PRIVATE EQUITY

FINANCING HIGH-GROWTH FIRMS : THE ROLE OF ANGEL INVESTORS.

 

 

 

 

 

WHY IS ANGEL INVESTING IMPORTANT ?

1. ANGEL INVESTMENT IS THE MOST SIGNIFICANT SOURCE OF OUTSIDE EQUITY FOR SEED AND EARLY STAGE START-UPS.

 

 

 

 

 

 

  • BANKS ARE EVEN MORE RELUCTANT THAN IN THE PAST TO FUND YOUNG FIRMS DUE TO THEIR PERCEIVED RISKINESS AND LACK OF COLLATERAL.
  • VENTURE CAPITAL FIRMS ARE, FOR THE MOST PART, FOCUSED ON LATER STAGE START-UPS AND THEREFORE HAVE LEFT A SIGNIFICANT FUNDING GAP AT THE SEED AND EARLY STAGE.
  • ANGEL INVESTORS ARE INCREASINGLY FORMING GROUPS AND SYNDICATES TO POOL FUNDS TO FILL THIS FUNDING GAP.

2. ANGEL INVESTORS, WHO ARE OFTEN EXPERIENCED ENTREPRENEURS OR BUSINESS PEOPLE, INVEST IN INNOVATION MORE BROADLY THAN VENTURE CAPITAL FIRMS.

 

 

 

 

 

  • ANGELS INVEST IN A WIDER RANGE OF SECTORS AND GEOGRAPHIES ( MOST ANGELS INVEST LOCALLY, NOT JUST IN HIGH TECH HUBS WHERE VCs TEND TO CONCENTRATE).
  • ANGELS INVEST NOT ONLY FOR A POTENTIAL FINANCIAL RETURN, BUT IN MANY CASES, TO GIVE BACK BY HELPING OTHER ENTREPRENEURS. ALSO, BEING FORMER ENTREPRENEURS THEMSELVES, IT IS AN ACTIVITY THEY ENJOY.
  • ANGELS TEND TO BE LESS SENSITIVE TO MARKET CYCLES THAN BANKS OR VCs.

3. ANGEL INVESTING IS BECOMING MORE VISIBLE, FORMALISED AND PROFESSIONAL.

 

 

  • THE FORMATION OF GROUPS AND NETWORKS HAS HELPED ENTREPRENEURS AND ANGEL INVESTORS CONNECT WITH EACH OTHER, ADDRESSING SOME OF THE INFORMATION ASYMMETRIES IN THE SEED AND EARLY STAGE FINANCING MARKET.
  • AT THE SAME TIME, ANGEL INVESTING DIFFERS ACROSS COUNTRIES AND REGIONS IN TERMS OF BOTH ACTIVITY LEVEL AND FORM. IN SOME COUNTRIES, ANGELS ORGANISE IN GROUPS AND IN OTHERS THROUGH NETWORKS AND EACH OF THESE ALSO CAN TAKE SEVERAL FORMS.

OUR COMMENTS :

WHEN IT COMES TO FORECASTING, THERE ARE ONLY TWO KINDS OF BUSINESS PEOPLE, THOSE WHO DON’T KNOW AND THOSE WHO DON’T KNOW THAT THEY DON’T KNOW…

PHLDUCX