Question

9. a) You are an angel investor and you invested in a series of startups in the FinTech space. Two of your portfolio companies appear to have exactly the same target market. What would you advise?

b) One of your portfolio startups is not meeting its growth targets and is falling behind the expected month-on-month customer growth rate. Your investment is conditional on meeting growth targets and the quarterly tranches tied to these targets. The startup is also facing cash flow issues. What do you do?

Answer 1

Ans. 9 a) I will advise both of these fintech companies to reconsider their business models (target market) if they want me to invest in their startups. Because investing in two mutually competitive startups will only bring chaos and confusion to me. As an Angel Investor, my primary concern is to earn revenue/profit which is solely dependent on the success of the startup in which I have made my investment. So If I invest in two start-ups that try to serve the same market segment then it will certainly make both of these startups become competitors and will try to hamper the growth/success of another startup. Since I have invested my money in both of them, the ultimate loser will be no one but me. So I will ask them to revisit their business plan and/or targeted market. And if they don't want to change their target market then I will invest my money in only that startup which prima facie seems to become successful because of its business plan, human resources, and technical skills.

Ans.9 b) If the startup in which I have invested does not perform well then I will ask its management to give a proper explanation for the failure of the startup and why are they not able to meet growth targets? What are the factors/impediments which are causing this issue? And the most important question what are they doing to tackle these issues? And in what time period they will be able to sort out the existing issue? I will ask the management of the startup to give a satisfactory reply of these questions. If I got convinced from their explanation then I will give a time period to prove themselves and if I don't get convinced then I will exit the startup by selling my shares of the startup to save my investment. Because as an angel investor at most I can give them a time period to tackle the problem and become a profit-making company otherwise I will exit the company as I am in the market to earn money and I will invest my money in any other good performing startup.

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