Looking for an Angel

Posted by: Amy Barrett on March 30, 2009

As if entrepreneurs needed more reason to conserve cash. On March 30 University of New Hampshire’s Center for Venture Research released its survey on angel investing. The bottom line: angel investors have tightened the purse strings.

According to the survey, total angel investing in 2008 was $19.2 billion, down 26% from 2007. While the total number of deals funded was only down 2.9% to 55,480, the average deal size was slashed 24%. That means small firms relying on angel funds need to stretch their funds further than ever. Particularly hard hit have been firms looking for capital to expand: the survey found those deals have suffered the biggest decline.

All this is hardly surprising. After all, angel investors are wealthy individuals—and those folks have seen their net worth take a hit along with everyone else as the stock market and real estate values nationwide have plummeted.

So what are small firms looking for funding to do? It is critical in the current environment to be conservative in the amount of money you seek and have a plan to share with investors that details how you will manage your cash flow. And with valuations for almost all companies being impacted by the tanking of the stock market, if you can get by without raising additional funds right now, it's not a bad idea.

As for the outlook, Jeffrey Sohl, director of the Center, says the hope is that 2009 investing will be flat with 2008.

"If this economy is bottoming out, that will at least get people thinking there is a light at the end of the tunnel. I don’t think we see another 30% drop in 2009. If we do we will all be in trouble. My gut hope is we are flat this year."

Reader Comments

homer simpson

March 31, 2009 09:14 PM

very insightful. angels are not investing and you should preserve cash. This just in... the sky is blue.

sally

April 1, 2009 10:31 AM

Hardly a surprise I suppose - angel investing was always going to struggle to some degree. What has surprised me is how some start-up web companies have actually enjoyed a good degree of success...sites like Twitter and the parenting site gurgle in particular.

Come Lague

April 1, 2009 05:55 PM

Amy, I agree that funding even from angel investors has gotten much harder to secure and the entrepreneur has to be prepared to do much more with less. Fortunately, aside from raising funding, it is a good time to start a business as the cost of starting up has decreased significantly - everything from office space, equipment, services and even employees - it seems everything is negotiable. Angels are a key source, but so are others such as micro-cap venture capital and strategic investors.

I have a post on my blog about raising a first round from different sources in this environment that may be helpful to your readers.

http://blog.nuevaventures.com/2009/03/18/raising-your-first-round-in-this-environment/

Benedict

April 3, 2009 08:42 AM

I am looking for an Angel Investor to Invest in a very potential opportunity.

R.I. Angel Investor

June 1, 2009 06:00 PM

Amy, while the CVR Report reflects the reality of 2008, I recently attended an Angel Capital Association Conference in Atlanta with over 300 other investors and was surprised to find no shortage of capital for or investors enthusiastic about early stage companies with clearly defined business plans and good prospects for returns. Last week at a New England Regional Angel Conference 6 promising companies made their pitches and plenty of hands were raised with interest in pursuing these investments. In addition to the points you made, entrepreneurs with a clear strategy on how the capital invested will carry them to a potential exit for the investors are viewed more favorably than those with no clue.

Additional resources for your readers can be found on our web site:
http://www.cherrystoneangelgroup.com

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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