MT28 | Kanishk Pratap Singh On How To Invest In Startups When You’re Not Yet A Millionaire

Are you fascinated by the world of startups, and really dying to capture some of that unicorn magic for your own portfolio? But that’s hard if you’re not a millionaire because no credible founder is going to take a few thousand rupees or a few hundred dollars. So is there a way to directly invest in a startup when you don’t have a lot of money?

Discussion Topics: How to Invest in Startups When You’re Not Yet a Millionaire

• How angel investing works
• How it differs from crowdfunding
• How to find good startups to fund
• Legalities of small-ticket angel investing in India
• Realistic ROI and time to cash out
• Risks and pitfalls of angel investing

Transcript: How to Invest in Startups When You’re Not Yet a Millionaire

Amit Ray: Welcome to another episode of MoneyTok, where we help make personal finance and investing simple and accessible through both my personal experience, as well as through the expertise of many of the guests that we bring on the show. Today, we are actually going to be talking with Kanishk Singh, who heads Investor Relations at POD, which is an angel funding site that helps match one of the investors like you and me with early-stage startups that are looking for capital. Thank you so much for agreeing to join us. Perhaps before we start, would you like to share a little bit about yourself, your journey so far and also maybe about POD.

Kanishk Singh: Sure. Thank you very much Amit for having me here. And also, thank you very much to the MoneyTok team for giving me this opportunity to talk about my experience and the entire angel investment ecosystem in India. So yes, I’m Kanishk, I had an investment at POD. Prior to this, I had been working in the US finance industry, and also the Forex industry for more than a couple of years. I started building POD from scratch along with my founder last year, March and onwards, and since then, it’s been only onwards and upwards. Once I got associated with POD, I’ve been fortunate enough to evaluate more than 5,600 startups from an investment perspective and also have been actively making some investments in early-stage startups since last year.

So, this is all about me. Now, talking about POD, so definitely POD is a tech-based platform, we are building a fundraising stack up the future in India, where a startup can easily raise funds and on the other hand, on the buy side of the ecosystem, there are investors who can invest in startups with as low as 20,000. So, in the industry, it has been like generally, people invest two lakhs, three lakhs, five lakhs, and ten lakh rupees to start with to invest in startups. So this is what our efforts had been focused on bringing this investment amount lower. And also, alongside that, we are building an entire ecosystem where the entire fundraising and investment can be managed on its own. So, this is all.

Amit Ray: So that’s actually pretty interesting. So what you’re saying is that, in a normal startup funding environment, a typical angel investor would put $10,000, $50,000 if they are a super angel, maybe 100, $200,000, which is well beyond the reach of regular folk. And what you’re trying to do instead is make it accessible for as little as I think you said 20,000 rupees, which is only about $300 or so. So, that is actually quite incredible. So why is it that you actually are trying to make this happen? What is wrong with angel investing right now the way that it is?

Kanishk Singh: See, before I explain to you why I’m trying to do this, I’ll have to drag you a bit like a couple of years back in the past. So I’m a finance enthusiast. I graduated five years back. So when I jumped into the corporate world, I got to hear a lot about people investing in startups and especially when you’re in Bengaluru, you can’t stay away from this. So then again, a thought hit me either you start a start-up, work in a start-up, or also one way is that you invest in a startup and be in the ecosystem. So when the thought came into my mind, why can’t a person like me who is earning let’s say, 50,000 rupees in starting or 40,000 rupees in his career, don’t have too much responsibility in my family as of now because I’m a young person right now in my 20s.

So why can’t a person like me invest in startups? As I went, I Googled it. I couldn’t find anywhere on any platform with any sort of lead where somebody says, you can actually start investing in less than one lakh rupees or less than 100k dollars. So, I was very much fascinated about this fact, like why can’t this be done and then again this thought process kicked me actually wanting to be in this ecosystem. And then things started from there. We started deep diving into the law, into the regulation, and talking to different people. And we ended up finding that you know there is no legality that stops a person from investing in a startup. There is no legality, if you directly want to invest in a startup, nobody is stopping you, no amount. So this has been the thought process especially since I have felt that is why I can’t invest in startups and that is where the POD started.

Amit Ray: This is really interesting. So, when you talk about regulation, that means there is no restriction on obviously a company raising money from anyone that is supposed to be okay. But on the other side, also, there is no regulation saying that you have to have a certain amount of salary or assets or something like that in order to be able to invest in a startup.

Kanishk Singh: So definitely, when we talk about the regulations, there is a very thin line. Now I’ll explain to you both. So what happens generally, in India, when we talk about angel investment, most of the investment used to happen like I’m talking of a time two or three years down the line in the past. So most of the investment used to happen through AIX. So all these platforms, all these Angel networks, VC funds, like those permanent names in India, or maybe outside also, most of these players have made a fund which is called a venture capital fund or an Angel fund. So this Angel fund falls under the alternative investment, like AIF category one.

Now, anybody who is investing through an AIF, they have to follow a regulation that you need to have a net worth of two crore rupees, where you will be called an HNI or accredited investor, and then only you can join AIF to invest in a startup. So this goes on the side of AIF, but when it comes to investing in startups, on your own, let’s say, you are building a startup and you came to me knowing me as a friend and said, hey, Kanishk, why don’t you invest in my startup, this is the idea I’m bringing, and I simply agreed to invest in you. And there is no check of whether this Kanishk is accredited or not or maybe he’s forming an AIF or not. So when it comes to investing through an Angel fund, or through an alternative investment fund, yes, you have to be legally bound by the law of angel funds accredited investors. But when it comes to directly investing in startups, there is no such law. No law says that you can’t invest. Anybody can’t invest who is not an accredited investor. So this is the entire law about it.

Amit Ray: Okay, got it. This is really interesting; I wasn’t aware of this distinction. And I actually liked your point about when you have a lot of disposable income, and you’re okay to take risks, perhaps it is one alternate route that one can take in terms of trying to build wealth. So speaking of which, how does angel investing actually work? And the corollary is, how can someone with little money actually think about doing this at all?

Kanishk Singh: So, great question Amit. Thank you for bringing this up. When it comes to angel investment when we talk about the nuances, there are some sort of differences, limitations, some sort of nuances that are involved and that is why not everybody tends to go ahead with investing in startups. So what are all those nuances? The first thing is that you don’t get a lot of information about a startup on a public platform or a public forum like Google or anywhere. XYZ startup you got to know how you can get only information from MCA about their filings and all those things, and about the industry on Google but not about the particular startup. So, you have to be sound enough in decision-making or maybe your own thought process to decide whether this is an investable company or not, and nobody is going to teach you this is how you select a startup because everybody’s investment thesis differs.

So, that is point one. Now, again, another point is that there is an e-liquidity issue in private equity or what we call a startup investment. So, irrespective of your investment amount, that definitely will be like a liquidation issue. What the liquidation means, like to all listeners, means that it is not as simple as selling these stocks when and then you want, like you sell your crypto or maybe stocks. So, this is one issue that happens, and also deciding at what point you have to exit or maybe sell your stock is also one point that is a very crucial thing that plays a crucial role in this entire journey. So except for some nuances like I mentioned, like, selecting one startup and liquidation issue apart from these things, there isn’t any rocket science in investing in startups or maybe in stock also.

Amit Ray: So you mentioned that just like with any other investment, there’s an entry point, and then hopefully a gain in value, and then an exit point. Now, with regular stocks, the exit is on your choice, you decide when you want to sell it. But in the case of startups, you can’t well sell it at any old time. So two parts to this question one is, typically, when does it actually happen such an exit event? And the second thing is, to what extent is it in your control where you decide that you’re going to exit in a certain round? Or you just get bought out at some point, and then you’re forced to exit. So how does that work?

Kanishk Singh: Interesting question. So first is that, yeah, definitely I mentioned that there will be liquidation issues, when you are investing in a startup and one has to be reminded about this, for sure. So how does this exits happen? So what happens is you invest in a startup at point A, now the startup is growing, they’re doing good business, then there are two or three things where exit can happen, let’s say after one year one another investor is coming to invest in that particular startup. And all the existing investors, or maybe the founder also proposed that, hey, you know what, you want to put $1 million into my startup.

So you take the 800k dollar new share that I’ll issue and 200k dollar is something which I have existing shareholders so why don’t you buy them out? So they agreed to buy them out. And this is how the exit from a startup happens. And this is the 95% case, irrespective of whichever startup ecosystem India, US, Europe, UK, whatever you talk about. So that is point one. And this is what we call a secondary sale. Also, like, let’s say, Amit, you have invested in any startup, and then you found your friend is interested to invest in a particular startup and you said, Hey, why don’t you buy out my shares, instead of going and asking the founder to give you shares, maybe the founder is not ready to raise another money.

So you found one buyer, and you said to the founder, or to the board of the company, that, hey, I want to sell my share to this particular person. And then the board will do some sort of legal quorum, they’ll approve, you will buy out and this thing happens, you get your money. So this is how typically the exit works. Now other ways are like when the company is making enough profit so out of the profit, they make a share buyback reserve, and then they use that money to give exit to existing investors. And basically, this happens as a share buyback, the company buys that safe back. But what happened generally in the market, people understand that companies can buy shares anytime back but this is not the case actually.

A company can only buy a share when they are making a profit. And you know, the truth is like how many startups right now are making a profit in the market? So this is also one point, like a lot of people brag on LinkedIn, or maybe on some social media platforms. So these are the two most important points. Now other things like let’s say Zomato acquired Blinkit. So all those existing shareholders of Blinkit would be getting an exit and on whatever valuation Swiggy has acquired, or maybe whatever valuation they have, both the parties have agreed. So most of the exits happen on the secondary sale and then this buyout and the last point is IPO. And if you are fortunate enough to get associated with one startup that goes to the IPO, that’s a huge wealth creation.

Amit Ray: My question to you is that as an early and small investor, my impression is that at some point in time, you will be forced to sell out to some large investor at some point because they don’t usually want to carry a lot of small investors with them all the way to IPO. So, is that indeed the case? Or am I mistaken there?

Kanishk Singh: Definitely, as of now, in the ecosystem for retail investors in India, there is a concept of forced exit, but what happens all these whatever, people who are making sure that this facilitation is happening, they’re making sure that whenever these force exits are also happening these investors are getting healthy returns. Again, this depends on the startup to startup the agreement that you signed, what we call a safe agreement, or maybe an SHA. So you have to be very careful when you’re signing the SHA, take time to read it. Once you read it, you’ll be able to know what all other clauses are there, whether you’re going to be given a forced exit or not, and if it is an exit, how beneficial is it for you.

Amit Ray: Yeah, I think maybe the big point to take away from here is that you have limited choices as a micro-investor. So your choices either don’t get in at all, because there are really no options for you to get in directly with very limited amounts of money. Or if you’re getting in with a small ticket size, then you have to compromise on these other things so that larger investors will have flexibility. So for example, the forced exit we talked about, there’s also I guess, liquidation preferences, where larger investors may be able to get their money out first before small investors do at the point of an exit.

Kanishk Singh: So what I was mentioning is that exit for larger investors and smaller investors is not something which I would say happens, because what happens at the end of the day, it boils down to the agreement. Now let’s say if I have put in the agreement that I’m coming at point A and a bigger investment investor is coming at point B. And at point A, I have signed the agreement that whenever the secondary sale is happening, within three years, I’ll be getting that exit. So whether this point B investor is bigger or larger, I have the right and also it depends upon the kind of instrument that you’re investing, like CCPS, CCD equity, all those things have different preferences when you get exit.

Amit Ray: Okay, fair enough. So, another question I have is, you know, there are other ways in which people can contribute money to companies. So, we talked about angel investing, but that’s not traditionally been the way the other ways have been crowdfunding, for example, Kickstarter or GoFundMe, or things like that, where people can give money to a company because they believe in whatever they’re making. So, how are these different crowdfunding versus angel investing?

Kanishk Singh: Angel investment and crowdfunding is a completely different concept, there are different kinds of crowdfunding like reward-based, donation-based, you have equity base, debt base, and a few other kinds of thing which is not too popular in India but yeah, donation-based crowdfunding is something which is popular in India, because those players like Milap and few other players are doing that. So, one thing is reward based, which is very famous in India also where you give a certain amount of money to XYZ company and for that money, they give you some sort of reward and it may be in the form of any product, any article or any sort of thing. You get money or contributions from an unlimited number of people.

Now, in an Angel investment or a startup investment, you are strictly bound by the law, that anywhere you can’t cross a number of which is more than 200. So, if the number of investors is within this limit of 200, it is not at all crowdfunding. Now, how people get confused between crowdfunding and angel investment, is just because you are implementing tech into the entire process like you want to invest in a startup earlier, it used to happen like, you are getting the documents to sign offline, maybe through post on email, you download it, sign it.

So now platforms like POD and a few other platforms, are making things very possible by implementing tech. So whenever the tech is implemented in the process, people think that oh, now you guys are doing this on the basis of crowdfunding, you are providing information to a wide number of people, a wide range of people where everybody can see the details. But yes, details can be seen but implementing tech doesn’t mean it is crowdfunding.

Amit Ray: Got it. And I think also with crowdfunding, you aren’t taking ownership in the company, right? You’re essentially pre funding the product, I suppose and then you’re going to get whatever it is that they make.

Kanishk Singh: Yes, some rewards.

Amit Ray: Yeah, exactly. Versus with this, your reward is hopefully the growth of the company, in which case you grow along with it. And so it’s capital appreciation. And from an investor’s standpoint, I guess if the ticket sizes are small, then between the two I personally might want to invest in the company versus just getting the product or the reward that they’re offering, if both opportunities exist. Actually speaking of that, what are the legalities of this investment? Like what are the things that you know the checks and balances that this investment goes through?

Kanishk Singh: So, see, everything goes through like the Companies Act, the Securities Act, the Contract Act. Now, why the Contract Act, because you and the startup are signing a few sort of agreements or contracts. So, the agreement and Contract Act comes into play like you have to make sure that it is being complied with this law. Now Securities Act because you will be issued a security. So, you will have to make sure that all the laws mentioned in the Security Law have been being followed. Companies Act because you are investing in companies so there are certain sorts of legalities like how you will be issuing your shares to the company and you as an investor how you will be investing. So there are two methods one is private placement and one is right issue in India, especially Companies Act 2013. So the startup can issue shares with these two methods. There are no third method along with that, so only two either the private placement or right issue. So, it says that the shares have to be issued or any security has to be issued making sure the private placement methods are being followed where the investors KYC would be done, investor will transfer money into the start-up account and until and unless shares are issued, the stamp duty to the government is paid all these sorts of things are done startup cannot use the funds. So those are the checks and balances and to make sure these things are happening we have Company Secretaries and compliance people in India who make sure these things have been checked. So yeah, this is pretty much.

Amit Ray: And what does that mean from a process standpoint? Like, what do I have to do as an investor to actually get the shares or share certificate or whatever?

Kanishk Singh: So see, basically with such platforms, or maybe Angel networks or VC funds in place, you as an investor really doesn’t have to worry a lot about the process until and unless you are investing on your own, like some startup came on your LinkedIn and says, Hey, do you want to invest in this and you liked and you’re investing, then you have to be worried about the process. But if you’re associated with any Angel investment platform, or maybe network, actually, those networks do all heavy lifting.

So there, you have to just make your investment decision and wait for some agreements to arrive, and sign it. And once this is signed, wait for the mail, once they ask for the call for money, deposit the money, wait for some sort of calls or whatever instructions are being given. Because of all these platforms and Angel Network, they were prominent, like experienced law people or legal people who take care of all those processes. So, if you’re investing through such platforms, you definitely have to don’t worry about it a lot.

Amit Ray: So now let’s talk a little bit about the quality of their investment because like you rightly said, with the share market, you have a lot of data and stats and history which you can base your decision on. And even then you can be wrong. In the case of startups, you don’t have any history. And like you said, the information is not really there, and it’s very limited, and so on. So how does one actually find good opportunities in which to invest?

Kanishk Singh: This is one question, if you are in a startup ecosystem, the most asked question to you. So, see at the end of the day, everything boils down to your own investment thesis. Now, let’s say even if you’re investing in a stock or maybe a startup, you have to be prepared with your own investment thesis. Now, what does this investment thesis mean? There are a lot of people who say, you know what, I will invest in only those startups which are making, let’s say, 100k dollar revenue every month. Some are there, no, I don’t care about revenue, I care about the idea, I care about the team and those sorts of things.

So you have to make your own thesis, like what you want to invest in. Point one is that don’t dive into something which you don’t understand. Like, if you ask me, I don’t understand crypto a lot. So I’m a person who believes in staying away from that because I don’t understand. Yes, it’s an attractive asset class, you will make a lot of money, or maybe not, I don’t know. But one piece of advice is that you don’t dive into any sort of industry, which you don’t understand, and just because people are saying that it is a cool industry, it will grow a lot.

No. So point one is that understand what you want to dive into and what you understand another is to make your own investment thesis, like whether you want to invest in revenue based startup, whether you are comfortable with existing players, are already in the market, but not making revenue and whatever things like whichever crowded market, like what happens sometimes, you find a startup, and there is a lot of startups who are already doing that. But you still believe that the team is something that can actually pass these things. So those are the basic checks. And also, it is more about learning and adding value to your knowledge source, especially for the startup ecosystem.

So it boils down to your research on a particular industry and all those things. Now, what do I think that if you don’t know how to decide your own investment thesis and how to do these things, the best thing is to try to connect with people who are already investing, follow them, read about them and the most attractive thing is these pitch events that happen. It teaches you a lot of things you simply sit there, listen, to how the startup is pitching, and how those experts who are already investing in the startup, ask questions that help you to add a lot of value, and also decide which industry you want to be in. So yeah, this is pretty much about how to select startups.

Amit Ray: So it is interesting that you know, I think the investment thesis idea is a good point. I do a little bit of angel investing. And I think it basically falls into two categories. One is you back the founder or you back the project. And if you know the founder, it makes life easier because you can make your own judgment about that. But in most cases, you won’t know the founder. So then it comes down to backing the project. But I think you gave some interesting proxies, which is back the project, which is backed by somebody else whom you trust. If there is somebody who has a track record of success, and you can somehow figure out where they are investing, you might be better off just following them into that because you will have the same probability of success as they have. So that’s interesting. What are the statistics on POD so far, you’ve been around for two years so what’s been the sort of funding rate just to give people an idea of really what are the ratios like?

Kanishk Singh: As an idea, we have been working on POD for the last couple of years, but we launched in January. So till now, we have received some 800 plus maybe applications, and we have a very stringent process to evaluate and identify startups out of that, those successful deals that went through the platform are 15. So you can relate to this ratio of 800 to 15. It is not also about whatever you get as an application being fundable, or maybe people will like that because we are a platform. So we don’t put our investment thesis, we have a metric that if the startup passes XYZ point, then it is good to go on to the platform. Now, it depends upon the investor, whether you want to invest in that, or whether you want to pass it.

If I talk about investors, so we have been able to onboard like 3,500 odd investors till now. And it is a combination of investors who are looking to invest for the first time, also those people who have invested significant amounts of money into the startups, and some micro VCs and funds also, they take us as like deal sourcing point as well. So this has been the number. We organise pitch events every alternative Saturday, not only for the sake of providing investment opportunities to people but also as I said, for me, pitch sessions were the most important learning point. So I believe the same thing that I can give to society or to the people who are actually following. So we organise pitch events, every alternative Saturday, what we call an interesting name, POP pitch on POD. So next Saturday, we are organising the 25th edition of pitch on POD. So this is pretty much about it like all those numbers are on POD.

Amit Ray: So this is quite interesting, essentially, I think, for me, the takeaway was 2% of startups are getting any kind of funding via your platform, which I assume should be representative, overall as well. And that’s how stringent one needs to be at least as stringent in order to try and identify reasonable or high probability opportunities, maybe not good you won’t know for some time. So speaking of which, so now somebody’s invested in this, and we’ve talked about exits and all of that. But what is the kind of exit that one can make or what returns can one make with start-ups, I’m asking this generically, not with POD, because you have not been around that long. But just generically speaking, what does the industry say?

Kanishk Singh: When it comes to the exits, I’ll divide it into two parts one is a timeline and one other is the quantum. So what happens generally people ask what is the rate of return I’ll be getting once I’m investing in a startup. And that is a very vague question to ask. And if somebody is promising that you know what, if you invest in this startup, and you get this much of a return, I would be probably saying that this is the worst advice you’re getting. There is nobody in the market who can guarantee you that you will make this sort of return because, at the end of the day, everything boils down to the success and maybe the growth of the startup. The amount of success is dependent upon the number of startups you’re investing in because the more quality startup you invest in, the more the probability of your getting returns.

Now, the second thing is like it also depends upon the timeline. So diversification is the one point we should love this word actually, like diversification in startups. So it is not about you came and in the ecosystem and you invested in three-four start-ups and then you are like now of course, it is done. Out of these four two are going to be the unicorn No, it is not the case. Because you see, there are like 105 unicorns out of those 10, 1,500 startups registered in India. So you take the probability of how much it is going to be. So point one is to keep investing in startups idea is maybe to invest in at least one startup every month or not one or two startups every quarter to start with, make a good amount of portfolio in two, or three years invest in 20, 30 start-ups, quality startups when I say startup it is called quality startup and that increases your chance of getting high return a good amount of money back.

Now when it comes to the timeline, one needs to understand how a VC cycle works. So you can’t plant a tree today and say that after two months why it is not giving me fruits? Because everything has a timeline and you can’t expect anything in a quick turnaround time. So in the same way in a VC cycle, what happens a general typical VC cycle takes three to five years, sometimes seven years to complete one round of VC cycle. And when we say VC cycle, this means that once you are investing, give some time to the startup to work, grow, build, raise another round, maybe do good business increase valuation. And once they are going with the entire cycle, then comes a point where they’re receiving a good amount of funding or maybe a buyback opportunity or anything, and there you get an exit.

So typically three to five years is something which you have to keep in your mind that I should not expect anything in less than three to five years. Because even if it happens in less than three to five years, it won’t give you anything healthy. There have been some exceptions for this, like BharatPay was one exception, which gave 90x return to people in I guess, 60x or 90x, in 9 to 10 months, but it was BharatPay, you can’t expect everything to be BharatPay. So in a similar way once you are investing in startup point one invest in a good amount of startup, a good amount of quality startup, make a timeline, make a budget that in two years, three years, you will invest this amount of money and divide it into small, small parts that this is the first startup allocation is going to invest in at least 15 to 20 startup in next two, three years, that will increase your probability of success, getting good returns and also give it a healthy time, at least one VC cycle to grow. And this is how you can make a good portfolio and expect a good return.

Amit Ray: Okay, got it. So, I think what you’re saying is right, this is one of those things where you cannot expect to return anytime soon. And I mean, it almost forces you to be a long-term investor, which I suppose is good in its way. What are the downsides of this investment? I mean, obviously, you are hoping for an exit, but what else could happen which is not so good?

Kanishk Singh: Great, you brought up this point actually. If you are expecting a high return, you should also be ready to lose. So, now talking about the downside see, you are investing 100 rupees the maximum that you can lose in an Angel investment is 100 rupees. So you invest X amount you will lose only X amount so the downside is 1x but when it comes to the upside, it is unlimited it is you take an example of Info Edge, they invested something around like one, one, and a half crore in Zomato, back in 2011, 12 and they got they got like 5,600% when Zomato was making IPO. So the upside is definitely too high, but the downside is only restricted to 1x.

We suggest everybody that invest only that amount into the start-ups that you are ready to lose because you never know which startup is going to grow and which startup is going to fail. So that is one downside. I earlier mentioned that e-liquidity is one thing. That is one restriction in the startup. So it is like let’s say you have invested 100 rupees, and after two years, you are in immense need of some emergency, and then you can’t expect your angel investment amount to be back to you. So these are the two major downsides of angel investment, which can pretty much be overcome through a good financial habits and a good investment thesis.

Amit Ray: Right. And actually, I think we should also look at this from a portfolio standpoint. So you’re right, with any individual investment, you can lose your entire 100 or you could make 10 times or 100 times on that. But over your portfolio, I mean, especially if we are doing what you said, which is you’re diversifying, so you’ve built a portfolio of 50 companies, and let’s say you put 100 rupees into each of them, chances are that if everything follows the venture style distribution and 40 of them might go to zero, but one of them might go to 100x or something like that. Again, if you’ve tried to select very well all those 50 and that one has to make up for pretty much all of the other’s performance.

Kanishk Singh: Yeah, so, as I said, building a portfolio is the best thing like building a quality portfolio. Now you invest in 30 start-ups, 40 start-ups definitely there is a high chance that 25, 30 out of them will not perform anything, they will go from 100 to 0. But out of those 10 that are performing well, there may be a couple that will give 1x 2x 3x return and there will be only one or two which will give you like 20x 30x 50x return which will cover all your losses that you have incurred. And this is with respect to the portfolio, not an individual investment, as you said rightly. So yeah, this is definitely the case there.

Amit Ray: And in fact, I think it’s important to make this point because people shouldn’t do angel investing with oh, I’ve invested in one and now I’m going to hope for the best on this one because that like you rightly said is a 0 or 100 sort of a game. But if you’re doing this in any sensible sort of fashion, you are going to have to invest in many and then you should know that the returns of that investment are not going to be 100 times your total money or anything like that.

It’s still going to follow some percent per year, you know, annualised basis returns, which is not going to be 3x 5x 10x, whatever it is, you think startups actually do. Instead, it’s going to be 20% to 30% if you’re a good investor, I guess if you make 30-35%, annualised, that would actually be a pretty good return.

Kanishk Singh: No, definitely as you talk about those super angels like all of us have been watching Shark Tank. Now take the example of Anupam Mittal. Recently, one of the interviews was published in the Mint. So he says that because he is a super angel, he has invested like 90% of his things in startups that we can’t do, we can’t afford to do this. But even being such an active investor, he has an IR of somewhere around 40 to 45%.

To see how realistic he is in his approach. And what happens, is we keep an expectation that every investment that we’re making is going to be 10x. That is not the case. And this is where when it doesn’t perform, we get demotivated, we say no boss, this was not the thing I had hardcore believe in this particular startup.

The first thing is don’t get too much associated with one start-up idea because one thing like we have taken a lot of examples, couple of things, they raise million dollars, multi-million dollars, and then they shut down immediately. So you never know what is going to happen because you are not sitting there and building that startup, it is somebody else. So don’t take everything in your mind very seriously. Invest, do follow-ups, and don’t expect it to be like something magic.

Amit Ray: Yeah, I think that’s a really good kind of way, to sum up the conversation. Angel Investing is exciting, it’s different, it gives you another kind of asset class that you normally wouldn’t get into. But it is not magic, it follows the same financial returns laws you have to build a portfolio and the portfolio will behave like portfolios, too.

And so therefore, you shouldn’t get into this expecting to 100x your money and also in a short amount of time, you should expect this to be like you said 5, 7, maybe 10-year journey for the whole cycle to end. And at the end of that you might find if you’re super lucky, you made 40% per annum returns. More likely you’re not an Anupam Mittal and so therefore, you would have made maybe 20% returns, but 20% returns are not bad compared to so many other places that you could have invested in.

Kanishk Singh: Yeah, definitely it is 20% higher than what we’re talking about and it is definitely very good.

Amit Ray: Yeah. One last question over here, which is a little different question. But are there any resources and books, articles, videos, or templates I don’t know that you might want to recommend to people in relation to their finances?

Kanishk Singh: See, as I said, the best way to learn angel investment, especially startup investment is to attend these unlimited pitch events that are happening like there are a lot of platforms, a lot of angel networks. We also do as I said earlier that we do pitch on POD every alternative Saturday. So join those pitches because you get to learn both the things there, one you understand how to evaluate one startup and maybe how to understand one startup and another thing is at the same point like live real time you get feedback from experts who are already investing in startups.

So I believe that yes, this is the best thing, these are the best learning resources for a newbie or maybe existing people also to join these topics and learn. There are a lot of podcasts of super angel people who invest in startups and MoneyTok is also one source where you can learn a lot. I listened to all your podcasts regularly and it is quality content that you bring. So definitely being on your platform is also a good source to learn about how to manage your money. So yeah, these are the sources that follow these things carefully, give some sort of time over the weeks to these things and yeah, you’re good to be a master in whatever you’re trying to do.

Amit Ray: Nice. Thanks a lot, Kanishk. It was a fun conversation. And I also think our listeners will benefit a lot because you’ve gone a little bit into the next layer of how to invest in angel investments and demystified some of this stuff. And potentially also, I really hope, taken away the whole rosy glasses that you know, if I do this, I will suddenly get a 100x kind of return. So, thanks a lot. Our listeners will definitely benefit from this conversation. And thanks for being on our show. And for those of you who are listening to us today, thank you for joining us. Do remember, if you haven’t already, please follow the show. And if you liked this episode, then please do rate it five stars. We were Kanishk and Amit with MoneyTok and see you next time.

Kanishk Singh: Yeah, thank you very much.

Amit Ray: Thanks Kanishk.

Our Guest: Kanishk

Kanishk is the Head of Investments and Operations at POD, prior to which he worked in US Mortgages as well as Forex. He’s built POD to be a fundraising stack that allows small investors to access startup funding rounds with as little as INR 20,000 (~USD 250)