shortly follow.
Passionately InquisitiveFounders are known to ask questions and seek inputs. Somewhere down their journey as seekers, startup founders tell themselves “enough of seeking, we made good progress and let us not waste our time”. That could be a dangerous precedence as they get busy tackling low-hanging challenges, worse if there are irrelevant ones, while putting off chasing the challenges that matter. Good things happen in life when you become a constant seeker. There are mentors out there willing to help you. Are you seeking?
Six S.I.M.P.L.E. FrameworksI have put together a S.I.M.P.L.E. framework that helps startup founders succeed. These instruments help founders ask the right questions that really matter.