Trends

By: Marianne Hudson, ACA Executive Director

This post originally appeared on Forbes.com

Entrepreneurial finance has changed more in the last five years than the previous 100. The evolution is coming so quickly these days that it almost feels like the opening credits of the Big Bang Theory television show.  It may be, though, that 2016 speeds up the changes an innovations.  I can’t think of a more exciting era for angel investors.

So what does this all mean and what should we be on the lookout for? As the New Year begins, here are my top themes and questions for how the rapidly evolving world of entrepreneurial finance may impact angel investing:

By: Marianne Hudson, ACA Executive Director

Last Friday, November 13 was an extraordinary day for angel investors across the globe:  during the first ever Global Angel Investing Forum a new book on angel investing was released, with chapters written by investors in 27 countries.  Angels without Borders: Trends and Policies Shaping Angel Investment Worldwide was released during the forum event in Beijing with many of the authors in attendance.

By Krista Tuomi, Associate Professor, American University

European crowdfunding laws and experience provide some background on how crowdfunding might work in the US. One of my earlier blogs dealt with some implications of equity crowdfunding for angels, drawing on the experience of Sweden and the UK. It highlighted some concerns about crowdfunding, particularly the low success rates for complex products and those that require follow on financing.  Despite tax and co-funding sweeteners, repeat investment has been low.  Only 17% of Swedes crowdfunded more than once, slightly lower than the 24% reported by a Scottish Crowdcube survey.  Another oft-mentioned concern is that “naïve” investors will get burned, leading to regulatory backlash.  Recent events in Germany may be a test case of this.

Don’t be surprised to see substantially more companies using Regulation A to sell securities through public solicitation of investors beginning June 19, when the SEC’s new “Regulation A+” rules take effect. Why? The new “Reg A+” provides a new option for “mini-IPOs,” allowing companies to raise up to $50 million from investors in unregistered public offerings. Angels benefit it two ways. This is another opportunity to invest or it can help their portfolio companies secure the funding needed to take them to the next level. 

Seventeen states and the District of Columbia now allow non-accredited investors to invest in startups located in their state. As more states follow suit, it is useful to look at data detailing other countries’ experiences. Both the UK and Sweden have experimented with “equity crowdfunding” for non-accredited investors for a number of years now. Their experiences so far have been interesting, as have the implications for the UK and Swedish angel communities.

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