For any startup, there is one crucial factor which determines the success of the company — fundraising. If it doesn’t come right on time, it’s more than likely that the startup is left with no option but to wind up shop. So there’s a reason that early backers are called angel investors in the world of startups, and angel networks — or groups of angels — are becoming increasingly common in the Indian context.
Similar to other countries, new startups in India gravitate towards angel investors for the first investment, and they are largely preferred over VCs, thanks to the lower equity demand and the higher chance of VCs rejecting early startups without products. Of course, other options such as family offices, investment banks, and other private companies also exist, but angel investors bring in a unique perspective and open up mentorship and market opportunities, besides helping raise funds.
Angel investors have reached their positions after years of experience in the startup ecosystem. It is this experience which attracts startups and usually angels pool their funds together to invest in startups as a group and hedge the risk. The guidance and mentorship provided by angel investors and these angel networks is something that startups desperately seek, especially those in the early-stage.
While venture capitalists hunt for mature startups that have a proven track record, even startups that are just beginning or have found the initial legs need support through funding. That’s when angel networks provide a lifejacket to these startups in the form of large funding and share the expertise to help them with their day-to-day and larger problems.