Last week we talked about the different types of investors you’ll meet in the Indonesian startup scene. This week we will angle the article differently and talk about the different types of angel investors you’ll find in the Indonesian startup scene. So what’s the difference between these two investors?
The investors mentioned last week are investors from institutions like venture capitals, private equity firms, big companies and banks. Angel investors are individuals who are interested in investing in startups because it aligns with their own personal agenda. This also would mean that the amount and benefits between these two investors are different as well. Most of the time, angel investors would fund less compared to other investors due to it coming from their own personal wealth. However this is not always the case.
In this article, we will talk about the different types of angel investors you’ll meet in the Indonesian startup scene. We will also talk about the strategies you can make to approach these angel investors.
Read More: Difference between Angel Investing and Venture Capitalists
So without further ado, here are the five different angel investors you’ll meet in the Indonesian startup investment scene:
The Friends and Family Investor
The friends and family investors are your friends and family members who knows you well. They want to support your startup by funding because they know you and trust you with their money. These investors are probably the ones most likely to fund you startup in contrary with other investors. However unlike the other investors, dealing with these investors can become a very complicated and emotional deal as it is very personal. When dealing with these investors, make sure you draw the line between personal and business relationship.
On the contrary, these investors can be your previous colleagues. They are better investors compared to close friends and family members as they have worked with you before. Although they don’t really understand your startup idea, they already understand the consequences from the very beginning. They wouldn’t fund your your startup if they don’t believe in you, your team and your startup idea.
Strategy for Contact: Make sure these investors are fully aware of the consequences in funding for your startup. You should also ensure that these investors are aware that you want personal and business relationship to be separate in the deal. Try to educate these investors fully about the idea of the startup so that they are fully aware where they are putting their money into. Remember transparency, honesty and trust is the key of success when dealing with these angel investors.
The Super Investor
These angel investors are the most common type of angel investor in the startup market. The are high net worth investors that has a track record of success in their business of their own. They are the mentors or the advisors of the startup scene. With their strong personal contacts with other players in the startup scene, these angels fund your company and ensures that your startup is profitable. They do the following through connecting you with the right connection, finding the right people to help your startup grow and providing the resources to speed the growth of your startup.
Most of these angel investors tend to be more hands-on in comparison to other investors. They will want to have a vote in regards to the management of the startup. These angel investors may help your startup get further funding as well. In the end, the value-added benefits that you get from these angel investors vary in whomever the individual.
Strategy for Contact: Do your research on the angel investors that you want to be funded from. Try to find one that can benefit from your startup and knows a lot about the Indonesian commerce and startup scene. Find someone with high value-added benefit for your startup. Someone with great network connections in the Indonesian commerce scene. Find someone that have a record of great startup portfolios. Find someone that can be a great mentor and advisor for you, your team and your startup employees.
When you find your idea super angel investor(s), contact them in-person or email them regarding your startup. If they reply or seem interested to invest, then its great news. However if they aren’t interest remember there are other investors, pestering them is never an answer. If you end up annoying them, they might use their connection to hinder your startup growth instead of helping your startup grow.
The Domain Investor
Domain angel investors are professionals who have spent their entire careers in a specific industry vertical. These investors are only willing to invest in startup within their industry of expertise. Due to their in-depth knowledge about the industry, they will be able to provide you with insiders knowledge and networks with useful connections within the industry. However unlike the Super Investors, these investors are limited in terms of getting information and resources from outside their area of expertise.
Strategy for Contact: In order to find these types of investors, you have to do your research. Choose the industry that your startup is in, and find out which professional or influencer in the industry tend to angel invest in startups. Find out whether your startup fits their portfolio and make contact with them in-person or through email, if you believe that your startup will match their portfolio. After prepare your material to pitch to the investor and make you sure your know your material because these investors understand the industry very well.
The Fool Investor
The fool investor is one of the most common type of angel investor in the Indonesian startup scene. These investors don’t really understand your startup and the Indonesian startup scene, however because he or she is a “true believer” of your startup, they are willing to spend their wealth and fund a startup that they don’t really understand.
These investors invest in startups only based on their idea, without understanding the tractions and current operations of your startup. These investors take awhile to convince to fund your startup but when you tell them your startup’s story, they will instantly believe and invest despite of the financial risks. These investors are the cheerleaders of the Indonesian startup scene.
Strategy for Contact: It can be very tricky to find these investors as they camouflage well in the startup industry. These investors can be mega-wealthy individuals that gained their wealth outside the startup world. Or generational angels who are second generation offsprings of successful families with lacking business experience. There are the inexperienced angels as well where they are one-in-a-lifetime angel investor. They have just started or trying angel investing, many might continue but most might feel intimidated and give up investing. Lastly, you can try to find these investors among older, retired individual businessmen who are independently wealthy. However, due to their commerce nature, they are willing to invest in different industries and view investing as a hobby rather than an investment.
The Group Investor
Lastly, there are the group investors. These investors a group of investors consisting of a mixture of the investors mentioned above. These combinations of angel investors grouped themselves due to various reason. They might group together because they believe they can get a better deal in investing your startup if they group their funds pool together. They might do the following in order to lower the risk in investing their startup because there are more value-added that they as a group can bring to the startup. These type of investors are often led by head angel investors. Investors that bring the group together and put in the most funding among the rest of the group members.
Strategy for contact: Try to find head angel investors, if you get them interested in your startup, then they will find the group to invest in your startup. Usually these type of investors come in the later stage of building your startup. When you have a certain amount of traction and revenue, then these investors will be willing to consider funding your startup. If your startup have barely started the operation, then chances are these investors will ignore you and ask you to come back when your startup have grown.
We’ve talked about the five different types of angel investors you’ll meet in the Indonesian startup scene. But keep in mind that there are other types of angel investors as well that we did not mention. We talked about the friends and family investors. They are your parents, siblings, friends and other relatives who supports your startup idea and trust you with their savings. Then we have the super investors. They are the most common investors you’ll find in the Indonesian startup scene who are not your friends and family members. We also talked about the domain investors. These investors have worked in the industry your startup is in for decades and understand it inside-out. Then there are the fools. These fool investors invest in your startup because they are excited about the startup scene and ready to join it. Most of the time, they believe in the idea of the startup but do not have enough understanding about the industry that your startup is in. Lastly, there is the group investors. The group investors are groups of individual angel investors combining their fund in order to get a better deal when investing in your startup.
Now that you know the different types of angel investors and institutional investors that exist in the Indonesian startup scene, go out and start your funding journey. Read up our previous article in the Kejora Series in regards to the steps to approach these investors. In the first part of the article, we talked about the documents and materials we have to provide for the investors. In the second part of the article, we talked about how to prepare for the meeting with the investors. Check our updates in our venture capital (Mountain Kejora Ventures), co-working space (Kejora HQ) and startups in our portfolio from our blog. Or read more about our Incubator program (Ideabox) and the startups in their portfolio in the Ideabox blog.
In next week’s article, we will talk about venture capitals. We will explain about what a venture capital is and how it works. We will talk about who runs venture capitals and who invest in venture capitals. We will explain the operations and how venture capitals manage their portfolio. Lastly, we approach the question that everyone wonders: how exactly do venture capitals make money? Check out our next article in the Kejora Series to understand venture capital better.
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