Avoid herd mentality. One should not invest unless one is comfortable: Paresh Madani, Angel investor

After a career of nearly two-and-a-half decades providing consulting-led solutions and services to global banks and the financial services industry, owing to personal setbacks, I moved away from professional life. For most of my career, acting as an intrapreneur and having been part of creation of some innovative industry pioneering financial solutions, I thought engaging with startups as an investor and mentor would professionally satisfy me.

While I did not have a specific investment thesis, I tried to focus on startups that looked to create a market differentiation by introducing concepts which add value to human lives and their well-being. Since 2017, I had the opportunity to invest in over 15 startups, plus some more, via the private equity route. I also informally mentored a few startups and some other founders.

Here are a few lessons I’ve picked up during my stint:

1. Angel investing is ideally only for individuals with very deep pockets. Statistics suggest that investments between only 20% and 30% of one’s total portfolio are likely to generate returns. In my relatively short journey, indications suggest this is true. I recommend that any investor should not just expect to look for winning startups, but invest for failure, rather than success. Most investors will never be part of a unicorn.

2. An investor should be prepared for a long-term investment horizon (seven years-plus). While there could be exceptions in terms of early exits, those will be rare.

3. Avoid herd mentality. One should not invest unless one is comfortable. This is because many startups are backed and mentored by leading investors; yet they fail.

4. While it may not be always possible, it is recommended to have an in-person meeting or two with the founder prior to investing. This will allow both parties to gain perspectives about each other.

5. It is strongly recommended to socialize and invest a lot of time among angel networks, forums and conferences to enhance knowledge and to increase the possibility of sighting good opportunities.