Seed Capital From Angel Investors: Padmaja Ruparel, President, Indian Angel Network (Part 4)

By guest authors Irina Patterson and Candice Arnold

Padmaja: There are other entrepreneurs whose plans we look at and play the devil’s advocate, punch some holes, and have the entrepreneurs really improve their presentations and really make them more investable. Or make them more palatable to investors. We make them think through their numbers, operations, and even valuations, which can really be over the top.

That happens all the time. We have an internal rule, every e-mail must be  responded to within three working days. But having said that, there’s obviously a due diligence [process] where we’ll have to sometimes invest a little more time; because we’re getting plans more vetting is required and there need to be several iterations to improve the plan.

What we do to save time is get the entrepreneur on the phone or meet with him or her, whichever works, and we work through the whole thing so the entrepreneur understands our thinking, understands why we are punching holes and what are those holes. We give him the logic as we see it. How quickly these holes get fixed is completely dependent upon how quickly the entrepreneur works. It’s very difficult to control that time.

Then there are those who are really not ready, and we sit and explain it to them. But there’s always a door open, so they can come back to us when they’re ready or have improved their plan or start something else.

That’s how it plays out. And then there are those who we tell, Look, you haven’t got this . . . why don’t you go work on it and come back to us, and then we track it. There is a regular tracking mechanism through which we touch base with the entrepreneur and say, hello and where is it going?

Irina: What would be the next step for someone who came to you and who is really good and you would consider investing in them.

Padmaja: They would present to the investors.

Irina: Do you have regular meetings?

Padmaja: Yes, every month we have a minimum of three meetings. We have a full calendar for the year.

Irina: When you’re debating whether to fund these ventures, what are the most decisive factors?

Padmaja: I think two things. One is the team itself, because at the startup level, what else is actually there? The most tangible thing is the team, whether it can execute the plan or not. The rest of it could well be just about one presentation or an Excel sheet, which can be tweaked around as much as one wants. But at the end of the day, can they execute, can they deliver, can they create the value from customer acquisition to collections and delivery? So, to my mind the team is critical.

Number two is the proposition, which is, how differentiated is this? The proposition needs to be doing something different or differently for a VC or angel investment. If I take those two, a class-A team with a class-B idea is better than a class-B team with a class-A idea.

An idea is still an idea until it gets executed; it’s still the team that makes a difference. So, those two are what I would be driven by. After that, of course, comes the understanding of competition, understanding of how they use finances, how they use the funds, how much bootstrapping they are doing, All of that comes later. At this stage, numbers should be reflecting operations and not the other way around.

This segment is part 4 in the series : Seed Capital From Angel Investors: Padmaja Ruparel, President, Indian Angel Network
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