Tech Startups Finding It Hard To Get Angel Funding
By Anna Johnson on February 6th, 2009As previously reported in Kikabink News, the level of U.S. venture capital (VC) investment dropped significantly in 2008. According to The New York Times, angel funding has also dried up for technology startups.
Unlike VC firms which raise and manage investment funds (i.e. ‘other people’s money’) and invest significant levels of funding in ‘startups’ in their later stages, angel investors tend to invest their own money – usually in the $10,000 to $1 million range – in ‘infant’ or very young startups.
Like VCs, angels typically aim to realise their investment by making a capital gain via the sale of the company to another company or via an initial public offering (IPO). And, like VCs, angels made fewer investments last year… and expect to invest even less this year.
Half of the angel investors surveyed in November by the United States based Angel Capital Association, said that in 2008 they reduced their expected investing, and one-third said the number of deals and dollar amounts they invest would decrease again this year.
It’s not all gloom and doom. Astute angel investors with sufficient cash are viewing the economic recession and low level of general funding as an opportunity to invest in promising companies at relatively low valuations. In other words, they believe there will be opportunities to get more equity for their money.
In general, however, it will be tougher for tech companies to find and raise funding from angels.
