In the last article, the success stories of investments highlighted the importance of conducting thorough due diligence before making any important investment decision. Through the above stories, we also highlighted the expectations that Angel Investors can keep while investing their hard-earned money into upcoming startups.

In this article, we take a look at ‘Understanding what is better: Investing in India or Outside’. Like with any investment decision, whether to engage in angel investing in India or outside of India depends on several factors that can influence the potential returns and risks associated with the investment. Let's understand this with the help of an example. Infact I would like to start by asking you all a question. Would you, if given a chance, invest in Pakistan? No? If your answer is no then why so? Why do companies prefer India over Pakistan?

Some of the reasons that can be stated are as below:

1. Currency risk: We ask our previous question again: Would any investor like to invest in Pakistan & if not then why so? Could Macroeconomic conditions also have played a role in shaping the decision? Pakistan’s economy is on the brink of a complete collapse and its currency is by far the worst-performing currency at least in Asia.

2. Geopolitical Instability: Another reason why many investors would hesitate to invest in a particular region would be because of Law & order issues or is it because of archaic regulations and stringent laws. From multiple wars that the region has seen to terrorism to narcotics etc.

Let's take a look at an investor who invested outside India & failed:

WeWork: WeWork, a co-working space provider, was once valued at $47 billion. However, the company's IPO failed in 2019, and its valuation plummeted. SoftBank, which had invested heavily in WeWork, suffered significant losses.

This is an example of investors who have suffered losses from their investments outside India. It is essential to conduct thorough research and due diligence before making any investment.

Enough sorry stories for the day? Don’t worry we won’t give you more. Infact we will now talk about companies and investors who are investing in India & doing well.

I am sure everyone would have heard of Apple Inc. Now, Apple Inc. has been in a lot of news recently. They, through their contract manufacturers, are investing billions of dollars into India, setting up world-class factories but do you know that they had asked the Indian government to first bring Ease of Doing Business climate which included relaxing certain regulations, easing labour laws, providing trunk infrastructure, etc.

Infact let me now give an example of a domestic company: Airtel. Are all of you aware of the fact that Airtel has a company in Africa that is valued at 3.67 Bn$? The question is how is Airtel, an Indian company able to build such a big empire in Africa? Many companies tried & failed miserably but Airtel not only survived but thrived. How?

The answer is pretty simple. Airtel has the wherewithal to get things done as per its requirements. It has the financial power & legal backing to sit down with bureaucrats of African nations and get things approved. Any company would like to invest in another country only if it is assured of Ease of Doing Business.

Now, we read about Apple, we read Airtel, and the question that arises is whether these are big conglomerates that have the requisite financial & legal backing but individual investors don’t have such backing to get things done their way. More importantly, most of them don’t even have knowledge about legal procedures in a third country so what would they prefer: Investing in India or Outside India?

Let's understand this with the help of an example of a Domestic Investor like Anupam Mittal who would rather invest in India instead of other regions. The first reason could be different laws being followed by different regions which act as a deterrent to investors. Another reason is that today India is the largest market that attracts business owners to set up their shop in India and invest in Indian startups.

Now the question arises if you can’t go through Angel Investors, then investors have a chance to go through VCs but VCs are themselves bullish on India. Infact India is the only country today that has a 0% chance of recession so why would investors not like to invest in India.

As a matter of fact, Only 4500 startups have got investment out of which only 100 have been unicorns & India’s startup ecosystem has over 90,000 startups showing the immense potential & scope of investments. Here are some points to consider when making a decision to invest in India:

Growing Startup Ecosystem: India has witnessed rapid growth in its startup ecosystem over the past decade. The country is home to a vibrant entrepreneurial culture with a significant number of innovative startups emerging across various sectors. This presents angel investors with a wide range of investment opportunities and the potential to back the next big success story.

Large Consumer Market: India boasts a massive consumer market with a population of over 1.3 billion people. The rising middle class and increasing disposable incomes have fueled the demand for products and services, creating ample market opportunities for startups. By investing in Indian startups, angel investors can tap into this vast consumer base and potentially benefit from significant growth potential.

Technology and Innovation Hub: India has emerged as a global technology and innovation hub, with thriving sectors such as software development, artificial intelligence, e-commerce, fintech, health tech, and more. The country is known for its pool of talented engineers, entrepreneurs, and tech professionals who are driving innovation and disruption. Investing in Indian startups allows angel investors to be part of this tech-driven revolution and capitalize on the transformative potential of these sectors.

Government Initiatives and Support: The Indian government has launched various initiatives and policies to foster the startup ecosystem and encourage angel investment. Initiatives like Startup India, Make in India, and Digital India aims to create a conducive environment for startups to thrive, providing incentives, tax benefits, and streamlined regulatory frameworks. This support from the government further enhances the investment landscape and reduces barriers for angel investors.

Access to Diverse Sectors: India offers a diverse range of sectors and industries for investment. From technology and e-commerce to healthcare, renewable energy, and agriculture, there are numerous sectors with untapped potential. This diversification allows angel investors to build a well-rounded portfolio and spread their risk across different sectors, maximizing their chances of success.

Cost Advantage: Compared to other global startup hubs, India offers a cost advantage in terms of talent acquisition, operational expenses, and overall business setup. The lower cost of living and wages relative to developed countries make it an attractive destination for startups to establish their operations. This cost advantage can lead to higher profitability and returns for angel investors supporting Indian startups.

Collaborative and Supportive Community: The Indian startup ecosystem is known for its collaborative and supportive nature. There are numerous incubators, accelerators, and networking platforms that connect entrepreneurs, investors, and mentors. This ecosystem provides a nurturing environment for startups to thrive and offers opportunities for angel investors to actively engage with the startup community, provide guidance, and leverage their expertise.

Ultimately, whether to engage in angel investing in India or outside of India depends on your investment objectives, risk tolerance, and investment horizon. It is important to do your research, seek professional advice, and diversify your portfolio to manage risk.

Based on some popular news reports, there are over 26,000 Angel Investors in India. Planify is one such organization that is supporting over 10,000 accredited investors & family offices and have given them average annual returns of 50%.

According to the PwC India report titled ‘Startup Deals Tracker- CY22’, total funding last year dropped 33% to 24 Bn US$ owing to the Funding Winter phenomenon but still remained at least 50% higher than pre-covid years. Infact, India last year became only the third country to have reached the milestone of 100 unicorns after the US & China. The numbers are set to rise rapidly as many startups enter the Soonicorn status & infact new divisions called Minicorns have been created to signify the early-stage startups which are showing immense potential.

Across both 2021 & 2022, early-stage deals took the lion share of total deals averaging at around 60-62% of the total funding. The category remained a hot favorite among investors contributing 12% in value as compared to 7% last year.

In conclusion, we feel India presents a compelling case for angel investors looking for promising investment opportunities. The growing startup ecosystem, large consumer market, technological advancements, government support, diverse sectors, cost advantage, and collaborative community make India an attractive destination for angel investment. However, it is essential for investors to conduct thorough due diligence, evaluate potential risks, and seek professional advice before making any investment decisions.