NYT: Angels Flee from Tech Start-Ups
CLAIRE CAIN MILLER and BRAD STONE report in today's New York Times the stories of angels paring back on their investments in tech startups. Rose Ors founder of LA-based TwoSmartDogs tells her story of succeeding in raising an initial $715K angel investment only to fold in the current environment when no further funding was available. "Many angels suffered deep losses when the market plunged last fall."
"A lot of companies view us to be the on-ramp to the venture capital superhighway, and a number of angels are less convinced that they should count on the superhighway this year," said John O. Huston, chairman of the Angel Capital Association.
The real impact will hit Silicon Valley two or three years down the road, said Mark Heesen, president of the National Venture Capital Association. That is when start-ups that receive angel financing today would typically turn to venture capitalists for their first round of institutional investments, known as a Series A.
"If we don't have angels, that hurts us. Where are we going to be getting our next Series A deals if those entrepreneurs aren't out there with the ability to move their idea forward?"
Comments
Frank, in light of the issues raised in this article, has TCA polled its members to learn who and how much they are willing to invest? This information is very important to both the members and the entrepreneurs. It helps members decide which opportunities to pursue and it helps entrepreneurs decide which opportunities to present.
If the amount TCA members are looking to invest this year is known, plus the knowledge of other facts, such as the need for the ability to generate liquidity for investors without the help of VCs, it not only changes how to present an opportunity, it also changes what to present, and changes the business plan of opportunities.
It has been said that there are going to be a lot of VCs at the TCA Fast Pitch competition. If the VCs are not investing it does not help the Angels if the type of opportunities being presented require VC funding in order to reach liquidity. Is this being considered in the application selection process?
TCA has also stated that it will be training the presenters for the competition. Are the new realities of what Angels are looking for considered in the training?
There is only a two-minute time limit. It would benefit the Angels if it is stated that each presenter has already been screened for their ability to reach liquidity without the help of VCs. That way every presenter would not have to waste precious time explaining the same thing over again.
If the selection process this year is the same as previous years where VCs were relied on, TCA will not be able to look back on this year's competition as a success, because it will contain opportunities that its members are not able to take advantage of. Being able to reach liquidity without the help of VCs should be an additional judging category this year.
Posted by: Matthew Artero | February 3, 2009 05:45 PM