Straight talk > Angel investing: not for the faint-hearted

Angel investing: not for the faint-hearted
Luckily for entrepreneurs, more people are becoming Angels every day in India. NEN asked its Angel Experts: Why? Is investing in raw startups a good way to make money?
R. Ramaraj, The Chennai Fund
R. RamarajAngel investing is not for your nest egg. Of course not. I think we should be prepared mentally to lose all of it.

I think you should come with the attitude that it may not work at all. And if you come with that attitude, you will be looking at helping the entrepreneur, and not really be worried about the return to yourself.

So, I think you must come to Angel investing saying that this money is already written off, and then whatever comes is, 'Wow, Christmas!'

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Sridar Iyengar, Bessemer Venture Partners
Sridar IyengarAngel Investing has got to be fun for you. For me, it is not a portfolio approach where I say: I have got so much to spend let me find 10 good deals and put the money in. That's not for me. I think for Angel investing you have got to say: even if I lose the money I am going to have fun doing it.
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Pradeep Gupta, Cybermedia and Indian Angel Network:
Pradeep GuptaIf making money was the goal, then I would have invested my surplus in a VC fund or given it to a portfolio manager who would have put it in a mutual fund or whatever. But not in Angel investing because the risks of Angel Investing are far higher...of course the potential returns are also higher.

All of us, what we do with our surplus is that we will put a certain amount into debt, so there is very little risk but the returns are also lower. Then we will also put some money in mutual funds, which is equity, where there is a slightly higher risk, but then the returns are also higher. Then you say so much of my surplus is what I'm going to put in high risk. That is the amount you will put in Angel investing.

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Padmaja Ruparel, Indian Angel Network
Padmaja RuparelIs Angel investing a good way to make money? Absolutely. But it's a disproportionate game.

What I tell entrepreneurs is that every Angel would want to have the potential to make much more on their investments in startups than their other asset classes are giving them. I don't think Angels are going to be excited about 18% - 15% returns on their Angel funds because that is what the market is giving them - and the market is much safer. Why would they take such a big risk for an additional 2%?

But when we bring in new Angels, we expect a person to have an appetite for not only Angel investing but also for spending time on due diligence and mentoring. We would want people to get actively engaged - it's not just about writing a cheque.

> Don't blame lack of funds!
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> Angel investing: not for the faint hearted.
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