[Posted on February 22, 2008 - 2:15 PM]
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A growing number of angel investors are expected to find more investment
opportunities, but fewer exits, in 2008, according to a new report from
the Angel Capital Association. The organization, a peer-to-peer
affiliation of independent investment groups that funnel individual
wealth into startup companies, also asserts that angel investment is somewhat insulated from macroeconomic trends and can
thrive during economic downturns.ACA director John May says the group surveyed its roughly 150 members, among the roughly 275 angel groups currently investing high-net-worth individuals' money. The field is growing, as more individuals accumulate wealth and startup costs have fallen significantly over the past decade.
May points out that more than half of ACA's members are less than five years old, and expect a fairly long investment cycle -- so much that the number of available investment opportunities and anticipated exits need not go hand-in-hand. As such, angels aren't as vulnerable to multiquarter recessions or similar macro trends, and often see better opportunities when markets struggle and valuations fall, according to May.
Only 8% of the groups surveyed use pooled, committed capital; the remainder use a model in which individuals opt in for deals, then perform common due diligence. And while market fluctuations can surely affect those individuals' decisions, May says his group serves "a niche of a niche" that isn't deeply affected by mood swings like those found on Wall Street lately. "When the Nasdaq was at 5,000," he says, "we saw more risk behavior -- not less." - Paul Bonanos
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