The rise of Angel Investing

Tumblr_mivs61RwKA1qz8375o1_500There are probably a variety of reasons on why there has been such a rise in angel investing over the past decade.  More than likely the affluence across the globe and the desire for those individuals to diversify their assets.  Putting money away in more traditional risk adverse areas is not giving investors the returns that they got in the past.  Also, doesn't everyone want to be part of the start-up nation? 

I am seeing a significant change in the power of the angel investor over the past year.  There are many businesses that I have invested in that are going out to get their next round of financing.  These are businesses with traction, engagement and revenues.  They are not having the easiest time getting VC's to lead the deals.  Why?  Maybe they don't see those businesses are multi-billion dollar businessees, maybe they don't believe the entrepreneur will stick it out to get big, maybe maybe maybe.  I don't know the answer but I am finding we don't necessarily need the lead VC.

What I do know is that I am seeing these entrepreneurs raise $1-2 million from angels, super angels, original investors putting money back in and they can close their round without a lead.  I know because I am leading these deals.  I am not leading them financially but because I am intimately involved with the company and I believe that this next round of financing is the key to the next step in growth, I am putting together the documents and setting a price.  I am pretty sure that these companies will either never have to raise more money or have zero problem raising money at the next turn. 

As more successful entrepreneurs who have cashed out, more people who have a desire to invest in start-ups that they understand and can make an impact in, more women (PLEASE!) get into this game, I believe I will be doing more leads on the Series A and others will to. 

Angel investing is changing and that is giving more companies the ability to grow because angel investors are happy with a $50m exit or even getting paid dividends on a business of that size and VC's are not. 

Comments (Archived):

  1. leeschneider

    You could spin this into a good discussion on asset allocation (and I think you’ve discussed it before), especially as the landscape for angel investing seems to be changing.

  2. William Mougayar

    That’s very insightful, and I’m seeing this as well.Angels doing internal follow-on round was probably un-heard of before. VC’s think differently than Angels.What are you seeing in terms of the pricing valuations for these? I’m suspecting they are lower than a typical A round but higher than the seed rounds, i.e. somewhere in-between?

    1. Gotham Gal

      Somewhere in between and I believe more realistic for everyone involved

  3. Kirsten Lambertsen

    That infographic is quite interesting. The Top Locations For Angel investing surprises me a little, with New England out-doing NY and mid-Atlantic combined.Sounds like finding the right angels is more important than ever.

  4. laurie kalmanson

    Seems realistic and sustainable

  5. Solajj


    1. Solajj

      Sorry, hit the sent button. Do you believe that this is also a winning situation for entrepreneurs in getting better terms, as VCs will not have to compete with angels?

      1. Gotham Gal

        Its good for everyone