Vinay Bansal

Founder IPV

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How To Curate The Right Investing Mindset To Be A Successful Angel Investor

The mindset to become a successful angel investor demands the cultivation of six mantras; these principles provide an excellent starting point for anyone donning an Investor's hat.

Angel investing is a fast-rising investment model that is being preferred by CXOs, seasoned entrepreneurs with exits because they have been a part of the startup industry and have the know-how to invest. Startup investing as an asset class is a fast emerging one which functions on the pillar of high risk, high returns. But it doesn’t have to be mean high cheque sizes. You can start small similar to the game show quiz pyramid and work your way up as you gather more confidence, knowledge and success.

As the startup ecosystem in the country tackles the challenges of the 2nd wave of the pandemic, experts are anticipating the pace of innovation and growth for these companies to pick up post-vaccination. As the pace picks up, a plethora of opportunities are going to be available for the angels. This would be the ideal time to dip your toes and test the waters as valuations remain rational, more innovative startups are looking to raise seed and angel money. A good starting point would be to join some of the best-known angel networks, peer community to gather first-hand knowledge before you take the first plunge.

On that account, to upskill investors for angel investing and help them understand the art and science of investing in startups, many of the well-known Angel Networks, VC firms and media publications are organising webinars to share the key details of the investing process, things to watch out for when evaluating a startup, understanding technical subjects like Valuation, Legal documentation and CapTable. Many of these webinars and masterclasses are free to join. Make the most of it. Be proactive and ask questions from the globally celebrated speakers.

The mindset to become a successful angel investor demands the cultivation of six mantras; these principles provide an excellent starting point for anyone donning an Investor's hat. Here is a succinct overview of these mantras:-

1. Be probabilistic - The frequency of being right does not matter in the big picture; what matters is whether or not you put a bucket when it rained gold. Many successful angel investors use probabilistic thinking to work with ambiguity. It helps them to concentrate on their investment process rather than the outcomes. Reasoning probabilistically prompts them to consider the impact of their decisions. It assists them to put losses into perspective.

2. Invest in the circle of competence and expanding this circle - A principle advocated by Warren Buffet, “Strike where you understand the business, don't worry about things outside your circle of competence, and keep expanding it.” Intelligent investing is not complex, though that is far from saying that it is easy. What an investor needs is the capability to evaluate chosen startups correctly. We need not be an expert in every industry/sector. One only needs to be able to assess companies within his circle of competence. The extent of that circle is not very important; knowing its boundaries, however, is vital.

3. Independent thinking - It is vital to have the ability to block out the views of others in Investing & knowing the difference between information & influence. One needs to invariably remain critical with his thinking and meticulous with his analysis when it comes to investing. The clearer you become with your very own independent investigation and analysis, the more self-assured you will be with your own investment decisions. This is the key tool in your armory that guides you on the timing of entry as well as when to exit.

4. Overconfidence, loss-aversion & price anchor (biases in investing) - Become cognizant of your own biases and factor them out of your decision-making to form a habit that will pay you good dividends. Angel Investors tend to suffer from overconfidence, regret, attention deficits, and trend-chasing - each of which can lead to suboptimal choices and eat away at returns

5. Right opportunity at the right time - Know when the fundamentals have changed and when there is the right startup for an investment opportunity.

6. Be patient - Patience or lack of it can be a defining trait of success in angel investing. Understand the power of compounding; growth is never linear. The real gains are beyond the inflection point, be patient! In the end, how your investments act is much less important than how you act.

Angel investing can make you a millionaire if done with knowledge and support of right experts. Consider angel platforms and fund managers the hosts of the show who will present you with the right options backed by deep due diligence, options to pick the best startup and then comes the million-dollar question – Isko lock kiya jaaye

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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