Bangalore:The Angel investment market wherein the Angel investors play a crucial role in developing an idea into a scalable business model is suffering a downturn in terms of ROI. 39 percent of the Angel investors do not get a positive return on their investment, which means that they end up losing money. The statistics is been revealed by Ewing Marion Kauffman Foundation, a U.S.-based foundation that is devoted to entrepreneurship.

Angel funding is one of the primary ways to get funding for the startups and small business entrepreneurs, it is important for them to know what is going on with Angel investors in order to better sell their business model. But few reasons to such downfall in the ROI is the financial crisis in 2008 that delayed the kinds of payoffs the Angel investors expected from their small business beneficiaries.

Some Angel investors invest fund from their personal pocket, thus increasing the risk of ending up with tied up money for a long period of time without substantial gains. This is the primary reason for the Angel investors limiting themselves from making huge investment in startups and small businesses. “According to me the scalability ratio of 6:4 is not a bad number if I consider it in India. The entire Angel funding scenario in India has changed drastically in the past few years, especially in the past three years. Several new Angel firms are founded, but due to certain reasons, the investments made by them are still low. However, they bring in considerable amount of added value to the companies they fund,” says Ashwin Raguraman, Vice President, IKP Investment Management Company.

The Angel firms have become more niche in terms of selecting the space for investment. Also, a growth in the PE funding can also be seen in the Indian market, thus providing a thrust towards the financial development of the startup fraternity. The strategic acquisitions of Indian Startups by global MNCs and business giants are another example to prove that the Indian market is maturing. “We can find that the quality of entrepreneurs has improved substantially in the past few years. They have gained maturity in terms of market and titration of business plan too as compared to those few years back who were a poor decision maker and low risk taker,” adds Raguraman.

Starting and growing a business is an exciting timewhere the angel investors spend time in  taking care of some of the most difficult aspects, by providing legal advice, helping with vital responsibilities like accounting and by obtaining business finance. They play the role of a mentor by easily guiding the entrepreneurs  through several difficult and complicated processes and put them on the path of success.

Angel investors need to take a higher degree of risk as compared to the Venture Capitalists. Before investing, they check the scalability of the idea in terms of business. A good idea can provide them with quick flip, i.e., within five to seven years they can exit with decent multiple returns. “For an immediate positive response in the Indian market too, I doubt the possibility, as the market has just started to scale up. The possibility of every Angel investor to succeed with great returns out of ten investments can be said to be one, where as two can churn good returns with two other leading the firm to break-even and five others usually fail,” adds Raguraman.