Why do Angel Investing

Let's rewind the time to the 1980s. What do we remember?

Ambassador Cars, Lambretta Scooter, Campa Cola, etc. We find one thing common in all these, all these products were manufactured by Indian companies. Indian companies of that time didn’t have the sheer scale or size, they have now but they had the vision to make it big.

Companies like Havells, Infosys, and Reliance were very small in size & few recognized their potential. Today, all these companies are giants in their own fields with a presence across the globe. Reliance at one point was giving its investors a mammoth return of 700% annually while Wipro was giving a mammoth return of 1900% annually at one point.

One question that arises is how were these companies able to achieve the sheer scale & size over the years. Who gave them Angel Capital to grow? Who were Investors interested in startup investing? If we take a close look at their journey, all these companies grew by close to 100% year-on-year for the first 10-15 years. The basic principle of the stock market is that the pace with which companies grow share prices grow at a proportional pace, which is why ₹ 1 Lakh invested by investors have given a return of ₹100 Cr., ₹20 Cr., ₹ 15 Cr. etc.

This was the story 30-40 years ago when the era was quite different. The rules & regulations were not as strict as they are now. SEBI has created a very well-structured system for the listed market in India.

If we take a close look at the table, we would notice that post-1994, not many companies have listed their IPO. The main reasons behind this were the scams by Harshad Mehta in 1992 and the scam by Ketan Parekh in 1998. The inquiry conducted in these scams revealed that both the culprits had launched many bogus companies with the sole motive of raising funds while these companies conducted no operations. A lot of investors lost their age-old savings in these scams.

Taking lessons from these scams, SEBI announced new guidelines for investor protection in which it disallowed companies from launching their IPO until they have achieved maturity in terms of growth of the company, its products, revenue, etc.

Although these measures had a negative impact on the growth which got cut for a brief duration. Now, although there were restrictions on launching IPOs but registration of companies didn’t come to a halt which meant founders & entrepreneurs required money to fund and expand their businesses.

Now the question that arose was how to fund these startups and saturate their hunger. Another question that was being raised was if the new age investors could trust the regulations directed by SEBI & would these regulations be enough to protect the rights of investors.

This gave prominence to newer concepts like Angel Investors, Venture Capitalists and Private Equity Funds.

Angel Investors are those people who spend out of their personal capacity, those who invested in the stock market earlier, now invest ₹2 Lakh, ₹5 Lakh, ₹ 10 Lakh ki amounts in Startups. The concept of currency depreciation remains the same. ₹1 Lakh invested in 1980s would be equal to ₹5 Lakh 20-30 years later. Similarly ₹1 Lakh invested today would become ₹ 10 Lakh, 20-30 years down the line. Toh aaj woh Angel Investor startups ko fund kar raha hain.

At that point in time, Startups started raising funds through Venture Capitalists & Private Equity Funds to fund business expansion. The thinking behind this was that the Angel Investment industry was quite unstructured & unregulated.

Previous to the launch of Planify there was no company that had regulated & structured the Angel Investing system so well. Planify launched a platform to enable investments in upcoming startups. In the last 4-5 years we have seen a boom of startups, many of whom have gone ahead & achieved Unicorn status already.

There’s no brand in this chart that has gone unheard of. If we talk about the first company i.e Flipkart that got launched in 2011, if someone would have invested ₹1 Lakh at that time, today the value would have been around ₹60 Cr. which shows an astonishing annual growth of 54,545%. If we talk about Oyo, ₹ 1 Lakh investment invested 8 years ago, investors would have made close to ₹ 50 Crore which gives an annual return of 62,500% so on & so forth.

This is one big reason why Angel Investing is the new hot topic of the day. Today, India has more than 108 unicorns & around 650 companies are such that have achieved the Soonicorn status i.e it is close to reaching Unicorns status. A new term has been coined called Mincorns, which is being given to those companies with very high potential.

Only the language of Angel Investment has changed. People who were investing their funds in IPOs have now started investing in Angel Investment.

Planify has structured this system so well, giving investors over 250 options for Angel Investment. Planify has created a 6 step process to allow Angel investors to invest hassle-free. The steps are listed below:

• Find
• Screen
• Pitch
• Due Diligence
• Invest
• Track
  

The success of this system can be gauged by the fact that Planify has facilitated over ₹250 Cr. worth of secondary investments in as many startups since it’s inception, earning investors a minimum annual return of 50%.