Entrepreneurs and

Informal Investors
Presented By:
Talha Nadeem
 Entrepreneurs
 The owner and manager of a business enterprise who, by risk and initiative, attempts to
make profit.
 An entrepreneur supplies risk capital as a risk taker, and monitors and controls the
business activities. The entrepreneur is usually a sole proprietor, a partner, or the one
who owns the majority of shares in an incorporated venture.
 Someone who exercises initiative by organizing a venture to take benefits of an
opportunity and, as the decision maker decides what, how and much of a good or
services will be produced.
 According to the economist Joseph Alois Schumpeter (1883-1950),
Entrepreneurs are not necessarily motivated by profit but regard it as a standard for
measuring achievement or success.
 What can I do?

Situations faced by start ups…

Common methods for raising funds……
 Formal Investors
 Banks
 Usually asked for personal and collateral guarantees
 Venture capital funds
 The only formal investment vehicle for financing stat-
ups
Aim at later stages but show little interests to start-ups

 Government Funding programs

 Limited capability
Informal Investors

Business Angels
What is Informal Investor?

 An informal investor is an
“ Affluent individual who provides debt to skilled person for
start-up business that called INFORMAL INVESTORS & ANGELS
INVESTOR ”

(Usually in exchange for Convertible Debt or Ownership Equity)

 Founders of Informal Investors

 This term of business organized in the early 1900's. At that time wealthy
individuals salvaged Broadway productions in last-minute investment.
 In informal investors, are available in our families, friends, and private
investors.
 It is true that venture capitalists are behind the success of many high-
profile ventures.
 The amount of their investment is, however, much less than informal
investors. Informal investors provide much more investment than
venture capitalists do (a ratio of 12 to 1 in Hong Kong; 54 to 1 in
mainland China).
Importance of Informal Investors
 Informal capital is also important in another way.

 Most founders cannot afford the resources for developing a marketable

product. That’s why they will start informal investment

 They invest more fund in the later stages to facilitate ventures.

 Informal investors also provide valuable advice on management,

finance, and other matters.
 High risk! Why they come?
 Angel investors are not only those that want to maximize their wealth in a “High
Risk” “High Return” way…..
but often include retired entrepreneurs or executives, who are interested in angel
investment for reason that go beyond pure monetary return
Investment profile of informal
investors
 Angel investments are High Risk investments.

 This type of investment starting with minimum funds like:

Minimum 50,000 to 500,000
Maximum 500,000 to 5000,000

 Informal investors are also credited investors.

Individuals that makes $200,000 or more I base salary every
year
Maintain a net worth of $1,000,000.
Affiliated and Non-affiliated
 Angels can be classified into two groups:
 Affiliated
 Nonaffiliated

 Affiliated
An affiliated angel is someone who has some sort of contact with you
or your business but is not necessarily related to or acquainted with
you.
1. SUPPLIERS
2. CUSTOMER
3. EMPLOYEES
4. COMPETITORS
Category of Non-affiliated

 Non-affiliated
A nonaffiliated angel has no connection with either you or your business. It
makes sense to start your investor search by seeking an affiliated angel
since he or she is already familiar with you or your business and has a
vested interest in the relationship
1. Entrepreneurs
2. Professional
3. Business brokers
4. Middle manager
5. Telemarketing
6. Advertising
Five basic requirements from
investors
o Market
_ Large and rapidly expending
o People
_ That can get the job done
o Idea/technology
_ Be commercialized
o Strategy
_ With strong unfair advantage
o Price per share
_ Be reasonable
  How can you find angel
investors?
There are a variety of ways to find angel investors, including through:
 Start with the people you know and trust
 Entrepreneurs
 Universities with an entrepreneurial programs
 Lawyers and accountants
 Business incubators
 VC clubs
 Angel investor networks (groups that aggregate individual investors)
 Venture capitalists and investment bankers
 Crowdfunding sites like Kickstarter, AngelList  and Indiegogo
 The best way to find an angel investor is a solid introduction from a
colleague or friend of an angel. The use of LinkedIn to ascertain
connections can prove useful.
Common mistakes entrepreneurs make
in search of capital
 Lacking of analyses
 Acting at the wrong timing
 Failing to understand the real needs
 Wasting the time of investors
 Failing to recognized the strength of MGT
 Providing business plan to access detail
 Afraid of share idea without telling the whole story
 Underestimate strategic benefits of investors
 Wrongly recognizing valuation in a science
Checklist for whether to seek informal or not

 Management team
 Market size
 Target Customer
 Competition
 Protect intellectual Property
 Sales strategy
 Profit potential
 Capital needs
 Financial projection
 Exit strategy
 Business plan
Pakistani startups that
raised investment with
the help of informal
investors.
 Uber

One of the several travelling services, Uber is an app-based car service

with an aim to provide affordable and reliable urban transport. Operational
in 20 cities around the world, Uber is on the verge of expansion by
garnering new investors interest.
In a Series C investment round, the transport-focused startup managed to
raise an investment of $60 Million with The Abraaj Group (Abraaj) as lead
investor. Through this they will be able to make new hires in order to
accelerate their pace of entry into new markets, and ensure the
development of new innovative products and services.
 Amazon.com

Amazon.pk is one of the biggest shopping portals in Pakistan currently and

keeps on growing, in terms of users as well as revenue. A Pakistani
subsidiary of the Germany-based venture builder, Rocket Internet, it is also
known for its aggressive sale strategies like the recently-organized Black
Friday which turned out to be a massive success (minus a few hiccups).

Amazon.pk recently managed to secure an investment of $55 Million for its

operations in the three countries it functions in today: Pakistan, Bangladesh
and Myanmar. Most of the investment (60%) came from Asia Pacific
Internet Group (APACIG), Amazon’s existing investor, while the rest 40%
came from CDC Group, Development Finance Institution owned by the UK
Government.
AutoGenie

 Pakistan’s first on-demand car maintenance service, AutoGenie started

as a very small four-person startup in 2014 and has come a long way. It
has also been incubated by LCE and is currently a part of PlanX’s startup
acceleration program.

 In the September of this year, AutoGenie received $100,000 in funding

 from PakWheels, Pakistan’s biggest online car portal. PakWheels itself
raised an impressive $3.5 Million last year, making this the company’s
first investment since then.
 Examples of some informal investors
Abraaj Group
 We are a global institution investing in growth markets across Africa, Asia, Latin America, the Middle East and Turkey.

Plan X
 With a strong network of local and global investors associated with PlanX we connect our startups with the best potential
investors to help aid their growth.

Invest2Innovate
 Invest2Innovate supports startup communities in growth markets, and has been operating in Pakistan since 2011. They have
incubation center and they also invest in selected companies.

Dot Zero Ventures

 Dot Zero ventures primarily invest in early-stage companies that have successfully demonstrated through pilots that their
service, product or idea has mass appeal.

Lakson Group
 The Lakson Group is one of Pakistan’s leading business conglomerates. The Lakson Group (“Lakson”) was established in 1954
and is one of the largest business groups in Pakistan.

Shell Tameer
 hell LiveWIRE is a Royal Dutch Shell Social Investment Programme, which enables young people to start their own business
and create employment.

Frontier Digital Ventures

 Funding to accelerate the growth of amazing online classified businesses

WECREATE Pakistan
 Women’s Entrepreneurial Center of Resources, Education, Access, and Training for Economic Empowerment (WECREATE)
Projects.
Conclusion and Recommendations
 Overall, it has been a really illustrious year for startups in Pakistan, for
which a lot of credit goes to the numerous incubators that have sprung up in
the country. Some notable ones include Plan9, the Punjab Government-
backed startup incubation program; LUMS Center for Entrepreneurship(LCE),
the university’s very own startup program; and P@SHA’s Nest I/O.
 Start-up Incubators and Venture Capital Firms play a vital role in an
entrepreneurial ecosystem. They not only offer guidance to entrepreneurs
and help them build profitable start-ups but also serve as a means for
sorting out “extra-ordinary” teams from “mediocre” ones. They also provide
“seed funding” to business models that they see viable and have strong
teams to carry the project on their own.
 Medium Startups Mentorship has compiled a list of such opportunities for
Pakistani Startups & entrepreneurs. We will be including more organizations
in the list as they come.
 Pakistani entrepreneurs must check the respective websites and discuss
with the representatives of these companies. Because even if they do not
provide funding for your startup, the valuable guidance they will give you is
a must have for any successful entrepreneur.