Seed Capital From Angel Investors: Padmaja Ruparel, President, Indian Angel Network (Part 5)

By guest authors Irina Patterson and Candice Arnold

Irina: How many investments have you made in the past 12 months?

Padmaja: Within the past 12 months we would have done five.

Irina: And how much do you usually invest per deal?

Padmaja: We’re touching $400,000 to $500,000 per investment.

Irina: On average, how many investors join in per deal?

Padmaja: We used to do about nine to ten investors per deal. But our last deal has clocked 47 on an about $800,000 investment.

Irina: How long does it take for a company to receive funding from your group?

Padmaja: I would say three months. That’s an average, but there’s always less or more, but the 12 days case that I was telling you about was really signing the term sheet. Then the due diligence happens, the legal due diligence, all of that. In this particular company, he needed to change a few things on his pre-investment equity holding, which he wanted to change and which took him time. So, you factor all those things in and it becomes about 90 days.

Irina: What is the typical valuation of a company that you invest in?

Padmaja: We usually take between 20% and 30%.

Irina: Do you usually have a valuation of $1 million to $3 million for a company?

Padmaja: You could say that. Sometimes below $1 million. Once, we funded a company that approached us with a $10 million valuation. Finally, when we invested, pre-money was $750,000!

Irina: What is the typical return you seek?

Padmaja: As I said, it would be nice to have a typical return of 5x over 15 months. That’s what we’ve done with Druvaa/Druva , a software solution for continuous data protection and disaster recovery .

Irina: In what stage of a business’s development do you usually invest?

Padmaja: I think what our investors typically like is a company which has gone operational or about to go operational, with some customer endorsement. It’s not necessary, but if a company has revenues, we’re happy to look at it. We looked at a company which had revenues of about $200,000. For an Indian company to have $200,000 in revenues is not bad.

Irina: Do you take the total available market (TAM) into consideration?

Padmaja: Yes. The market should be large. But since we’re sector agnostic, it completely depends upon each sector.

Irina: Would you consider a company with the TAM as small as say, $20 million?

Padmaja: In Indian terms, it could work, but remember we need an exit. We need to figure out whether the next round of investment is going to come in or what is an exit route.

If the market is too small, it is hard for us to fix a number. It may be large from an angel perspective, but it also needs to be large from a VC perspective because only then will a VC come in and give an exit to the angels.

Or if there is the development of intellectual property (IP), you can ride the IP valuation game, meaning that if a venture creates an IP, the valuation of the company increases which allows for tech transfers and licensing and finally acquisition opportunities. These are also interesting opportunities.

This segment is part 5 in the series : Seed Capital From Angel Investors: Padmaja Ruparel, President, Indian Angel Network
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