I attended the Angel Connect breakfast meet today (on the sidelines of the TIE Summit Mumbai), organised by Alok Mittal and team from Cannan Partners (VC guys); where the lead topic of discussion seemed to be "why is their such a drought of Angel Investing in India? The big parallel drawn was with the US, where VC investments last year were apparently $30B and Angel investments were a close 2nd at $26B; and apparently in India, Angel investments are way behind VC investments.
Most people at the meet agreed that Angel Investments are chiefly in businesses that VCs are likely to fund once the model is proven. This is logical because Angels cannot write large enough cheques to carry a business all the way to sale or IPO, thus will need VCs to step in with big cheques after 4 - 8 quarters. Thus one limitation as to what businesses are being funded by Angels is the kind of sectors VC find hot.
Another agreement seemed to be that, since Angels need to spend lots of time on with their investee startup, they like the business to be local; thus Angel activity in India is chiefly restricted to business HQ in Delhi, Bombay and Bangalore.
Surprisingly some Angels differed on the fact that only business that have an exit potential need to be funded by Angel Capital. Some Angels at the meet said they fund businesses that can give them healthy dividends ! I found that quite strange and didn't make sense to me.
From my own experience, Angel investing is growing by leaps and bounds in India, at over 300% a year, with more and more projects Angel invested each year. At Indian Angel Network, since 2006 we have done 19 investments, with 10 of those coming in 2009! At this rate in about 8 years we should see Angel investments reach a very sizeable number, possibly equaling VC investments.