Are angels still investing in companies?

Are angels still investing in companies? Good question.

Here are some numbers from 2008…

Over 16,100 angels invested $1.69 billion into 5,000 early stage companies. That makes these wealthy individuals the single largest source of start-up capital according to a survey conducted by the Australian Association of Angel Investors.

No doubt the numbers are down for 2009 but it is a source of funding worth chasing after. The VC market is very quiet so angels are your best bet right now.

Angel money comes from their investment portfolios, and, just like everyone else, they have been hammered. However, even in a tough economy, deals can still be done, but don’t expect them to happen in a hurry. There are a lot of nervous investors out there and angels are no exception.

As well as losing money on their existing investment portfolios many may have funds tied up in other start-ups. Right now, they may well be working hard to keep those companies afloat to protect their existing equity stake.

And angels tend to get more involved in the running of their investee companies than VCs, so even having the time to look at other investment opportunities may be a problem right now.

If you are looking for funds, be prepared for a buyer’s market. That means requests for more control as well as lower valuations. However, angels know better than to do a deal where there is very little incentive for the entrepreneur to drive the business forward.

But a balance between angel returns and entrepreneur incentives will be more difficult to achieve in these times. The challenge is getting those reluctant angels on your team – whether you have never landed an investment or you are going back for a second round.

There is an active angel network in Australia. Here is the link to the Association of Angel Investors website.

Here are some tips to help you make and keep contact with investors:

• Have your elevator pitch ready including a ‘call to action’.
• Work out what you’ll do to stay in touch once you’ve made a good contact but don’t pester investors.
• Find out when both AVCAL (Australian Venture Capital Association) and your state angel groups are having their functions and get along to as many as you can.
• Contact other entrepreneurs who have investors and seek their advice and introductions to investors.
• Get on the mailing list of the relevant state government department for invitations to any functions that involve equity investment.
• Contact the incubators in your state to find out if they are holding any functions. Many incubators are linked to a range of investors.

That will give you a good start. I know this takes time and I know you can’t afford to spend all your time chasing investors. That’s a judgement call you’ll need to make.

One thing is for sure… If you don’t build relationships with a few investors you’ll never get any money.

Until next time.

Gail Geronimos, is the founder of Achaeus, which helps entrepreneurs develop their businesses and she has just started a new site https://pitchingtoinvestors.com/ with tools and tips about how to develop killer presentations to raise capital.

To read more Gail Geronimos blogs, click here.