What comes to your mind when you say ‘Startup’? Let me improvise the question a bit. Whose image comes to your mind when you hear the word Angel Investors?

This is one big reason why Angel Investing is the new hot topic of the day. Today, India has more than 108 unicorns &amp; around 650 companies are such that have achieved the Soonicorn status i.e it is close to reaching Unicorns status.

In the past 1 year, Angel Investors have incurred heavy losses to the tune of around 5.7 Bn$ or roughly ₹47,000 crores which show issues in either strategy, methodology, or fundamentals. Many people have FOMO or Fear Of Missing Out because of which they start investing in stocks they have no idea about. Let me explain this with the help of a real-life example.
 
 Someone in my distant relatives was very keen on investing in the stock market ever since he saw a boom in Unicorns. His confidence increased manifold when he saw me earn handsome returns in the Startups &amp; Pre-IPO. Not to brag, but i have been an avid investor since the very beginning and I have been fairly successful at it. So my relative thought that if I can, why can't he &amp; I feel there was always a fear of missing out at the back of his mind. The thought wasn’t bad either. After all, that's what we have been taught that nothing is impossible.
 
 He decided to invest a portion of his savings in Startups &amp; Pre-IPO, in the hope to earn excellent returns. Although his journey, unfortunately, didn’t turn out as rosy. The reason was that he invested in stocks which he had very less idea about. He invested in brands he had heard about but didn’t check their background, the financial status of the company, the experience that the management possessed, etc. Turned out that the company my relative was investing in didn’t wasn’t performing as well as its reputation &amp; thus had a negative cash flow to the extent that they had to take debts to meet their day-to-day work. Eventually, my relative ended up in heavy losses. Infact this is not a one-off story. We met thousands of investors who are willing to invest but lack strategy and knowledge and end up in losses just because of it. 
 
 This is just one example of poor strategy but not the only example in the market. One can find thousands of such investors who invested only out of fear of missing out. Infact, if you are thinking that these are ordinary people who invested in the wrong business, allow me to give you examples of top businessmen who made wrong investment decisions.
 
 Although, It's not common to find stories on unsuccessful Indian angel investors as they don't tend to be widely publicized. However, here are a few examples:<ol><li>Vijay Shekhar Sharma: Vijay Shekhar Sharma is the founder and CEO of Paytm, one of the largest digital payment platforms in India. While Sharma has had great success with Paytm, he has also experienced some failures as an angel investor. In 2016, Sharma invested in the hyperlocal services provider, Zimmber, which later shut down due to financial troubles.</li><li>Anand Ladsariya: Anand Ladsariya is the founder and CEO of Everest Flavours, a leading food ingredient company in India. However, his investments in startups haven't always been successful. In 2017, Ladsariya invested in the health-tech startup, Medidaili, which later shut down due to a lack of funds.</li><li>Bhavin Turakhia: Bhavin Turakhia is the co-founder of Directi, a leading technology company in India. He is also a prolific angel investor who has invested in several startups such as Haptik and Unacademy. However, his investment in the grocery delivery startup, Peppertap, was unsuccessful. Peppertap shut down in 2016 due to a lack of funds.</li></ol>It's important to note that angel investing is a risky and unpredictable endeavor. Even experienced investors can make unsuccessful investments due to various factors such as market conditions, management issues, or unexpected competition. It's crucial for angel investors to conduct thorough due diligence and have a diversified investment portfolio to mitigate risks. Now, as we can clearly see, some high-profile names invested in the Angel Investment market &amp; yet they faced significant losses initially. Many reasons can be attributed to the same. For instance, Poor strategy can be one of the reasons. Poor understanding of the background or methodologies could also be one of the potential reasons behind their generating losses. Another reason could be the unrealistic expectation of generating quick returns which is rarely the case with Angel Investing.
 
 This is exactly what we aim to cover in this article of our Angel Investing Masterclass. We’ll speak on why should one not do Angel Investing.
 
 While angel investing in startups can be a potentially lucrative investment strategy, it's important to consider the risks and drawbacks before making any investments. Here are some reasons why you might want to think twice before investing in startups:<ol><li>Risk of Losing Money: Investing in early-stage startups is inherently risky. Many startups fail within their first few years, and as an angel investor, you may lose some or all of your investment if the startup you invest in does not succeed. It's important to have a diversified portfolio of angel investments to minimize the risk of losing money. If you’re someone who feels that all your investment should be successful or should generate handsome returns, then investing in the Stock market is not the right choice, instead, try investing in much safer options like Debt Funding Market, get Fixed Deposits in banks where you’ll get small regular returns.</li><li>Lack of Liquidity: Angel investments are typically illiquid, meaning it can be difficult to sell your shares or exit your investment. Early-stage startups often have no secondary market for their shares, and it may take several years before the startup is acquired or goes public. This means that angel investing is a long-term investment, and you should be prepared to hold your investment for several years.</li><li>Time and Effort: Angel investing can be a time-consuming and active process. As an angel investor, you'll need to do your due diligence on potential investments, monitor your portfolio, and actively work with your portfolio companies to help them succeed. This can be challenging if you have a full-time job or other commitments.</li><li>Limited Control: As an angel investor, you typically have limited control over the operations and decision-making of the startup you invest in. You may have the ability to provide advice and guidance, but ultimately the founders and management team will make the decisions that impact the success of the company.</li><li>Valuation Challenges: Valuing early-stage startups can be difficult, as there is often limited financial data available. As an angel investor, you'll need to carefully evaluate the potential of the startup and negotiate a fair valuation before investing. This can be challenging and may require the assistance of a professional advisor or consultant.</li><li>Opportunity Cost: Investing in startups requires a significant amount of capital, which may be better used for other investment opportunities. Depending on your financial situation and investment goals, you may be better off investing in more established companies or other asset classes.</li></ol>In conclusion, while angel investing in startups can be a potentially lucrative investment strategy, it's important to carefully consider the risks and drawbacks before investing. As with any investment, there is the potential for significant returns, but also the risk of losing your investment. It's important to have a diversified portfolio of investments and to carefully evaluate each opportunity before investing.

In the past 1 year, Angel Investors have incurred heavy losses to the tune of around 5.7 Bn$ or roughly ₹47,000 crores which show issues in either strategy, methodology, or fundamentals.

In the last article, where we covered why not to do Angel Investing, we spoke about how many investors had lost money due to a lack of understanding. Infact many top Angel Investors also suffered heavy losses. All this might have presented a gloomy picture in your mind. We need to understand that every coin has two sides. While many top angel investors failed initially, there was a side where many Angel Investors also succeeded in making heavy profits.
 
 Now a question would arise in your mind. What is it that certain Angel Investors were doing correctly that others didn’t? Were they just more realistic or were the loss-generating a bit too ambitious?
 
 We took the examples of famous Angel Investors like Anupam Mittal who had 25% of his investments sunk as companies shut down early
 
 Anupam Mittal: Anupam Mittal is the founder and CEO of People Group, a leading online matrimonial service in India. He is also a prolific angel investor who has invested in several successful startups such as Druva, Capillary Technologies, and Ola. His investment in Druva was particularly successful, as the cloud data protection company is now valued at over $2 billion.
 
 Jason Calcanis: It isn’t possible to skip the name of Jason Calcanis if we are talking about Angel Investments. Jason Calcanis started his career in the 1990s as a reporter covering the Internet Industry in New York. He then started his own venture with the name ‘Rising Tide Studios’, a media company that was involved in publishing print &amp; online publications. In 2009, Calcanis founded the ‘Open Angel Forum’, a platform that connects early-age startups with Angel Investor. Some of the exceptional achievements of Calcanis include converting 1,00,000$ which translates to ₹80 Lacs ko ₹800 crore. Some of the marquee companies he invested in include Uber, Robinhood, Datastax &amp; Super Human. 
 
 In this article, we help you understand what can expect from Angel Investing. We start by taking a look at some stories of successful angel investors in India:
 
 Kunal Bahl: Kunal Bahl is the co-founder and CEO of Snapdeal, one of the largest e-commerce companies in India. However, before founding Snapdeal, Bahl was an angel investor who invested in several successful startups such as FreeCharge and TinyOwl. His investment in FreeCharge was particularly successful, as the company was later acquired by Snapdeal for $400 million. 
 
 Rajan Anandan: Rajan Anandan is the former managing director of Google India and a prolific angel investor. He has invested in several successful startups such as Druva, Capillary Technologies, and Innovaccer. His investment in Druva was particularly successful, as the cloud data protection company is now valued at over $2 billion.
 
 Rehan Yar Khan: Rehan Yar Khan is the founder and managing partner of Orios Venture Partners, a leading early-stage investment firm in India. He has invested in several successful startups such as Ola, Druva, and PrettySecrets. His investment in Ola was particularly successful, as the ride-hailing company is now valued at over $10 billion.
 
 Sanjay Swamy: Sanjay Swamy is the founder and managing partner of Prime Venture Partners, a leading early-stage investment firm in India. He has invested in several successful startups such as ZipDial, Ezetap, and HackerRank. His investment in ZipDial was particularly successful, as the mobile engagement platform was later acquired by Twitter.
 
 Alia Bhatt: Alia Bhatt, a renowned actress in Indian Film Industry has been an angel investing in startups for a few years now. Infact one of her most successful investments was in the popular beauty &amp; wellness brand Nykaa. Nykaa has been founded by Falguni Nayar. Nykaa launched its IPO in October 2021 which attracted 82x subscriptions in 3 days, worth around 32.53 Bn$. Today Nykaa is valued at 1.3 Bn US$. 
 
 Shilpa Shetty: Shilpa Shetty, another renowned actress in the Indian Film industry is also an avid Angel Investor. Her famous investment into popular Indian skincare startup Mamaearth went viral. Mamearth became a Unicorn in January 2022 by raising 52 Mn$ at a valuation of over 1.2 Bn$. Mamaearth launched its IPO at a whopping valuation of 3 Bn$ which in Indian currency translates to around ₹24,000 crores.
 
 These are just a few examples of successful angel investors in India who have made smart investments in promising startups. Their success stories demonstrate the potential for high returns when investing in Indian startups, and highlight the importance of conducting thorough due diligence before making any investment decisions.
 
 Angel investing is a type of investment where individuals provide capital to early-stage startups in exchange for ownership equity or convertible debt. Angel investors typically invest in startups that are not yet profitable but have high growth potential. Here's what you can expect from angel investing:
 
 Functional Benefit - High Potential Returns: Angel investing has the potential to generate high returns, with some successful startups yielding returns as high as 100% or more. 
 
 However, it's important to keep in mind that investing in early-stage startups is a high risk, and many startups do not succeed. As an angel investor, you should be prepared to lose some or all of your investment in a startup.
 
 For eg. An Indian investor investing in a high-potential returns startup is Ratan Tata's investment in Ola. Ratan Tata, the renowned industrialist and former Chairman of Tata Sons, made a personal investment in Ola, an Indian ride-hailing company, in early 2015. At that time, Ola was competing with global ride-hailing giant Uber in the Indian market. Ratan Tata's investment not only provided a significant infusion of capital but also lent credibility and support to Ola's mission of transforming urban transportation in India. Today, OLA’s net worth is US$ 6.5 Bn.
 
 Emotional Benefit - Support, Groom &amp; Cultivate what you care about: Angel Investing provides investors with the perfect opportunity of investing in startups, choose the next idea to be supported &amp; make a difference in the world. 
 
 It is an opportunity to support innovation, to support talented people who have the potential to positively impact millions of people around the world.
 
 For instance, TATA, with its long-standing legacy of innovation and social responsibility, embodies a sense of purpose and commitment to making a positive impact. By supporting Goodfellows, TATA provides not only financial backing but also mentorship, guidance, and access to its extensive network. 
 
 
 Economic Benefit - Access qualified Deal flow: Angel Investing provides investors with not only an opportunity to support budding entrepreneurs but also helps minimize the risk of their investment through diversifying their investments.
 
 At Planify, you can find vetted Startups at cheap prices &amp; generate very handsome returns. Infact Planify has a rich experience of providing annual 50% returns on an average investment in its backed startups. 
 
 More importantly Planify charges 0% subscription &amp; transaction fee to help enable ease of investments for Investors.
 
 Self-Expressive Benefit - Opportunities to Learn and Network: Angel investing can be a great way to learn about new industries and technologies and to meet and network with other investors and entrepreneurs. 
 
 By investing in startups, you'll gain insights into the entrepreneurial process and may even have the opportunity to mentor or advise the founders of the companies you invest in.
 
 For eg. One real example of an Indian investor investing to gain opportunities to learn and network is the TiE (The Indus Entrepreneurs) is a global organization that fosters entrepreneurship and supports startups through mentoring, networking, and educational initiatives. While TiE itself does not directly make investments, it provides a platform for entrepreneurs to connect with investors and access funding opportunities. One of the notable investments has been in Druva which is a data protection and management company that offers cloud-based solutions. The startup received investments from TiE Charter Members, which are successful entrepreneurs and investors associated with TiE.
 
 Society &amp; Environmental Benefits - Earn an opportunity to shape the future economy: Angel Investment provides investors with an opportunity to shape the future economy of the country. Investing in startups that have the potential to impact the lives of millions of people can transform a particular industry. 
 
 More importantly, today, Startups are a huge source of employment generation &amp; provide entrepreneurs also with a chance to return back to their entrepreneurial community by supporting their fellow entrepreneurs. Infact many startups today are playing a role in both shaping the economy as well as conserving the environment by investing in Green technology.
 
 For eg. Take for instance Renew Solar in which Goldman Sachs, the global investment banking firm has made significant investments. They have been one of the early investors in the company and continue to support its growth. ReNew Power is one of the leading renewable energy companies in India. It was founded in 2011 by Sumant Sinha, a former CEO of Suzlon Energy. The company is dedicated to transforming India's energy landscape by generating clean and sustainable power from renewable sources.
 
 In conclusion, angel investing can be a high-risk, high-reward investment opportunity that requires active involvement and a long-term investment horizon. While there is the potential for high returns, it's important to understand the risks and drawbacks before investing and to have a diversified portfolio of angel investments to minimize the risk of losing money.

What is it that certain Angel Investors were doing correctly that others didn’t? Were they just more realistic or were the loss-generating a bit too ambitious?

In the last article, the success stories of investments highlighted the importance of conducting thorough due diligence before making any important investment decision. Through the above stories, we also highlighted the expectations that Angel Investors can keep while investing their hard-earned money into upcoming startups. 
 
 In this article, we take a look at ‘Understanding what is better: Investing in India or Outside’. Like with any investment decision, whether to engage in angel investing in India or outside of India depends on several factors that can influence the potential returns and risks associated with the investment. Let's understand this with the help of an example. Infact I would like to start by asking you all a question. Would you, if given a chance, invest in Pakistan? No? If your answer is no then why so? Why do companies prefer India over Pakistan?
 
 Some of the reasons that can be stated are as below: 
 
 1. Currency risk: We ask our previous question again: Would any investor like to invest in Pakistan &amp; if not then why so? Could Macroeconomic conditions also have played a role in shaping the decision? Pakistan’s economy is on the brink of a complete collapse and its currency is by far the worst-performing currency at least in Asia.
 
 
 2. Geopolitical Instability: Another reason why many investors would hesitate to invest in a particular region would be because of Law &amp; order issues or is it because of archaic regulations and stringent laws. From multiple wars that the region has seen to terrorism to narcotics etc. 
 
 
 Let's take a look at an investor who invested outside India &amp; failed: 
 WeWork: WeWork, a co-working space provider, was once valued at $47 billion. However, the company's IPO failed in 2019, and its valuation plummeted. SoftBank, which had invested heavily in WeWork, suffered significant losses.
 
 
 This is an example of investors who have suffered losses from their investments outside India. It is essential to conduct thorough research and due diligence before making any investment. 
 
 
 Enough sorry stories for the day? Don’t worry we won’t give you more. Infact we will now talk about companies and investors who are investing in India &amp; doing well.
 
 
 I am sure everyone would have heard of Apple Inc. Now, Apple Inc. has been in a lot of news recently. They, through their contract manufacturers, are investing billions of dollars into India, setting up world-class factories but do you know that they had asked the Indian government to first bring Ease of Doing Business climate which included relaxing certain regulations, easing labour laws, providing trunk infrastructure, etc.
 
 Infact let me now give an example of a domestic company: Airtel. Are all of you aware of the fact that Airtel has a company in Africa that is valued at 3.67 Bn$? The question is how is Airtel, an Indian company able to build such a big empire in Africa? Many companies tried &amp; failed miserably but Airtel not only survived but thrived. How?
 
 The answer is pretty simple. Airtel has the wherewithal to get things done as per its requirements. It has the financial power &amp; legal backing to sit down with bureaucrats of African nations and get things approved. Any company would like to invest in another country only if it is assured of Ease of Doing Business.
 
 Now, we read about Apple, we read Airtel, and the question that arises is whether these are big conglomerates that have the requisite financial &amp; legal backing but individual investors don’t have such backing to get things done their way. More importantly, most of them don’t even have knowledge about legal procedures in a third country so what would they prefer: Investing in India or Outside India? 
 
 Let's understand this with the help of an example of a Domestic Investor like Anupam Mittal who would rather invest in India instead of other regions. The first reason could be different laws being followed by different regions which act as a deterrent to investors. Another reason is that today India is the largest market that attracts business owners to set up their shop in India and invest in Indian startups. 
 
 
 Now the question arises if you can’t go through Angel Investors, then investors have a chance to go through VCs but VCs are themselves bullish on India. Infact India is the only country today that has a 0% chance of recession so why would investors not like to invest in India. 
 
 
 As a matter of fact, Only 4500 startups have got investment out of which only 100 have been unicorns &amp; India’s startup ecosystem has over 90,000 startups showing the immense potential &amp; scope of investments. Here are some points to consider when making a decision to invest in India:
 
 
 Growing Startup Ecosystem: India has witnessed rapid growth in its startup ecosystem over the past decade. The country is home to a vibrant entrepreneurial culture with a significant number of innovative startups emerging across various sectors. This presents angel investors with a wide range of investment opportunities and the potential to back the next big success story.
 
 Large Consumer Market: India boasts a massive consumer market with a population of over 1.3 billion people. The rising middle class and increasing disposable incomes have fueled the demand for products and services, creating ample market opportunities for startups. By investing in Indian startups, angel investors can tap into this vast consumer base and potentially benefit from significant growth potential.
 
 Technology and Innovation Hub: India has emerged as a global technology and innovation hub, with thriving sectors such as software development, artificial intelligence, e-commerce, fintech, health tech, and more. The country is known for its pool of talented engineers, entrepreneurs, and tech professionals who are driving innovation and disruption. Investing in Indian startups allows angel investors to be part of this tech-driven revolution and capitalize on the transformative potential of these sectors.
 
 Government Initiatives and Support: The Indian government has launched various initiatives and policies to foster the startup ecosystem and encourage angel investment. Initiatives like Startup India, Make in India, and Digital India aims to create a conducive environment for startups to thrive, providing incentives, tax benefits, and streamlined regulatory frameworks. This support from the government further enhances the investment landscape and reduces barriers for angel investors.
 
 Access to Diverse Sectors: India offers a diverse range of sectors and industries for investment. From technology and e-commerce to healthcare, renewable energy, and agriculture, there are numerous sectors with untapped potential. This diversification allows angel investors to build a well-rounded portfolio and spread their risk across different sectors, maximizing their chances of success.
 
 Cost Advantage: Compared to other global startup hubs, India offers a cost advantage in terms of talent acquisition, operational expenses, and overall business setup. The lower cost of living and wages relative to developed countries make it an attractive destination for startups to establish their operations. This cost advantage can lead to higher profitability and returns for angel investors supporting Indian startups.
 
 Collaborative and Supportive Community: The Indian startup ecosystem is known for its collaborative and supportive nature. There are numerous incubators, accelerators, and networking platforms that connect entrepreneurs, investors, and mentors. This ecosystem provides a nurturing environment for startups to thrive and offers opportunities for angel investors to actively engage with the startup community, provide guidance, and leverage their expertise.
 
 Ultimately, whether to engage in angel investing in India or outside of India depends on your investment objectives, risk tolerance, and investment horizon. It is important to do your research, seek professional advice, and diversify your portfolio to manage risk.
 
 Based on some popular news reports, there are over 26,000 Angel Investors in India. Planify is one such organization that is supporting over 10,000 accredited investors &amp; family offices and have given them average annual returns of 50%.
 
 
 According to the PwC India report titled ‘Startup Deals Tracker- CY22’, total funding last year dropped 33% to 24 Bn US$ owing to the Funding Winter phenomenon but still remained at least 50% higher than pre-covid years. Infact, India last year became only the third country to have reached the milestone of 100 unicorns after the US &amp; China. The numbers are set to rise rapidly as many startups enter the Soonicorn status &amp; infact new divisions called Minicorns have been created to signify the early-stage startups which are showing immense potential.
 
 
 Across both 2021 &amp; 2022, early-stage deals took the lion share of total deals averaging at around 60-62% of the total funding. The category remained a hot favorite among investors contributing 12% in value as compared to 7% last year.
 
 In conclusion, we feel India presents a compelling case for angel investors looking for promising investment opportunities. The growing startup ecosystem, large consumer market, technological advancements, government support, diverse sectors, cost advantage, and collaborative community make India an attractive destination for angel investment. However, it is essential for investors to conduct thorough due diligence, evaluate potential risks, and seek professional advice before making any investment decisions.

We take a look at ‘Understanding what is better: Investing in India or Outside’. Like with any investment decision, whether to engage in angel investing in India or outside of India depends on several factors that can influence the potential returns and risks associated with the investment.

We’ll discuss the Angel Investing Opportunities present in India. India offers a range of investment opportunities across various asset classes, sectors, and geographies.

In the previous article, we read about Angel Investing Opportunities in India where we closely read about how India offers a range of investment opportunities across various asset classes, sectors, and geographies. We also explained through popular global &amp; Indian examples what successful angel investments can lead to. We took the example of Facebook, Google, and popular Indian startups like Flipkart &amp; Ola to help explain the significance of Angel Investment.
 
 Lastly, we listed out popular angel investment opportunities in India:
 Healthtech
 Fintech
 Edtech
 Agritech
 Clean Energy
 
 In this article, we take a look at what we mean by accredited investors &amp; how these accredited investors are playing a crucial role in supporting the startup ecosystem in India &amp; fostering innovation.
 
 Like always, we’ll try to explain the definition in the form of a story to help readers get a comprehensive understanding of the subject.
 
 Once upon a time, in the bustling city of Bengaluru, a selected group of individuals held a key to a mysterious realm known as "Accredited Investors." These individuals were not your ordinary denizens of the financial kingdom; they were the chosen few, whispered about in hushed tones by those seeking entry into exclusive opportunities.
 
 The gates to the world of Accredited Investors were guarded by the Securities and Exchange Board of India (SEBI), standing tall and vigilant. To enter, one needed the magic key—a specific financial status that set them apart from the common folk.
 
 Accredited Investors, adorned with financial insignia, possessed a net worth that soared high above the clouds or an income stream that rivaled the mightiest rivers. These fortunate souls had crossed the thresholds set by the SEBI, unlocking access to a realm where private offerings and exclusive investment opportunities awaited.
 
 According to SEBI guidelines, an Accredited Investor is a business entity or institution that wishes to start its AIF Fund to invest in startups. While individual investors are required to have a net worth of ₹2 Crores to be considered as an Angel Fund, a Corporate investor is required to have a net worth of ₹ 10 Cr. 
 
 The SEBI has also prescribed certain rules &amp; regulations regarding the amount of funds that can be raised from investors via AIF. For AIF Category 1, Category 2 &amp; Category 3 respectively, the minimum investment is ₹ 1 Cr. The minimum commitment required for investment in VentureX Fund is ₹ 1 Cr.
 
 Tales of Accredited Investors' prowess spread far and wide. They were the patrons of private equity, venture capital, and hedge funds—investments shrouded in secrecy and privilege. The kingdom recognized them as the risk-takers, the visionaries. They were considered as the chosen ones who dared to dance where others feared to tread.
 
 We take a look at some examples of successful startups that have benefited from the support of accredited investors:
 
 1. Uber: Uber is a ride-hailing platform that has revolutionized the transportation industry. In its early days, Uber received funding from a group of accredited investors, including Benchmark, TPG, and Google Ventures. This early funding helped Uber to expand its operations and develop new products and services.
 
 2. Airbnb: Airbnb is an online marketplace that connects travelers with hosts who have spare rooms or homes to rent. In its early days, Airbnb received funding from a group of accredited investors, including Sequoia Capital and Greylock Partners. This early funding helped Airbnb to scale its operations and expand into new markets.
 
 There have been many successful Indian startups that have benefited from the support of accredited investors. Here are some examples:
 
 1. Byju's: Byju's is an ed-tech company that offers online learning and educational products. In its early days, Byju received funding from a group of accredited investors, including Sequoia Capital and the Chan Zuckerberg Initiative. This early funding helped Byju's to expand its operations and develop new products.
 
 2. Oyo: Oyo is a hotel booking platform that has become one of India's most successful startups. Oyo received funding from a group of accredited investors, including SoftBank, Sequoia Capital, and Lightspeed Venture Partners. This early funding helped Oyo to expand its operations and develop new products and services.
 
 3. OLA: Ola, an initiative by ANI Technologies, emerged as a beacon of convenience, redefining how people traverse the ever-expanding cities. With just a tap on a smartphone, Ola empowered millions to summon a ride, making daily commutes more efficient and enjoyable. What began as a local solution for urban transport soon expanded its wings globally. Ola ventured into international markets, bringing its user-friendly platform and innovative solutions to new corners of the world, contributing to the evolution of the global ride-hailing ecosystem. 
 
 Now that OLA is foraying into the emerging Electric Vehicle and Lithium Ion Batteries space, this is an opportune time to talk about the investors who understood &amp; trusted its potential at a very young age &amp; gave it funds to fuel growth. These accredited investors included Softbank Group, Sequoia Capital, and famous Shark Tank judge Anupam Mittal among others.
 
 These examples demonstrate the crucial role that accredited investors play in supporting Indian startups. Accredited investors bring not only financial resources but also expertise, mentorship, and networking opportunities to help startups grow and thrive. Without the early-stage funding and resources provided by these investors, many startups would struggle to get off the ground and achieve success in India's competitive startup ecosystem.
 
 Planify is proud to state that it has a set of 10,000 accredited investors who have been actively investing in over 300 vetted startups on our platform &amp; Planify has helped facilitate over ₹250 cr. worth secondary investments, earning them a minimum annual return of 50%. Planify has also facilitated over 31 successful exits where a cumulative investment of Rs. 3.1 Cr. (Rs. 10 Lakh per company) is presently valued at Rs. 17 Cr., providing absolute returns of ~450% and CAGR returns of a whopping 117% every year.

In the previous article, we read about Angel Investing Opportunities in India where we closely read about how India offers a range of investment opportunities across various asset classes, sectors, and geographies.

In the first unit of our series, we covered in-depth Angel Investing, the need for angel investing, what to expect of it and why should one not do angel investing. Now, we introduce you all to the second unit of our Masterclass covering Financial Concepts and Terminologies. We have divided this module into two parts. In the first part, we plan to cover Concepts and terminologies related to Markets and users which are crucial to understanding before any investor starts investing in a particular company. In the second article, we’ll cover the Financial Concepts &amp; terminologies related to a business: Like always, we’ll try to explain the concepts to all of you with the help of a story and examples to help you grab the information better. So tighten your seatbelts as we go on a rollercoaster ride to understand the various financial concepts &amp; terminologies related to Angel Investing. In the olden times in Bharata, where money moved through markets like rivers and piles of information were like quiet guards, there was a magical cloth called the "Tapestry of Financial Concepts." This special cloth was made with words and mysterious signs, and it had the secrets to riches, risks, and doing well in life. One day, an investor who was interested in supporting the entrepreneurial spirit of the society &amp; making exceptional returns was sitting alone in the local ground, watching children play games. He called a few kids &amp; offered them candies provided they answered his question. The question was very simple, What did the kids aspire to become? One of them replied Pilot, another kid replied that she wanted to serve in the Armed Forces, and another kid replied they wanted to represent the country in Cricket. There was one kid standing behind all the others, maybe too shy to give a reply. Upon insistence, the kid replied he wanted to start a business. This kid caught the eye of aspiring investors. For far too long, the investor had been hearing about stories of successful entrepreneurs &amp; how Angel Investors were making a living for even their future generations just by investing in these early-age startups. Here, was a kid in front of him, barely 15 years of age, having an idea with potential &amp; a vision to contribute something to the development of society. The question was how to groom him into a successful entrepreneur so that his success would have spillover effects. After thinking for a while, the investor believed that the only way he could meet both objectives was if he got access to the renowned, much-talked-about special cloth because that special cloth had the recipe for success. So the investor set out on a path to explore the secrets of the special cloth. Upon finding that special cloth, the investor carefully opened the cloth &amp; it had a few terms written on it as if they were some codewords. What were those codewords? Let’s explore those Codewords together: TAM/SAM/SOM: We’ll start by explaining each one of them briefly. TAM: TAM stands for Total Addressable Market. As we promised earlier, explaining with the help of an example, if an Investor wants to invest in startups that are into electric vehicle manufacturing, the first thing they would look at is what is the demand for electric vehicles across segments in the market &amp; who has a dominant position in the market. It is to be noted that Electric Vehicles are divided into different segments, from 2-wheelers to 3-wheelers to 4-wheelers to even Trucks and buses. SAM: SAM stands for Serviceable Addressable Market. In other words, if we have an investor, let's say his name is Ram, before investing in a particular electric vehicle startup, he would like to know the size of the market the company is trying to address with its products. For eg. OLA &amp; Ather are into 2-wheeler electric manufacturing while TATA, Tesla, and Mahindra are into 4-wheeler electric vehicle manufacturing. There’s even a segment of Electric Buses in which the players consist of Olectra, Ashok Leyland, etc. The larger the Serviceable Addressable Market, the better prospects the company has. SOM: SOM stands for Serviceable Obtainable Market. It looks at what portion of the Serviceable Addressable Market, the company can realistically capture shortly (3-5 years). In other words, let’s say Ram finds an attraction to invest in the 2 Wheeler market but before investing he would like to understand how much market size the company, let’s say OLA, plans to capture till 2025 &amp; how much share its competitors plan to capture. This will help Ram plan his investments accordingly. With this, we have completed our first sub-unit of this module. Coming to the second sub-unit of this module, we plan to cover: CAC &amp; LTV: In this sub-unit, we’ll talk about two very important terminologies that every investor should know before they start investing. CAC: CAC stands for Customer Acquisition Cost. Many companies resort to targeted online marketing campaigns to attract their customers. So the cost that the company pays to attract customers is known as Customer Acquisition Cost. Fintech Companies like Paytm &amp; Policy Bazaar spend sizable sums of money on acquiring a customer. It’s possibly one of the major reasons behind them having a sizable customer base. For eg. the Average monthly users today transacting via Paytm is over 90 Million. LTV: LTV stands for Lifetime Value of Customers. LTV estimates the average revenue the company is expected to generate in the lifetime of the customer’s association with the company. LTV &amp; CAC are interlinked. A company needs to back the increasing customer base by retaining those customers which is only possible if they provide better products and services. The more customers get retained, the more would be the LTV value earned by the company. For instance, Take the example of BSNL. Over the past decade, BSNL fell from having the second largest consumer base after Airtel to now at the last position among big players because while on the one hand, CAC increased after the entry of players like JIO, on the other hand, due to poor delivery of service, LTV also decreased as many customers purchased services from private players. MRR &amp; ARR: In the third sub-unit we plan to cover MRR &amp; ARR. So let's dive straight into our 3rd sub-unit: MRR: MRR stands for Monthly Recurring Revenue. MRR is an indication of the health of your business. It signifies the growth potential of your business. ARR: ARR stands for Annual Recurring Revenue. ARR is the value of the recurring revenue of a business’s term subscriptions normalized for a single calendar year. Most companies, especially companies dealing in Software as a Service (SaaS) lay special emphasis on improving their MRR &amp; ARR. Recently a SaaS-based company Whatfix hit 50 Million US$ ARR. COGS: COGS stands for Cost of Goods Sold. It is the sum of all direct costs associated with making a product. It includes money mainly spent on Raw materials &amp; labour. Companies like Apple have impressive profitability because just in the FY 2023-24, Apple’s COGS, also known as cost of revenue represented 56% of its entire cost base. The lean P&amp;L further strengthens Apple’s robust business model. Of late, Apple has been pursuing to improve gross margins via supplier dominance &amp; in-house chip development. AOV &amp; ARPU: In this subunit, we’ll cover AOV &amp; ARPU. AOV &amp; ARPU are two important indicators of how your business is performing, and how much revenue on average is the business able to generate per order value &amp; user. AOV: AOV, also known as Average Order Value is a key performance metric that underlines the the customer purchasing habits. Its of great help to e-commerce companies like Amazon, Flipkart &amp; now the newly launched ONDC as it will help them prepare a database of the average amount of spending per order. ARPU: ARPU or Average Revenue Per User, on the other hand, as the name suggests how much money you’re earning from each user in a given timeframe. ARPU indicator is used by companies across the world. It helps companies plan better strategies to attract more revenues from their users by offering enhanced products and services. For eg. Recently Telecom companies like Airtel &amp; VI have been asking for a hike in the tariff rates to attract more revenue per user, automatically improving their ARPU. DAU &amp; MAU: In the 6th sub-unit, we would cover the Daily Active Users (DAU) and Monthly Active Users (MAU) indicators. DAU &amp; MAU are 2 indicators that are frequently used by companies around the world, especially to track the traffic on their websites &amp; apps. This helps them design their brand campaigns &amp; get clarity on who is their target market. I won’t take any other company’s name here but Planify itself. We regularly track the DAU &amp; MAU numbers to check traffic on our page &amp; app. This helps us plan better on what our target market is. User Retention: In the last sub-unit of this User submodule, we'll discuss User Retention &amp; what it signifies. User Retention indicates the amount the company is willing to spend to retain its customers. Retaining your customers increases word-of-mouth recommendations &amp; loyalty toward the business. Infact, according to a report published by Hiver, existing customers are more likely to spend 30% more on a new product than new customers. Finally, as the financial saga unfolded, the Tapestry of Financial Concepts became a masterpiece—a symphony that harmonized the dance of risk and return, the ebb and flow of markets, and the alchemy of wealth creation. In Bharata, where every investor and trader was a storyteller, the enchanted tapestry continued to evolve, unveiling new chapters of financial mastery. ​

In the last article, we covered Concepts and terminologies related to Markets and users which are crucial to understand before any investor starts investing in a particular company. In this article, we’ll discuss the Financial Concepts &amp; terminologies related to a business, signifying the financial health of a business. Understanding the financial health of a business is equally crucial, if not more. Firstly, it provides a comprehensive insight into the company's profitability, liquidity, and overall stability, allowing investors, stakeholders, and management to gauge its ability to generate sustainable revenue and weather economic uncertainties. Secondly, a thorough analysis of financial statements helps in assessing the company's risk profile, enabling investors to make informed investment decisions based on their risk tolerance and objectives. Like always, we’ll try to start this concept in the form of a story to help our users get a comprehensive understanding of the subject: In the bustling startup hub of Mumbai, seasoned angel investor, Aisha, found herself intrigued by a young fintech startup called "FinVista." The founders, Raj and Ananya, exuded passion for their digital financial solutions platform, and Aisha sensed the potential for a transformative journey. However, she also observed a gap in their understanding of critical financial concepts. Recognizing the need for guidance, Aisha decided to mentor Raj and Ananya. The first lesson was on "Burn Rate," a term that Raj and Ananya hadn't fully grasped. Burn Rate: Aisha explained the importance of managing expenditures vis-a-vis income, and the founders realized the significance of optimizing costs to achieve sustainable growth. Burn Rate, in the case of Startup companies, is the rate at which a new company is spending its venture capital to finance its overhead before generating positive cash flow from operations. Thus, the Burn Rate can be considered a measure of the negative outflow of the business. Burn Rate can be divided into 2 types: Gross Burn Rate: Gross Burn Rate is simply the money spent by the business every month or in other words the total monthly cash outflow. It is generally calculated by combining all your monthly expenses as found on your income statement inside your P&amp;L sheet. Net Burn Rate: Net Burn Rate is the amount of money lost each month and takes into account possible company revenues. In other words, it signifies the difference between monthly cash inflows and cash outflows. Let me give you examples of a couple of companies to help you understand better the concept of burn rate: Airbnb: In the early days, Airbnb had a high burn rate as it invested heavily in marketing, growth, and product development. However, they were able to achieve profitability by focusing on revenue-generating activities and cutting back on non-essential expenses. Uber: Uber also had a high burn rate in its early days, as it invested heavily in expansion and marketing. However, the company was able to achieve profitability by scaling its operations and cutting back on driver incentives and other expenses. Runway: Next on the agenda was "Runway." Aisha painted a vivid picture of a startup's financial runway—the time it could stay afloat before running out of funds. Raj and Ananya began to see their startup's trajectory as a flight, and the concept of maintaining a sufficient runway period resonated deeply. It was a paradigm shift in their financial mindset. Runway, popularly known as Cash runway, is a term used to imply the amount of time, in months a business has before it runs out of cash. It can be calculated by dividing the current cash balance by the cash burn rate. Let's understand the concept of Cash Runway with the help of examples: Pharmeasy: Recently we heard that Pharmeasy, which had earlier planned to launch its IPO in 2023, had delayed the process till 2025 due to some concerns with its high cash burn rate which was leaving a decreased Cash runway for the company that had the potential to badly impact their proposed IPO, since that would create a negative perception about the company’s financial management in the eyes of the investors. Cash Burn Rate: The discussion then shifted to "Cash Burn Rate." Aisha emphasized the need for efficient cash management, urging the founders to understand how quickly their startup was using up its available cash. The realization dawned on Raj and Ananya that controlling their cash burn rate was paramount for longevity. Cash Burn Rate signifies the change in Cash balance month over month. It is calculated as the difference between the Cash balance in the prior month &amp; Cash Balance in the current month. Meesho: Take for instance the case of the popular online women's clothes shopping business Meesho which has recently achieved a milestone by reducing its cash burn by 90% in the last year. This is in line with the company’s aim to become EBITDA positive. CM Level 1, CM Level 2, CM Level 3: The discussion then turned to Contributing Margin (CM). Aisha emphasized the crucial role of Contributing Margin—highlighting that it represents a product’s net sales minus all associated variable costs. The total contribution margin represents the total amount available to pay for fixed expenses and to generate a profit. It can be further divided into CM1, CM2, and CM3. CM Level 1: CM Level 1 represents the Sales (revenue from Operations) minus the basic cost of goods sold, discounts, and coupons. This is the same as the Gross margin. CM Level 2: Under CM Level 2, we deduct any other Operational Variable Costs which include logistics warehouses, payment gateway fees, etc. All these are also known as Indirect Expenses in the field of finance. CM Level 3: Lastly, we arrive at CM Level 3. Under CM level 3, we deduct the marketing &amp; administrative expenses. In other words, CM level 3 can be regarded as deducting direct costs from EBITDA. Understanding and optimizing this metric is key to sustainable business growth and financial success. EBITDA: EBITDA is the net income with interest, tax, depreciation and amortization added to it. EBITDA is generally used by companies, on the one hand, to track and compare the underlying profitability of companies regardless of their depreciation, assumption &amp; financing choices &amp; by investors on the other hand to see how well is the firm being managed. PAT: PAT on the other hand refers to the amount that remains after a company has paid off all of its operating &amp; non-operating expenses, other liabilities &amp; taxes. This profit is either distributed among the shareholders as dividends or kept as retained earnings to be invested back into the business for further expansion. Royalty: Royalty is akin to renting out special rights. In startups, royalty is a way to get money from investors. Instead of giving up ownership, investors get a part of the startup's future revenue. This helps startups grow while still keeping control of their company. Let’s take an example from Shark Tank to understand this better. The first startup that appeared on Season 3 of Shark Tank, The Honest Home got a deal from Sharks as a part of which they had to give 1% Royalty per unit of sales until Sharks got ₹1.5 Cr. returns which was 1.5x the invested amount. So supposing The Honest Home is selling a unit of eco-friendly daily-use product for ₹500, they pay ₹5 to Sharks who had invested. Ramen Profitability: Ramen profitability refers to a business's ability to generate only enough profit to cover the founders' basic living expenses, reminiscent of the low-cost lifestyle often associated with instant ramen meals. While this term underscores the importance of profitability, it also highlights the limitations of generating just enough income for sustenance. However, for startups aiming for long-term success, relying solely on "ramen profitability" is not sustainable. Instead, founders should aim for "traditional profitability," where the business generates sufficient profits to support a comfortable and viable standard of living for the founders, reflecting the success of their sales efforts. Churn Rate: Lastly, Aisha delved into "Churn Rate." As she explained how customer churn impacted the business, Raj and Ananya started dissecting their user base. Understanding the nuances of customer retention became a key focus, with the founders realizing that sustaining customer loyalty was as crucial as acquiring new users. Churn Rate, commonly known as the Rate of Attrition is the rate at which customers stop doing business with the entity. It is most commonly expressed as the percentage of service subscribers who discontinue their subscriptions within a given period of time. Many companies look towards the Churn Rate to assess their performance as an entity. Infact many wholesalers also use this metric to check how efficient their after-sale services have been. Let’s look at an example of a company that had a very high churn contributing to their decreased revenues: VI (Vodafone-Idea): VI or Vodafone-Idea, India’s 3rd largest telecom player in the market has been assessing its performance year on year using a Churn Rate that has been decreasing for a while now &amp; a report by ICICI securities has cautioned them that if they don’t arrest this collapse in churn rate, they will be left at the 4th position in the telecom market in terms of active subscribers thus resulting in further increase of losses. Armed with this newfound financial literacy, Raj and Ananya transformed their pitch deck. They confidently presented to potential investors, including Aisha, showcasing a deep understanding of their startup's burn rate, runway, cash burn rate, and churn rate. The language of finance had become their ally, and it resonated with investors looking for not just promising ideas but also a solid financial foundation. As "FinVista" secured funding, Aisha beamed with pride, knowing that the journey had extended beyond mere investment—it was a journey of education and empowerment. The story of FinVista and Aisha became a beacon in the Indian startup ecosystem, emphasizing that for angel investors, a founder's grasp of financial concepts was as crucial as the innovation behind the business.

​ Throughout our masterclass journey, we have delved into various topics covering the need to Angel Invest, Why not to Angel Invest, What to expect from Angel Investing &amp; Opportunities it provides. We also covered in depth the Financial Terminologies that will assist investors in their Angel Investment journey. In this Unit, we’ll cover Asset Allocation. We’ll look at how much an investor should allocate capital towards Angel Investing, understand the power of the law of returns, how many companies one needs to invest in &amp; many such diverse topics that will assist an Investor in making the right investment decisions. Our first module discusses how much Investment Capital to allocate &amp; what things to keep in mind while allocating. Like always, we’ll start with a short story. Let’s Begin! In the bustling world of investments, Sarah found herself at a crossroads, On the one hand, her job was paying her just enough to maintain her living standard while on the other hand, the inflation was rising and her income was not enough to cope with increasing expenses. Being an elder sister she had to look after her little brother’s expenses apart from paying off monthly expenses like Rent, Groceries, Electricity, etc. One fine day while packing her bag after a long day’s shift, her friend walked up to her and inquired about how she was managing her expenses. Tension was very much visible on her face. The friend suggested she start investing whatever little she could &amp; further diversify it to reduce risks. This way not only would she meet her future expenses adequately but also be able to secure her family’s future &amp; meet her own financial aspirations. Deliberating the crucial decision of how much capital to allocate for investments. Armed with financial wisdom from mentors and years of market observation, she embarked on a strategic journey. Sarah understood the importance of diversification and risk management. Setting clear financial goals became her compass, guiding her allocation decisions. She decided to earmark a substantial portion for equities, seeking growth potential, while allocating a percentage to bonds to provide stability and minimize risk. Real estate investments offered a tangible and resilient asset class, securing another slice of her portfolio. As market dynamics shifted, Sarah remained adaptable, tweaking her allocation strategy. She embraced the principle that no one-size-fits-all formula exists, recognizing the need for periodic reassessment. Through disciplined decision-making, Sarah's portfolio flourished. The carefully balanced allocation not only weathered market fluctuations but also capitalized on emerging opportunities. Sarah's story reflects the art and science of investment allocation – a dynamic process where thoughtful decisions and adaptability pave the way for long-term financial prosperity. Now let us come to the present day. In the past, our ancestors used to advise their successors to save 2/3rd of their earnings. In other words, if an individual was earning ₹100, they were asked to save approximately ~ ₹67 of that while the remaining ₹33 would be for consumption. <div class="se-component se-image-container __se__float- __se__float-none" style="width: 50%"><figure style="width: 100%;"><img src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeu-XtulYM54fZX1-jQJk_-GGFHfAzOYUpWdHlBkl4DGUyYjm0k4RAXUHP0ZK3HlfNN5uGOqymW2nO_7QfM-7D08XcBf530yk05zWO0mJbfHQqN838c5NLfRYNaMNy-EXoOfw79fJP0uF9NTRMhsqq_Q07F?key=XzH7wtzaMqBmxCAaGeVXgA" alt="" data-proportion="true" data-align="none" data-file-name="AD_4nXeu-XtulYM54fZX1-jQJk_-GGFHfAzOYUpWdHlBkl4DGUyYjm0k4RAXUHP0ZK3HlfNN5uGOqymW2nO_7QfM-7D08XcBf530yk05zWO0mJbfHQqN838c5NLfRYNaMNy-EXoOfw79fJP0uF9NTRMhsqq_Q07F?key=XzH7wtzaMqBmxCAaGeVXgA" data-file-size="0" data-origin="," data-size="50%," data-rotate="" data-percentage="50," style="margin-left: 0px; margin-top: 0px; width: 100%;"></figure></div> Today, things are much different than they were in the past. Today’s generation is much more risk-taking and has a lot of more secure investment avenues than the previous generations had. More importantly, there’s a lot more financial awareness among individuals. Many consulting firms have come up in recent years whose entire business model revolves around directing individuals' investments to help them earn good returns. If we talk about the present scenario, individuals like to save anywhere between 33% to 50% of their earnings that align with their personal financial goals &amp; remaining is spent on consumption. Suppose an individual’s total income is ₹100, assuming Sarah’s monthly essential expenses ranging from Rent to Bills to Grocery consumes 50% of her income which leaves ₹50 as savings. Assuming this ₹50 as a whole, the first thing they need to do is save for their short-term goals &amp; long-term goals. Let’s first take a look at the Asset options that an individual has to invest in: <div style="margin-left: 0pt; text-align: justify"><table><tbody><tr><td>Assets</td></tr><tr><td>Gold</td></tr><tr><td>Real Estate</td></tr><tr><td>Fixed Deposits</td></tr><tr><td>Bonds</td></tr><tr><td>Mutual Funds</td></tr><tr><td>Listed Stocks</td></tr><tr><td>Unlisted Stocks</td></tr></tbody></table></div> Her friend suggested that 25% of your savings should be diverted towards Private Companies and the remaining 75% should be allocated towards other asset classes like Gold, real Estate, Fixed Deposits, Bonds, Listed Stocks &amp; Mutual Funds respectively. Now let’s break down the allocation of this 75% that are allocated to Non-Private Stock asset classes. <div style="margin-left: 0pt; text-align: justify"><table><tbody><tr><td>Asset Class</td><td>Allocation</td></tr><tr><td>Gold</td><td>2%-5%</td></tr><tr><td>Real Estate</td><td>2%-5%</td></tr><tr><td>Fixed Deposits</td><td>10%-15%</td></tr><tr><td>Bonds</td><td>10%-15%</td></tr><tr><td>Mutual Funds &amp; Listed Stocks</td><td>35%</td></tr><tr><td>Private Markets</td><td>25%</td></tr></tbody></table></div> <div class="se-component se-image-container __se__float- __se__float-none" style="width: 50%"><figure style="width: 100%;"><img src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfx2RWOwUxzlBtydpPDengv5P1xlHvhkwKNkWCoxHuNoKhq1f-A17EDeNg9V4NZnzATBy4_ivmfnNd2zvhOxDje2xTdJsM6f-B5AQGKmwA1d3K__lZ47b4YXvaj6AaIHnArRvpAWkfzdlqV2ozE75IAjsIZ?key=XzH7wtzaMqBmxCAaGeVXgA" alt="" data-proportion="true" data-align="none" data-file-name="AD_4nXfx2RWOwUxzlBtydpPDengv5P1xlHvhkwKNkWCoxHuNoKhq1f-A17EDeNg9V4NZnzATBy4_ivmfnNd2zvhOxDje2xTdJsM6f-B5AQGKmwA1d3K__lZ47b4YXvaj6AaIHnArRvpAWkfzdlqV2ozE75IAjsIZ?key=XzH7wtzaMqBmxCAaGeVXgA" data-file-size="0" data-origin="," data-size="50%," data-rotate="" data-percentage="50," style="margin-left: 0px; margin-top: 0px; width: 100%;"></figure></div>​ Now let’s understand the allocation process. Assuming Sarah’s annual savings amount to ₹2 Crores &amp; she has ₹1 Crore of past savings. So now, we begin with the allocation process. Let’s start with Gold. People in India consider gold to be an ornament rather than an investment. Infact as per recent estimates, Indian women account for 11% of the world's total gold reserves. This is about 18,000 tons of gold. Real Estate Investments have also mostly given single-digit returns in the past decade. Although there are real estate investments that provide double-digit returns as well those are mostly limited to Tier 1 cities, and the cost of investment is often considered excessive. More importantly people in India like to prefer investments in real estate for their consumption i.e. for their living rather than looking at it from a pure profitability prism. Owning a house has become a statement of lifestyle now. Indian values lay importance on having a roof over your head is one of the top priority. So the amount of savings an individual diverts toward these two assets depends on their returns-generating capability and your short-term and long-term goals. On average 2-5% of your investments should be in Gold &amp; Real Estate. Next, we turn to short-term goals. Short-term goals are generally considered as a period of up to 7 years. Supposing in another 2 years, Sarah plans to have a car or she plans to pay the college fee of her younger sibling in the next 5 years or Sarah plans to save something for her marriage over the next 7 years. Sarah would look to invest in instruments or assets that give her fixed returns over a period of time. In this case, where she is planning to undertake a financial liability upon herself, she can invest in assets like Fixed Deposits, Bonds, or Non-convertible debentures &amp; Debt/balanced type Mutual Funds that would pay her regular returns. Now this can also depend upon person to person. Planning for Kids or going on Extravagant/foreign trips on Honeymoon are other common financial goals that people have in their bucket lists. Most people tend to put all of their savings towards Short-term goals and nothing is kept for the long term. Assuming Sarah ends up diverting 40% of her savings toward these Short-term goals, she would be left with 60% of her remaining savings, out of which another 35% she can divert toward her Medium-term goals which can be related to family planning or planning your kids future or buying a house, etc. Sarah being an avid investor would look to invest in Equity Funds and Mutual funds to plan to finance her Medium-term goals. Her friend suggested that for better returns, she might as well diversify her equity &amp; mutual funds portfolio in such a way that it focuses more on the small-cap stocks and Sector sector-specific stocks that have higher growing potential. If she wants exceptional returns then Sarah might also invest in PMS where professional portfolio mangers would manage her investments. Disadvantages &amp; Inherent Risks of Mutual Funds get covered in PMS. This leaves 25% of investable savings with Sarah which she could divert towards investing in Private markets. Her friend suggested she adopt a disciplined approach when investing in Private Markets and don’t get carried away by outliers. In other words, if she has 25% savings diverted toward Private Markets, then in 4 years that sum will go up to 100%. Let’s consider this as ₹100 for ease. Sarah can adopt a strategy where this ₹100 will be distributed among 20 companies over the next 4 years with each company getting approximately ~ 5% or ₹5 of savings. Her friend also cautioned that if she invests in 20 companies, the probability of finding an outlier in 1 company is 60%. Outlier, in other words, means any company that gives you more than 10x returns. If she invests in 50 companies with each getting ₹2, then the probability of an outlier is 95% and it keeps on increasing. So, if Sarah invests in 20 companies in the next 4 years, she’ll have to identify 5 such Private Companies every year from whom she can earn good returns &amp; this would take it to 20 companies over 4 years. Let’s assume Sarah right now has ₹1 crore as savings &amp; she can save ₹50 Lakhs every year, in the next 5 years, her total savings would be ₹3.5 Cr. to invest in Private Companies. Even if she plans to invest it in 25 companies (5 companies per year), the per-company investment amount would come out to be roughly ₹14 lakhs. If Sarah plans to invest in 5 companies annually, then her annual investment in Private companies would come to ₹70 lakhs. Let’s take another example. Suppose Sarah doesn’t have anything in savings and she can save ₹50 Lakhs per year for private markets, then total investment, over 5 years comes out to be ₹2.5 crores. Assuming she invests in 25 companies over 5 years i.e. 5 companies every year, then her annual investment would come out to be ₹50 lakhs with each company getting ₹10 Lakhs. Take another example. For instance, Sarah had ₹1 Crore as past savings, and assuming she had the ability to save ₹50 Lakhs in the first year &amp; every year her ability to save increased by ₹10 Lakhs. By the 5th year, she would have a total savings of ₹4.5 Crores. Keeping the number of companies the same i.e. 25, her annual investments would be ₹90 Lakhs with each company getting ₹18 Lakhs as an investment. Take a fourth example where Sarah wants to increase her investment avenues and so she plans to double the number of opportunities. In other words, the number of companies increase to 50. In that case keeping everything else constant including ₹4.5 Cr as savings, the total annual investment would amount to ₹90 lakhs but the investment in were company would drop to ₹9 Lakhs. Too many cases, right? Ultimately the amount of investment any individual makes depends on the savings they can generate. The key here is to take small bets &amp; average out the risks through diversification. So what lessons do we learn from the above story? Several valuable investment lessons emerge: Strategic Diversification: Sarah understood the importance of spreading her investment capital across different asset classes. This strategic diversification helped manage risk and capitalize on various market opportunities. Strategic diversification is the cornerstone of a resilient investment portfolio, involving the deliberate allocation of capital across a range of asset classes. Clear Financial Goals: As we saw in the story, setting clear financial goals provided Sarah with a roadmap for her investment journey. This clarity enabled her to align her allocation strategy with specific objectives, whether it be growth, stability, or a combination of both. Continuous Assessment: Regular reassessment of her allocation strategy showcased the importance of ongoing evaluation. Markets and personal circumstances change, and periodic reviews ensure that the investment portfolio remains aligned with evolving goals and market conditions. In essence, the story emphasizes the art and science of investment, where a thoughtful, disciplined, and adaptable approach to capital allocation forms the foundation for long-term financial success. ​

These module will go into detail on the various styles of investing, amounts to invest, knowledge sharing, and trust vs legals.

Module

Lesson

Hours