Seed Capital From Angel Investors: Amit Grover, Member, Mumbai Angels (Part 2)

By guest authors Irina Patterson and Candice Arnold

Irina: How many deals do you get each month, approximately?

Amit: On average, I would say we get maybe sixty to seventy-five, but it can be up to one hundred.

Irina: How many of those deals deserve a closer look?

Amit: Once the one hundred companies apply to Mumbai Angels, we have a screening committee that looks at each one and shortlists fifteen of them as meeting our criteria, which include the team, which is the most important, the scalability, and the business plan.

Based on this, we look at fifteen to twenty companies in detail. What are their business models? What kinds of customers they have? What is the competitive scenario in that domain?

Based on these criteria, we select about four companies. These top four companies allow to present to all of our one hundred members. We organize a meeting with all Mumbai Angels members every forty-five days. After they present to all of the members, we go into due diligence, a closed-door meeting, negotiations, and so forth. That’s how the process goes to close the deal.

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

Amit: Seven to eight.

Irina: What was the approximate dollar amount?

Amit: Amounts start from $100,000 and go up to $500,000. There are a few exceptions wherein the deal size has gone higher than $500,000 but on average, it is between $250,000 and $500,000.

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

Amit: On average, I would say from the time the company makes contact with Mumbai Angels and the process of putting money in the bank takes about two or three months.

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

Amit: Usually, the valuation of the company, depending on a lot of things – a few of them include the team, the plan, the scalability – on average, we have $1 million to $2 million valuations.

Irina: Do you think in terms of how much equity you would like to have?

Amit: We don’t have any set target for a percentage that we need to take in a company. On average, I would say that between 10% and 20% is the nominal number that we look at.

Irina: Do you think in terms of x number of returns in, say, five years?

Amit: We actually don’t look at it in terms of the rate of return. We look at what are the exit possibilities and how do they scale the business. Those are the immediate concerns of a company. We try to bridge the gap in terms of mentoring, consulting, and advising them on how to scale a business. We don’t prepare the company for an exit. But in the past few years, our returns have been anywhere from four times to five times for each of the companies.

For example, InMobi gave us more than a ten times return. Myntra has been giving us more than a five times return, as have Reverse Logistics, Apalya Technologies, and other companies we have exited.

We have a time of two to three years before the companies can or should go for the next level of funding. Our expected return is anywhere from four times to five times in this time.

Irina: At what stage of a company’s development do you usually invest?

Amit: We have invested in early-stage companies in the past. In the past few years, our focus has been on companies that have working prototypes in terms of having a few paid customers and having a good team in place, which is more important than the financial parameters.

Customer validation is a key criterion because these are very risky investments at the early stage, and a lot of things can go wrong. What we believe is if your customer is on your side, then there are a lot things in terms of possibility.

Irina: Do you think in terms of total available market? Do you have a market size that you prefer?

Amit: Yes. Typically, this is specific to a sector. If it is a technology, logistics or education-related company, then India is a very, very large market. We don’t define it in terms of the total addressable market being $1 billion or $10 billion. We are obviously looking at large plays in terms of number of customers. We don’t define it exactly as it should be at least a $1 billion market before we tap into it. We say that there has to be some unique characteristic about the company.

This segment is part 2 in the series : Seed Capital From Angel Investors: Amit Grover, Member, Mumbai Angels
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