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December 28, 2012

Should Angels Bet on Follow-on Funding from VCs?

From the post by Alok Mittal - who incidentally wears both hats - at VentureWoods:
The venture capital industry in India is relatively small. And besides sporadic instances of “spray and pray”, it has mostly remained tight and focused its resources on one or two bets in a given area. That means that not more than 3-4 companies in any given space get to Series A. Angel investors need to understand this dynamic, and hence not just look at whether a company could build a good business, but also whether it has credible chances of raising the next round of capital to get there. A small VC industry also poses the issue of volatility - couple of VCs talking about an area being over-invested in enough to create a sudden negative sentiment.

...Is the Indian angel investor ready to lead? Are we ready to step up to the plate and make bets that we know VCs don’t like/understand today? Are we simply going to follow what we expect VCs to do 12 month down the line, or are we going to show them the way? Is our vision going to be just about the next round of financing, or creating truly great companies?
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