Angels venture where others fear to tread

Points to ponder before you give wing to the angel investor lurking inside you

You would have heard proverbs that embody the difficulty of a task (selling ice to Eskimos) or the pointlessness of one (carrying oranges to Nashik). Shantanu Deshpande, founder and CEO of Bombay Shaving Company, added to these adages when he sold the idea of a shaving products start-up to a Sikh angel investor: Me.

My wife, Bhakti, a Mumbai girl, took an instant liking to Shantanu when he first came to visit us in Gurugram in 2016. I liked him, too, but wasn’t sure about investing in his start-up.

Shantanu’s pitch was simple. The razor market had only one dominant brand. With the rising affluence of Indians, they would love to be able to choose. The US had already tasted this disruption with start-ups such as Harry’s shaking up the sleepy razor market.

Shantanu’s timing could not have been better. At the time, Vibhore Goyal and I were closing a deal to sell Cocubes, our start-up in HR Tech, to Aon Hewitt. Finally, we had come into money. I had been making tiny investments for a while. The exit from Cocubes gave me more cash to deploy.

Only, Bombay Shaving Company did not appear to be the right start-up. It was not a technology start-up, the area I understood. And, I had never shaved and wasn’t about to start. I told Shantanu so. But two days on, I still found myself replaying the things he had said. His energy had been infectious. So I decided to get onboard. I was never going to use his products, but expected a fun ride. And so it has been.

In five years, Bombay Shaving Company has raised $17 million. It has given the early angels more than 10 times the return on their investment as well as a fun ride. I could have missed both had I not been flexible enough to put my personal preferences aside.

Why, what, who

If you want to be an angel investor, ask yourself why you want to do it. Is it to make money? Do you want to advise young founders? Is it so you can talk about it at a party?

The answers determine how much money you want to invest and the kind of founders you want to put it on. For me, angel investment is a way to work with founders and share their passion. I did not always have this clarity.

Initially, I invested in ideas I thought would work or felt strongly about — even if I was not sure about the founders. I thought I could help them do it right. I lost time and money. But I gained clarity. If the founders’ decisionmaking ability is ordinary, there is not much you can do. A lot of first-time angels think they can help. Some try to extract an extra pound of flesh as “advisor equity”. They learn their lessons soon. The best founders do not dish out advisory equity easily. They back themselves and love their company enough not to throw around equity.

Finding founders

The surest way is to get to know the founders by spending time with them and observing them. You want to see how they execute projects, how they deal with people and issues, how they solve problems, and how real their commitment is. In case of more than one founder, knowing them is also a way to prevent the most common reason why start-ups fail: fighting founders.

But it is not always possible to have the luxury of time and opportunity to get to know the founders. So, you pick up signals, which are of two types: data and people.

In Shantanu’s case, I saw his seniors from Mckinsey, where he worked before turning entrepreneur, investing in Bombay Shaving Company. This was a positive people signal. If he was fresh out of college with no work experience, I would have learned more about him from his college batchmates and seniors.

The data signals come from what the founders have done before. I must confess to a bias towards founders from the best colleges (Shantanu went to IIM Lucknow). That tells me they have competed and won before. They can do it again.

If the founders have worked in the past with a fastgrowing start-up as an early member, that is also a source of positive data signals. They know what it takes. At times, it is the founder’s moving personal story that tips the scales in their favour.

Rare are the founders who come with many positive signals, be it people or data. Those are the ones who manage to sell the idea of a shaving company to a Sikh.

It is not always possible to get to know the founders. So, you pick up signals, which are of two types: data and people