INSIDER: May 29th, 2021
Welcome to our first ever newsletter edition.
You have been a patient member of our growing investor community and we thought it's about time for us to give back some more value to you than just those random WhatsApp forwards. So, here we are with a weekly newsletter edition, in an effort to sum up the week for you. We aim to give you a glimpse into the biggest happenings of the startup ecosystem along with heads up on our network events.
We will also cover investor insights on all things investment (through our Reverse Pitch section) and an angel bytes section will cover the basics of angel investing.
So, let's get started!
This past week has been merciful on us. The crypto charts are finally showing upwards trends and the covid charts are showing a downward trend, finally.
It has given us our 14th unicorn of the year (Already!) in Zeta. Just to put this in context, we had 9 unicorns in the entire year both in 2020 (covid year) and 2019 (pre-covid year).
The investor sentiment is definitely looking up and with the upcoming Zomato and Paytm IPOs, a lot more cash is expected to flow back into the ecosystem. So, a good time to be an angel investor, I'd say.
Do share your feedback on this effort. You can reply or mail to firstname.lastname@example.org.
Take a quick run-down of the week gone by:
How to evaluate an idea before starting up?
Before a founder takes a plunge and startup, they should always evaluate their idea. Rishab Malik, Founder, and Managing Partner, Madison Capital, shares various techniques that founders can utilise to evaluate their idea.
Acquire Expertise in Angel Investment and read our well-researched and in-depth topics about startups and investing
What are the risks involved in angel investing?
Startup investments are an illiquid asset class. This means that unlike stock, crypto, real estate or gold investments, here you cannot sell your positions at any time and liquidate your investment.
You have to stay invested till someone (founder or a larger investor) buys you out and offers you a partial or full exit. Then there is the risk of the startup shutting down entirely, before it reaches the next round and in this case, you lose your entire investment. However, proportional to the risk, the rewards in this asset class are also high. While the industry average returns for angel investors are 20-27% IRR, angel investors have also made 100X and more on their startup investments by simply making early bets.
The earlier you invest, the better it is - you can take early positions even at small ticket sizes. On the flip side, early stage startups are the most risky. Whether the product will get made, whether it will get made on time or not, whether they will get traction or the right product-market fit are some of the risks typically associated with early stage startups. Your job as an early stage angel investor is to minimise these risks. You can do so by -
a. co-investing with other larger (proven) investors (for ex - Favcy VB)
b. diversify your investments (even if you have a small corpus)
Sharing here a real life journey of an angel investor who is also Partner at a Venture Network -
“Angel investing is not about finding the magic startup but it’s all about building a diversified investment portfolio.
I have invested in ten startups till now. I have lost money in three and have exited from one at 30% IRR. In the remaining six, one is at 10X, one is at 7X, one is at 4X, two are at 2X and one is at 1X. Thus, my overall active portfolio is still at ~4.5X.
The moral of the story is that no startup is a magic startup at the start. Every startup takes many years of hard work to become a magic startup. So don’t look for magic instead, fill up your portfolio with dedicated founders, values and diversity."
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