Angel Investing

Matt Dunbar contributed to this article. He is the co-founder of the South Carolina Angel Network and managing director of the Upstate Carolina Angel Network.

This post originally appeared in Upstate Business Journal.

Risky business

Investing in startups is not for the faint of heart. These businesses are just beginning to develop, and their expenses typically exceed their revenue. In fact, most of them will fail.

But you could find yourself sitting on a goldmine. Case in point: Andy Bechtolsheim, co-founder of Sun Microsystems. He invested about $100,000 in Google just months after founders Larry Page and Sergey Brin created the tech giant in their garage.

Bechtolsheim is now worth about $3 billion. That could be you.

By: Marianne Hudson, ACA Executive Director

Ever wonder how your investment activity and background compares to other angels in the US?  Take The American Angel survey to put in your information and get early access to detailed reports to learn more. 

ACA is partnering with Wharton Entrepreneurship to develop the first ever large dataset of US angel investors to understand who angels are demographically, how they became angel investors, how angels make decisions, and what level and type of investment activity they have.  The project should benefit angels as an asset class as it brings more visibility to angels, supports a stronger early-stage investing environment, and lead to better public policies to support angel investing and innovative startups.  It just might refute a lot of assumptions about angel investors that are incorrect.

While I was doing some research about some of our ACA Summit speakers, I found that several have penned some really interesting pieces.  Angels and entrepreneurs can learn a lot about investing trends and key trends and issues in early stage investing.  Here is an incomplete list of articles to check out:

By A.J. Watson of Fundify, LLC in Austin, TX.  This article originally appeared on Medium.com

Summary: The majority of angel investments are made by investors with no prior industry experience. This is a problem since one of the best indicators of investment success is the investor’s past experience. If you are an angel investor, you should seek to invest in industries where you have experience OR invest alongside investors with prior experience. I believe so strongly in this fact that I’m helping build Fundify.com, a community of industry experts, to help.

By: Marianne Hudson, ACA Executive Director

Are you an accredited angel investor?  We need ten minutes of your time to make a big difference for startup investing.  Please take this confidential survey to help us understand who angel investors are, how they became angels, and what factors influence their investing activity.

Today ACA and Wharton Entrepreneurship announced a partnership to complete the first-ever comprehensive demographic study of angel investors across the U.S.  We believe this study will help identify characteristics of angel investors that have never before been understood. It is critical for entrepreneurs, economic development entities, private market makers, regulators and legislators to understand who angel investors are, in order to drive effective policies to ensure a robust angel investing marketplace and for startups to better access equity capital.

A few weeks ago I provided a comparison of different debt options for startups.  This generated a conversation about debt options for angels and angel groups and whether there were cost-effective ways to tap extra liquidity when needed.  There certainly are a broad range of debt offerings emerging as non-bank financial service providers all look for substantial yields.

One interesting method is the asset backed financing offered by Merrill Lynch/ BOA and Morgan Stanley, among others. Broker/dealers have always had margin accounts where investors could borrow funds to buy stocks or bonds. Using one’s existing exchange listed shares as collateral for startup financing is new, however. (This refers to investors’ stocks, not those of the entrepreneurs.)

By: Villette Nolon and Heather Krejci, Angel Capital Association

Yesterday’s (January 13, 2106) ACA webinar on Investor and Entrepreneur Experiences with Accredited Investing Platforms was a great kickoff to the year. When you watch the recording, you will see why a record number of investors attended.  The accredited platform space is growing exponentially and the rules are changing rapidly.  Highlights of this timely webinar include:

By: Marianne Hudson, ACA Executive Director

Angel group valuations and deal sizes are on a huge growth trajectory according to the HALO Report through the third quarter of 2015.  The report, released today by the Angel Resource Institute at Willamette University, shows the median seed stage valuation at an all-time high of $4 million, a 33 percent increase over 2014.  Some of this is reflected in median round sizes, which more than doubled in one year - $350,000 in Q3 2014 to $725,000 in Q3 2015.

These increases are a really big deal for the angel group community, and I hope that these trends reverse themselves soon.  As ARI’s Vice Chairman of Research Rob Wiltbank said, “This report reinforces the trends that we have been reporting on for the past several quarters, particularly the rise in all round sizes and pre-money valuations. These trends have a significant impact on the way that angels and entrepreneurs plan for the future when raising capital.”

By: Marianne Hudson, ACA Executive Director

Today we send a special congratulations to our sister organization, the Angel Resource Institute, which is now the Angel Resource Institute at Willamette University.  ARI and Willamette University have developed this new joint venture, which should be a good result for ACA members, and angels and entrepreneurs in general.  More information about the joint venture is here.

As ARI Chairman, Michael Cain, said, “There is a natural fit between our two organizations. This partnership allows us to provide better service, enhance our research, and expand our training offering.”

By: Marianne Hudson, ACA Executive Director

This post originally appeared on Forbes.com

A new buzzword in entrepreneurship and equity investing is “inclusiveness.”  It is gaining traction with Venture Capitalists and angels alike, who see that building the diversity of the investor community and the entrepreneurs they invest in is not only a good societal goal, but it is also a way to build great deal flow, make better investment decisions, and grow returns.

What has many investors scratching their heads, though, is: how do we do become more inclusive?  Think about it.  Do you often go outside your social network to bring in co-investors or entrepreneurs who are different from you?  Most likely the answer is no.  You probably stick with the core people you know or are like you.  Research backs this up for most investors.  But “sticking to your knitting” may be limiting your options and leaving some money on the table.

Subscribe