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“Don’t trust investors completely” and three other tips from angel investor Sharad Sharma on early-stage impact investing

27th Nov 2013
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Unconvention | L, is a series of national level events organized by Villgro. They are designed to inspire local social entrepreneurs and nurture the social enterprise movement across India. On November 9th, Unconvention | L was held in Bangalore, at Sun River campus of Yahoo! Software Development Centre India. In the panel discussion on ‘Landscape of Funding in the Social Space’ Sharad Sharma, an angel investor, member of the Indian Angel Network and ex-SVP at Yahoo!, spoke about the problems of funding for social enterprises and how to overcome them. Here are his top insights: 1. Get Indians to invest in the Indian social landscape:

There is a huge shortage of early-stage investment in India: it is estimated that the country has 160 to 200 angel investors across all sectors. On the other hand, the US have more than 100,000. In terms of investments, what India can do during a year, they do in one day by 11 am. The way to solve the problem is to unlock more Indian money to Indian entrepreneurs. This money will not come from the US, will not come from China, it has to come from the local ecosystem: locals will understand the problem much better than a foreigner. And that is why they are perfect for early-stage investment.

2. Find people who believe in your problem:

If you are really looking for early-stage funding, don’t waste time trying to convince investors about your solutions. “If someone comes to me and says they have a solution to a problem in which I believe in, they have my attention right away. An angel investor will wait until you have three, four years of traction, until they help you reach the next level of scale. This happens because they might not take your problem as a validated one. Instead, unlock a non-angel investor, someone that believes in the problem that you are solving.

3. Don’t trust completely in investors:

If we are not well-informed about financing and other issues when dealing with investors, you will get short changed. They have an aura which says: ‘trust us. We are all interested in your good will’. Don’t take it. The thing is that there is more investment money than there are entrepreneurs. So you are forcing the angel investors to behave very differently, being arrogant and taking advantage of the situation because the gap is so large. So what is the solution? Become an informed entrepreneur.

4. The time to get into social impact is right now:

Competition forces you to go early. The people who benefit from revolutions are those who got in before it became mainstream. Social impact investment is not just a wave that is coming, it it happening right now. While it does come with risks, it also comes with opportunities as a driver of innovation, impact measurement, new capital and most importantly fresh energy to tackle those issues, and that’s what makes the difference for people who got there earlier.

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