The new rules of angel investing
Angels still have wings, but they aren’t flying quite so high.
The rules of the game of angel investing have changed in the post-crisis world, Kermit Pattison writes in The New York Times. The average deal size shrank by 31 percent in the first half of this year, according to a recent study by the Center for Venture Research at the University of New Hampshire.
The study shows that total angel investments fell to $9.1 billion in the first half of 2009, a 27 percent decline from the same period last year, but the number of companies getting venture investments actually increased by 6 percent, to 24,500.
Angels are still financing deals, but at lower valuations and with more specific milestones. They have grown more picky and less tolerant of risk. “What you’re seeing now is a real flight to quality,” said David S. Rose, chairman of New York Angels. “If you are the real deal, you can get funded.”
Read more at:
http://dealbook.blogs.nytimes.com/2009/10/29/the-new-rules-of-angel...
The rules of the game of angel investing have changed in the post-crisis world, Kermit Pattison writes in The New York Times. The average deal size shrank by 31 percent in the first half of this year, according to a recent study by the Center for Venture Research at the University of New Hampshire.
The study shows that total angel investments fell to $9.1 billion in the first half of 2009, a 27 percent decline from the same period last year, but the number of companies getting venture investments actually increased by 6 percent, to 24,500.
Angels are still financing deals, but at lower valuations and with more specific milestones. They have grown more picky and less tolerant of risk. “What you’re seeing now is a real flight to quality,” said David S. Rose, chairman of New York Angels. “If you are the real deal, you can get funded.”
Read more at:
http://dealbook.blogs.nytimes.com/2009/10/29/the-new-rules-of-angel...
Views: 2
Replies to This Discussion
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Permalink Reply by JP van der Spuy on -
as you mentioned, being able to pick the quality lower risk investing... almost like siffing through a gem mine for Angel investors. In my opinion, another internet bubble was on the lurke, but the recession beat it to it. VC's was splatting too much money into low quality startups, just riding the social media hype wave and not understanding the fundamentals of what drives/creates/generates traffic, interaction and ultimitely leads to making money at the end of the day.
Lets face it, we're all here to make money... but too much searching for the next facebook or twitter. Time for Online startups to move to SASS mindset and it's happening more than ever before. Good to see the economic slump poke a little hole in the Social Media bubble, it was about time.
Minister of Sci & Tech... how is she getting involved?
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Permalink Reply by Tomas Van den Berckt on
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also interesting from Chris Dixon's blog where he warns about the dangers of getting 'big' VCs in too early:
"As has been widely noted, startups – especially internet-related ones – require far less capital today than they did a decade ago. The VC industry has responded by keeping their funds huge but trying to get options on startups via seed programs. Ultimately the VC industry will be forced to adapt by shrinking their funds, so they can invest in seed deals with the intention of actually making money on those investments, instead of just looking for options on companies in which they can invest “real money.” "
http://www.cdixon.org/?p=1746
and
http://www.cdixon.org/?p=256
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Permalink Reply by Wynand Meyering on -
Hi Justin Stanford,
How does angel investment work? What is the process? Is there any angel investors at Silicon Cape ? I mean do entrepreneurs get together at Silicon Cape and give a live demonstration or presentation of their business - at say a trade show - and talk to angel investors or VCs- that would be nice!?
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Permalink Reply by Eeshaam September on -
Ya what Wynand said, I'm a bootstrapper by nature but you always get to that point where you need to find investors (prefereably not a bank) that can enable you to move to the next level, or if you need a bit of bridging finance.
Where do you find these people? Is there a shark-tank thing where you can present to people who are there to invest and are looking for vehicles. For some of us, there aren't people with ready capital in your immediate family/friends circle.
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Permalink Reply by Justin Stanford on -
You do get Angel networks in other countries where you can make your pitch. Currently there isn't really any such thing in the Silicon Cape, but I think there's a lot of interest to see one established.
Eeshaam September said:Ya what Wynand said, I'm a bootstrapper by nature but you always get to that point where you need to find investors (prefereably not a bank) that can enable you to move to the next level, or if you need a bit of bridging finance.
Where do you find these people? Is there a shark-tank thing where you can present to people who are there to invest and are looking for vehicles. For some of us, there aren't people with ready capital in your immediate family/friends circle.
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Permalink Reply by Justin Arenstein on
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Hi.
I'm using my sabbatical here in the US to attend both Angel network meetings & to participate in a series of VC 'bootcamps' here in Palo Alto, California, to get a feel for how they really work in Silicon Valley.
The striking thing is that it isn't just the Angels who are reeling from the recession. The VCs are on the verge of a major meltdown, with many of the larger cap outfits unable to maintain their returns. Even mid-cap VCs are feeling the pinch, with many here predicting a structural stake-up that may change the way the sector works.
Angel networks aren't quite as despondent. They are aggressively networking with local blue-chip universities to help source new deals & help keep early-stage innovation alive. The universities use IP as a major funding stream, & are eager partners, through programmes such as http://bit.ly/4sA3wl and http://bit.ly/1iNSpX .
They also draw VCs into cross-disciplinary classes as mentors, panellists, and presenters to help entrepreneurs prepare for start-up. Two of many such classes at Stanford are http://bit.ly/3JfXUw and http://bit.ly/2umseF .
The second class actually offers small seed grants ($50,000) to the best social enterprise proposals. Both classes are also allowed to collaborate with innovators outside of the university.
Then, once students leave university and pursue their business concepts, they get to apply for seed funding through angel networks such as http://bit.ly/4lLbiK.
The system isn't uniquely American. Israel kick-started its VC industry by creating a fund just to lure VCs to the country. It then helped build homegrown Angel networks & mid-cap VCs, and today boasts more direct foreign VC investment than economic powerhouses such as Germany.
South Africa, or at least Silicon Cape, could perhaps adopt some of these strategies.
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Oh, and Angel networks such as K4 are keen to establish chapters in South Africa ...
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