While venture capitalists have been taking an interest in India’s thriving investment market for more than a decade by providing large sums of money to companies with proven growth potential, entrepreneurs at the start-up phase weren’t given as many financing options until recently. Business angels, or wealthy individuals who invest their own funds, are a relatively new phenomenon in India, especially in comparison to America, where a large number of entrepreneurs turn to these private investors at the beginning stages of business development.
Business angels are willing to take risks that venture capitalists won’t - being that the amount of money invested is smaller and covers initial marketing, operating and production costs and salaries. In return, business angels expect a 10 to 30% return on their investment, usually over a five to seven year period.
Entrepreneurs in India have also experienced greater rewards from their “angel” relationships outside of financing. Some are mentored for more than a year by business angels before their company is up and operating, and many business angels continue to play a supporting role - providing them with contacts and business advice, sometimes participating in day-to-day operations - until they exit the company.
Other investment angels, however, want no active role in the management of the company and strictly view the relationship from a financial standpoint. It is up to the entrepreneur and business angel to agree upon the structure and boundaries of their relationship. The RR Finance Group helps entrepreneurs and investors find the partnership and structure that they are looking for.
