There’s good news for entrepreneurs on the lookout for startup or early-stage financing right now: Angel investors are feeling more optimistic than they have in years, and money is starting to flow.
Last year, angel investor groups sank 23 percent more dollars into startups than a year earlier, and the number of businesses backed jumped 34 percent, according to a first-ever survey of U.S. angel investor group activity. What’s more, 97 percent of angel groups say they’re continuing to invest in seed and early-stage businesses this year, that they have more plans to co-invest with other types of investors, and that opportunities for profitable “exits” (via mergers or acquisitions) are increasing.
“Not only are angel groups funding early-stage ventures at an increased level, but many are also reserving follow-on funding for their portfolio companies to help them grow,” says John May, chairman of the Angel Capital Association, a professional alliance of angel groups in the United States and Canada that represents more than 5,000 active angel investors.
The number of angel groups operating in the U.S. and Canada has increased about 67 percent over the past six years, according to ACA. So what types and stages of business are most interesting to angel investor groups right now?
By a considerable margin, angel groups say they prefer to invest in seed and startup companies (80 percent) and early-stage firms (85 percent), over expansion (22 percent) and later-stage companies (5 percent).
Angel group leaders expressed an interest in a wide variety of industries, but these ten were particular standouts: medical devices, software, biotechnology, business products/services, electronics and instrumentation, health care, industrial/energy, IT services, networking and equipment, and telecommunications.
But if your business is in another industry, don’t worry. Most angel groups have interests and expertise among their member-investors covering a broad spectrum of business types. However, most do prefer to invest in companies near them; about half say that should be within a four-hour drive.
These resources can help plug you into the investment capital you need:
• The Angel Capital Association, at www.angelcapitalassociation.org, is an excellent source of information.
• The Work.com Guide to Angel Investors is a quick-read “how-to”; visit www.work.com and enter “angel investors” in the search box.
• For small-sum, tech startup backing, check out a group called Y Combinator, at www.ycombinator.com.
Daniel Kehrer can be reached at editor@business.com.
