Kerala's Angel Investment Landscape: Opportunities, Insights, and Challenges

This panel discussion features leading Kerala angel investors discussing the state's investment landscape. The panelists share their experiences, investment strategies (including average check sizes and sector preferences), and advice for both aspiring founders and angel investors. Key themes include risk assessment, mentorship needs within the Kerala startup ecosystem, and the benefits of joining an angel network versus becoming an LP in a VC firm. A panel discussion concluded, with thanks given to all participants and the moderator, Santos. Awards were presented. Shillin, with a tech background, shares the story of Malabar Angel Network, highlighting their unique approach, including an incubator and a non-profit angel model focused on local economic prosperity. They've made over 10 investments, with ticket sizes ranging from 20 lakhs to 1.5 crores, showcasing their diverse portfolio and investment philosophy. V, a member of several angel networks, including Sparks, details their investment strategy focusing on early-stage, sector-agnostic investments in Kerala and beyond. They've completed 17 investments with an average check size of 40-50 lakhs, boasting 45 angels, 20 of whom are based in Kerala.Shaj, based in Dubai, introduces Phoenix Angels, a newer network established in 2022, with investments in three companies and an average check size of 1 crore. Their investor base is evenly split between Dubai and Trishur, with a non-sector-specific investment approach. This segment showcases a successful D2C company in their portfolio, highlighting its growth from 10 lakhs to a 2CR monthly run rate. It details the investment rounds, emphasizing the potential 10x return in a Series A round and a likely Series B exit, illustrating the typical 5-7 year gestation period for such investments. This segment discusses the high-risk, illiquid nature of angel investing compared to listed stocks. It emphasizes the importance of proper portfolio allocation, recommending 5-10% for average-risk profiles and acknowledging that higher risk appetites may justify larger allocations.This segment explores the diverse motivations behind angel investing, categorizing investors into three groups: exit entrepreneurs eager to give back, achievers seeking scalable high-growth opportunities, and conventional investors adopting a wait-and-see approach. It highlights the importance of mentorship and ecosystem contribution as key drivers. Ajit, founder president of Kerala Angels Network (formed in 2019), discusses their impressive track record: 14 startups, 24 deals, and a cumulative investment of $15 million in four years. He emphasizes their diverse membership, including family offices, and their optimistic growth projections.Babu, co-founder and CEO of Jiffy AI, shares his extensive experience as an angel investor for over 25 years, having made around 25 investments. He highlights his focus on promising ideas and strong entrepreneurs, even investing without formal contracts, emphasizing his unique and impactful approach.Shillin recounts his diverse career path, from teaching to entrepreneurship and advising governments, explaining his motivation for angel investing. He emphasizes his dynamic nature and desire to contribute to the startup ecosystem, particularly in under-served regions of Kerala.Srijith, from a wealth management background, discusses angel investing as a high-risk, high-reward asset class, advising on due diligence, sector selection (defense, renewables, water infrastructure), and the importance of long-term investment horizons (7-10 years) for successful exits.Srijith compares the risk appetite of investors in Kerala and the GCC region, noting the shorter-term return expectations in Kerala and the higher risk tolerance in the GCC due to higher per capita income. He also highlights the increasing involvement of traditional businesses in Kerala's startup ecosystem.Ajit offers advice on determining suitability for angel investing, emphasizing the importance of risk appetite and long-term commitment. He also describes the typical demographic of Kerala Angels Network members. This segment discusses the challenges of managing an angel network, highlighting the importance of cultural fit and investor orientation. It reveals the speaker's experience of identifying investors better suited as LPs rather than angels, emphasizing the need for careful screening and selection.This segment addresses the inherent risks in angel investing, acknowledging that it's not always the most rational financial decision. However, it emphasizes the learning opportunities and the involvement in the entrepreneurial journey as compelling factors for many investors. This segment provides background on Vin's MBA specialization in private equity and venture capital, focusing on his decision to shift into this field after experiencing difficulties pitching his own startups. It reveals a desire to be on the other side of the investment table.This segment compares the two investment avenues: direct angel investing versus becoming an LP in a VC firm. It suggests that the preferred choice depends on individual motivations; financial returns favor LP investments, while learning and ecosystem engagement favor direct angel investing. This segment explores the benefits of concentrated investment communities, using Sand Hill Road as an example. It highlights the ease of networking and access to investors for entrepreneurs, and contrasts the well-developed angel network ecosystem in India with the relatively less structured landscape in the US.This segment compares the number of startups and investors in the US and India, emphasizing the need for a more structured angel investing ecosystem in India, similar to Sand Hill Road, to support the growing number of startups. It proposes creating a similar hub in Kerala.This segment clarifies that the Kerala Angel Network was promoted by TiE but has a diverse membership, not exclusive to TiE members. It also reiterates the high-risk nature of the investment but highlights the network's risk mitigation strategies, such as deal screening committees.This segment details the Kerala Angel Network's rigorous deal screening process, showcasing how they've screened hundreds of startups but invested in only a select few, emphasizing the importance of selectivity and due diligence in mitigating risks.This segment offers advice to Kerala startup founders, highlighting the need for strong leadership, effective marketing, clear vision, well-defined exit strategies, proper fund deployment, and mentorship to improve investor outcomes and mitigate risks.This segment discusses the challenges faced by Kerala startups, focusing on the difficulties in retaining talent due to funding constraints and the need for more experienced individuals to guide founders.This segment emphasizes the critical role of mentorship in supporting Kerala startups and suggests a collaborative effort between Kerala Startup Mission and angel networks to provide more comprehensive support and guidance.This segment explains the process of joining the Kerala Angel Network, including the nominal membership fee and the screening process to ensure alignment with the network's investment philosophy. It highlights the transition from ROI to wealth creation as a crucial aspect of the investor journey.This segment elaborates on the onboarding process for new members, emphasizing the importance of understanding the investment philosophy and providing resources to help them transition to a wealth creation mindset. It also clarifies the relationship between the Kerala Angel Network and TiE.This segment details the day-to-day operations of an angel network, including deal sourcing, curation, due diligence, and decision-making processes. It highlights the role of member curators and the support provided by a full-time team.This segment describes the post-investment activities, including support for lead investors, council onboarding, and assistance with negotiations. It emphasizes the network's role in facilitating a smooth investment process.This segment explains the network's investment model, transitioning from individual investments to a fund-like approach to streamline the process. It also discusses strategies for keeping investors engaged post-investment, acknowledging the need for improvement in this area. This segment highlights the three main areas where the Kerala Angel Network provides crucial support to startups: market connections, customer connections, and funding, emphasizing the network's role in bridging these gaps for entrepreneurs. This segment discusses the historical preference for consumer-focused startups in India due to cultural factors and the undervaluation of B2B technology, contrasting this with the recent shift towards B2B opportunities and the potential for growth in this sector. This segment provides specific details about the Kerala Angel Network's investment process, including minimum ticket size, typical investment range, and the network's active participation and quick subscription rates for investment rounds. This segment offers valuable insights from an experienced investor on the importance of aligning personal investment with belief in the venture, highlighting the red flags to avoid and the investor's preference for being the largest individual investor in their ventures. This segment discusses the network's investment criteria, including the preference for companies with proven revenue traction and past MVP stage, and offers advice to startups on finding suitable investors based on their sector and stage of development. This segment delves into the Kerala Angel Network's sector-agnostic approach to investments, while acknowledging current trends like InsurTech and AI and the network's ability to leverage external expertise for thorough assessment.