Is Having Angel Investors an Advantage For Early-Stage Founders?

Eximius Ventures
4 min readAug 7, 2020
Credit: Austin Distel

The angel investing scene in India has undergone a massive transformation over the past decade as entrepreneurs turned angels have invested back heavily in the Indian ecosystem buoyed by their exits. From less than 50 angel investors a decade ago, the Indian start-up ecosystem has recorded angel investments from more than 2,000+ angel investors (DataLabs by Inc42). The Indian angel community counts serial entrepreneurs like Sachin Bansal, Kunal Bahl, Kunal Shah as well as corporate honchos such as Rajan Anadan and Mohandas Pai amongst its esteemed list.

Beyond just offering cash, angel investors add a host of other values to early-stage start-ups — their ability to validate the business model, offer advice on blitzscaling the start-up and connect with the first batch of customers are an invaluable asset for any early stage founder. Against such a backdrop, it is imperative for any founder to gauge the value-add that an Angel brings to their start-up as well as the track record of the prospective angels he/she would like to bring on-board. While qualitative value-add is subjective and will depend on founder-investor relationship, we have tried to provide a deeper understanding of their track record over the past 10 years throughout this article.

Our analysis, particularly, sheds light on the following aspects of Angel Investing in India:

  1. What is the hit rate of top angel investors in India? (For the purpose of this analysis, we have defined hit rate as the proportion of Seed or Series A investments that reach Series C or beyond)
  2. For the investments that do reach Series C, what is the median valuation growth from Seed/Series A to Series C?
  3. Lastly, is there a difference in the performance record of Highly Active Angels (defined as Angels with 50+ investments) vs. other Angels (minimum 20 investments)?

Below is a sample of 26 investors (10 Highly Active Angels and 16 other Angels) based on their investment activity:

Source: Tracxn

In total, across the aforementioned 26 investors, we looked at 608 unique investments in early-stage start-ups. Out of these 608 investments, 92 of them went on to raise Series C funding, as per the data gathered by Tracxn. However, we were only able to gather valuation numbers for 41 of those.

Our empirical study revealed:

  1. The median hit rate of angels investing in Seed rounds is 8% while those investing in Series A rounds is 20% which is in line with the fact that Series A investments are in general less risky as the start-up has achieved product-market fit and has seen some amount of traction.
  2. Within the angel universe, Highly Active Angels have a hit rate of 11.3% that is ~2x that of other Angels (5.6%). While this may occur partly because of the fact that Angels improve their investing process as they invest more, we cannot rule out that higher number of investments also leads to “network effect”, which improves their access to quality deal flow.
  3. To further test our assumption that investing track record of an Angel improves as they make more investments, we broke down our sample space in two time spans: 2010–2014 and 2015–2019. On studying the track record of the Highly Active Angels in their Seed investments across the two periods, we came up with the following observation:
Source: Tracxn

Δ(#Investments)=#Investments 2015–2019- #Investments 2010–2014
Δ(Hit Rate)=Hit Rate 2015–2019-Hit Rate (2010–2014)

The above chart highlights that there is no statistical evidence of improvement in investing performance. Between Time Period 2 (2015–2019) and Time Period 1 (2010–2014), even as Highly Active Angels made higher number of investments, the hit rates of 5 of them went up while for the other 5, it went down. A number of factors can explain this phenomenon:

  1. As more angels and early-stage VCs started investing in the Indian ecosystem, the competition to source deals went up, leading to a decline in the hit rates.
  2. As Angels started making higher number of investments, they had to step outside their area of core competence in newer sectors where they might not have the comfort of differentiated insights giving them an edge.
  3. Lastly, the median growth in valuation across Seed -> Series C for start-ups with angel investors was 66.8x [=Seed -> Series A (9.3x) * Series A -> Series B (3.0x) * Series B -> Series C (2.4x)]

So, what does this mean for an early-stage founder just starting out?

  1. It helps to have Angels on-board. As mentioned above, besides just offering cash, having Angels on-board acts as a signalling mechanism that helps recruit the best talent, reach out to the Angel’s investee companies for strategic tie-ups as well as land your first clients.
  2. Having Highly Active Angels gives you an edge in raising future rounds at favourable valuations. They bring with them decades of investing and organisation-building experience that skew your chances of success favourably.

Starting-up has often been equated to going on a war against the status-quo. While nothing guarantees victory in a war, it always helps to have the best lieutenants on your side!

Written and edited by Siddharth Prabhu (@Sidharth_Prabhu).

Eximius Ventures is a micro venture capital fund investing in young and dynamic Indian Entrepreneurs with a precedence for female founders. You can reach out to us at