Tuesday’s New York Times article “Angels Flee from Tech Start-Ups" written by Claire Cain Miller and Brad Stone, suggests that technology entrepreneurs are having a devil of a time finding angels. But in addition to the expected doom and gloom, the article suggests that there is a ray of sunshine for professional angels who invest more frequently and currently are continuing to invest (though at a slower pace) in the opportunities that reduced company valuations bring. According to Angelsoft, the web service for angel investors and entrepreneurs that ZINO Society uses, the median valuation for start-ups seeking angel funding fell 25% from the 3rd to the 4th quarter of 2008.
Another one of the positive comments in the New York Times article that we have seen to be true at ZINO Society is the willingness of angel investors to agree to participate in co-investment funds. For our upcoming ZINO Life: Life Sciences Investment Forum scheduled for February 24th at the Pan Pacific Hotel, we have found it very easy to put together a small investment fund of $50,000. The investors in the fund are active ZINO Society angel investors who are willing to put a small investment ($5,000 each) into a pooled fund where following the event and shared due diligence, they will choose the “best investment opportunity” of the 10-12 life sciences entrepreneurs that have presented. Of course, the angels have the option to write an additional larger personal check to invest in that same company or any others who present as well. But regardless of the size of the checks that these angels may generally write, several have told me that they also like the idea of making a small investment and spreading their overall risk.
Since many of the venture capital groups are making very few new investments, angels are also gravitating toward more low-cost companies that could become profitable without a large follow-on round of venture financing. During this challenging time, there has also been great enthusiasm among ZINO Society members to provide additional connections, mentoring and referrals to the entrepreneurs whom they meet at our Roundtable investment meetings and forums.
