Angel Investing

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.

Angel investing groups provide a considerable power to angel investors, which carries over to entrepreneurs and our startup economy.  I particularly like the powers of portfolio diversity, the right people and size. 

By: Bill Payne, Frontier Angels

The popular press has been hyping crowdfunding since the JOBS Act passed in 2010.  The Huffington Post tells us that the #1 Losers of the JOBS Act is Angel Investors!  AngelList and Kickstarter (and their facilitated companies) are getting considerable attention and Lending Club had a huge IPO in December.  Just how large is this crowdfunding movement in the US?  And, how is it impacting seed stage and early stage investing which has been dominated by angels for the past several decades?

During the past several months, I have been on a mission to quantify the several types of crowdfunding, both in the US and the rest of the world.  We hear crowdfunding exceeded $10 billion worldwide in 2014.  But, how much of that was equity crowdfunding?  In the US, all equity crowdfunding is accredited investor only.  What can we learn from Europe about the quantity of unaccredited investor (public) crowdfunding, compared to all other crowdfunding? 

Sometimes new regulations create the need for market leaders to adjust, so that efficiencies for all can continue.  One such example is a set of rules set by the Securities and Exchange Commission for “generally solicited” offerings.  The rules – or really the market interpretation of the rules – have created so much confusion that the Angel Capital Association decided to develop a certification program for part of the angel market, angels who invest through angel groups, so that angels and entrepreneurs can actually do generally solicited deals.

When Congress passed the JOBS Act in 2012 they allowed for the very first time the ability for entrepreneurs to raise equity capital by advertising rather than through existing relationships in private.  Fearing fraud, Congress also required that companies take “reasonable steps to verify” that investors in these deals are accredited investors and asked the SEC to set the detailed rules.  The SEC’s rules said that copies of income or wealth documents or certifications by accountants and lawyers would work, as would a complicated set of methods that look at the facts and circumstances of the deal.

By: Marianne Hudson, ACA Executive Director

The reality show “Shark Tank” has become one of the most popular programs on television and has helped the wider public hear the term “angel investor” and grasp what they do.  And likely the Sharks have invested in and coached many entrepreneurs, helping those companies become successful.

But I really liked a news article last week - “Dallas Health Startup Investors Are Angels, Not Sharks” - because it distinguished many angel investors from the maneuvering and other drama that happens on the TV show.  In my opinion, the article nailed it:

By: Marianne Hudson, ACA Executive Director

ACA is aimed at providing the best information and resources for our member angels and the startup community. As we begin what we hope is a fantastic year for investors and entrepreneurs alike, we share 32 of the best articles, blogs and books in our field from 2014 to help you build your own libraries.

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