My very first investment as an angel investor taught me a useful lesson. The company I invested in was beauty e-tailing venture Purplle.com.
This was a startup launched by a bunch of smart and committed entrepreneurs and clearly targeted a niche space with a significant customer need in a market that had considerable size and scale.
I became a board observer representing Mumbai Angel Investors, and, for several years, devoted time and effort in board meetings, sharing insights and giving strategic inputs. Why, then, do I regret this investment, which clearly will be an outlier and a multi-bagger, given Purplle’s growth and fundraising trajectory? The reason is I invested a very small amount, much lower than what I thought I would originally.
My investment returns, though phenomenal in percentage terms, are relatively small in quantum. Given my conviction in the investment and the time I spent on it, I should have invested a much larger amount.
I was concerned, however, that some of the more experienced investors were sceptical and not investing. Self-doubt in the early stages took over. I was advised that there would be more opportunities like this and I should be cautious in the beginning. The lesson I learnt was: If one is very convinced, one should go for a reasonable sized investment.
Seasoned angel investors can miss a big opportunity and one should not rely only on what others think.
Very often, we see angel investors make a few mistakes in their early investments and then simply freeze and stop investing. My initial investments did well, and I think after the first few, I became a bit reckless and started investing in companies that seemed interesting and focusing less on some of the criteria I knew were important.
Very soon thereafter, I saw a few failures which reminded me that I should go back to the basics and not base my decisions on initial successes.
