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The Playbook for Startup Investment Success: Vital Lessons

Angel investment is a symbiotic relationship that can accelerate a startup's growth trajectory and drive innovation, contributing to broader economic development and technological advancement

Mahavir Pratap Sharma, a distinguished serial entrepreneur, known for startup investment, hailing from Jaipur, has etched his mark in the business landscape through a myriad of ventures spanning several decades. Over the course of 35 years, Sharma has not only left an indelible imprint in carpet manufacturing and exports but has also demonstrated his entrepreneurial acumen across various other spheres.

For more than two decades, he has spearheaded an esteemed event management company, orchestrating upscale events, exhibitions, and weddings with finesse. Running parallel to these endeavors, he has nurtured an online marketing and branding venture for the past 12 years, dedicated to bolstering his carpet and event management enterprises.

In addition to his business endeavors, Sharma has emerged as a proactive angel investor, channeling his focus towards early-stage startups for the past 12 years. His notable distinction as the sole Asian to assume the role of Chairman for TiE (The IndUS Entrepreneurs) Global in 2020 speaks volumes about his leadership prowess. Furthermore, he continues to wield significant influence as the Chair of TiE India Angels since the same year.

In an exclusive dialogue with senior journalist P. Srinivasan, representing The Interview World, Mahavir Pratap Sharma delves into his journey as an angel investor, offering insights into the crucial considerations preceding investment decisions. He highlights common pitfalls that startups often encounter during investor pitches and emphasizes the governmental support available for Indian startups. Here, we distill the salient points gleaned from his interview.

Q: Could you share how your journey into Angel Investing began?

A: As the president of TiE Rajasthan in 2008-09, I observed a clear divergence in growth trajectories between traditional businesses and tech-based companies. Despite our diligent efforts, our turnover and profits didn’t match the rapid expansion seen in companies like MakeMyTrip and Naukri.com, which were scaling rapidly and even listing on NASDAQ. While our traditional businesses had taken 25-30 years to reach a certain level, these tech companies achieved comparable growth in just a decade. Recognizing that technology was the future, but lacking the technical expertise to start a tech-based venture myself, I chose to invest in technology startups, marking the beginning of my journey into angel investing.

Q: In which sectors do you primarily invest?

A: My investments span across sectors where technology is leveraged to its fullest potential, offering scalability with minimal time, effort, and capital.

Q: How many companies have you invested in thus far?

A: I’ve invested in over 40 companies to date.

Q: What are the key factors you consider when evaluating potential investments?

A: Several factors weigh into my investment evaluations. Firstly, I assess the founder’s abilities, ensuring they possess the necessary skills and determination. Then, I delve into market demand, ensuring there’s genuine interest in the product or service. Timing is crucial; I evaluate whether it’s opportune for the technology or innovation. The team behind the startup is pivotal, as is the company’s scalability potential, aiming for tenfold growth in the next three to four years. I also consider investment efficiency, competition levels, and the company’s saleability reaching a certain scale.

Q: At what stage do you typically invest, and in what age group do most entrepreneurs approach you?

A: I specialize in very early-stage investments, often at the pre-seed or idea stage. Typically, I encounter young entrepreneurs aged between 20-35 years. On average, I review 8-10 startups daily, totalling 200-250 per month. Filtering these through email and LinkedIn, I narrow the list to around 50 startups. From there, I engage in Zoom meetings with 25, ultimately selecting one or two for investment, constituting a 3-4% stake. This process is dynamic and influenced by various factors, ensuring a thorough assessment before committing.

Q: What support do you provide beyond financial investment?

A: While not every startup receives monetary investment, many require mentoring to become investment-ready. Recognizing the vulnerability of entrepreneurs deeply invested in their ideas, I offer guidance to steer them toward success. Mentoring and handholding aim to bring entrepreneurs to a stage where I might consider a modest equity stake, typically around 8-10%.

Q: What common mistakes do startups make when pitching to investors?

A: A prevalent issue is approaching numerous investors without understanding their interests and capacity for investment. This shotgun approach often leads to frustration and wasted time. Additionally, startups frequently lack insight into competition and market timing, believing their offerings to be unparalleled without thorough market analysis.

Q: What do you perceive as the greatest risks for startups today?

A: The primary risk lies in securing follow-on funding rounds. Continuous funding is vital for scaling operations; without it, companies risk stagnation or failure. Startups must understand the imperative of consistent growth and the need for continuous fundraising to support it.

Q: What advice do you offer first-time entrepreneurs seeking investment?

A: Prioritize building a strong team, as success hinges on collaborative efforts. Develop a product or service that offers a unique advantage and demonstrates sector expertise. Bootstrap or seek funding from friends and family before approaching angel investors, and ensure the timing is right.

Q: How does the government support startups in India?

A: Governments, both at the central and state levels, have implemented supportive policies for startups. Initiatives include grants for prototype development, the establishment of Atal Incubation Centres for nurturing startups, and Atal Tinkering Labs in schools to foster innovation from a young age. These initiatives underscore the government’s recognition of technology and startups as drivers of future growth.

Q: Where does India stand on the global startup stage?

A: India ranks third globally in the startup ecosystem, following the USA and China. While commendable progress has been made, there’s considerable room for growth, particularly in technological advancements, to realize India’s full potential compared to leading startup hubs like the US, Israel, Germany, Ireland, and China.

Angel Investors Writing the First Chapter of Startup Success through Generous Investment
Angel Investors Writing the First Chapter of Startup Success through Generous Investment
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