Saturday, October 31, 2009

Angel Investing

Playing catch-up today in the office, and ran across this interesting article and resources on angel investing from the October 28 NY Times. From the article: Small-Business Guide - Small-Business Guide - The New Rules of Angel Investing -

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.”

What’s the real deal? Angels are looking for companies with more modest capital requirements. They seek companies that bootstrap, beat quicker paths to profitability and have proven management teams. “The most striking change is angel investors are way more discerning about where they deploy their capital,” said Bruce Cerullo, a Boston-based angel investor who specializes in health care. “Now groups like ours are looking for more fully baked ideas that are much closer to revenue generation.”

I think the other reason that angels are able to be pickier about deals, is that there are so many other options for them to invest. For one, think of all the distressed investments that are available; the investment advisors for many of these angels are presenting other less risky and potentially more lucrative options for their available capital. That said, angels are investing, but as entrepreneurs, we need to make a clearer and more compelling case as to why they should invest their money with us versus the other options (think real estate) out there.

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