Angel Investments over the Past Decade

An excellent source of information about angel investments in the U.S. can be found at the website for University of New Hampshire's Peter T. Paul Center for Venture Research. https://paulcollege.unh.edu/research/center-venture-research
Scholars there have been tracking venture funding since the early 1980s, and the most recent ten years of annual and semi-annual reports are available for free, at the school's website. Below is a summary of highs and lows over the past decade. What questions do these statistics raise for your business funding plans?


In 2012, 21% of entrepreneurial ventures presented to individuals and angel groups (beyond a “friends and family” round) found investors willing and able to invest in their businesses. This percentage, referred to as a “yield,” is nearly as high as the peak 23% attained in 2001 and 2007, and far higher than the historic average of 10 – 15%. Interpretations for this influx of investment dollars vary greatly and sometimes combine such reasons as investor optimism, fleeing the public equity markets, and a bubble in the making.


In addition to the increased percentage of ventures funded, both the number of entrepreneurial ventures AND the number of angel investors have peaked for the past decade, at 67,030 ventures funded by 268,160 angels in 2012, and 66,230 ventures funded by a whopping 318,480 angels in 2011. These numbers far outstrip the paltry 36,000 ventures funded by 200,000 angels during the “boom years,” such as (these numbers in) 2001.


However, these investment dollars have shifted away from seed stage companies to those with more of a track record. In 2012, only 35% of angel dollars funded seed stage companies, and 33% early stage, far lower than 2005's 55% of investment for seed stage companies and 2010's 67% to early stage companies. A corollary to this shift is the nearly steady, year by year decline over the decade in the percentage of angel investment as the first investor, from a high of 70% in 2005 to 52% in 2012. In other words, although more angels invested in more companies in 2011 and 2012 than earlier, they have become more conservative, by targeting more developed companies, and preferring to follow other investors rather than lead the charge.


What about exits?
The worst year for bankruptcies was 2009, when 40% of angel funded deals went belly up. More commonly, the percentage is in the 20-27% range, highlighting the risk that angels take when they invest in young companies – a point that entrepreneurs should bear in mind when asking for other people's money. In other words, just about the same percentage of companies being funded by angels (about 1 in 5) will, once funded, fail. So entrepreneurs should expect attentive due diligence by potential investors, which may well take longer than they wish.


The most frequent positive exit by angels was in the form of mergers and acquisitions. The highest percentage was 70 in 2008. Other years, mergers and acquisitions accounted for 50 to 65% of the exits. For this reason, entrepreneurs are wise to surround themselves with industry knowledgeable management and directors, whose connections may be crucial to ensuring a profitable merger or acquisition.


IPOs don't happen for small companies anymore, and none have been recorded for the past few years.



The industry sectors most popular with angel investors remain remarkably consistent. The most frequent two sectors for the past ten years have been software and healthcare. The following industries shift back and forth for the next few places in the list: industrial, energy, retail, bio/life science, IT, and media. Financial services and telecom have both fallen out of favor in the past five years. This does not mean that entrepreneurial ventures outside these industries don't get funded, but it may suggest that other management teams need to explain their value proposition carefully to an audience that doesn't encounter as many deals in that sector.


Like any set of statistics, these data leave plenty of room for interpretation, but a few points jump out to me.

1. Entrepreneurs have a lot of competition for angel ears, as well as angel dollars. So be prepared to stand out of the crowd by being thoroughly prepared for investor scrutiny.
   
   
2. The percentage of entrepreneurial ventures successfully securing funding is close to beating the decade's high. This could mean that it is easier to get funding now than before, or it could mean that a bubble is forming and the gravy train will derail shortly. Entrepreneurs should develop contingency plans if the funding climate shifts during a protracted period of due diligence and should never, ever spend money anticipated but not yet in hand.
   
   
3. Seed funding is harder to come by. So entrepreneurs need to be able to self fund for a longer period than in the past or need to develop some revenue stream early, in order to (a) stay afloat and (b) attract investors who want to see a functioning business, not just a business plan. Besides, being able to generate some payments increases the range of potential funding sources, such as revenue based lenders (like factoring firms).
   

4. Because the majority of investor exits are through M&As, entrepreneurs need to know their competitors, suppliers, and customer base very well. Any of these could be your partners, buyers, or bosses in the future.
   
   
   To be routed to the website of the University of New Hampshire, click here.
   

Spot Liars and Frauds Before You Hire (or Date) Them

For ten years, my favorite job as Compliance Officer of an Investment Bank was spotting liars. This meant figuring out which finance professionals NOT to hire because they embellished their qualifications, which potential clients NOT to accept because they had obfuscated weaknesses in their companies, and which alleged investors NOT to believe because they would never pony up a dime. On the theory of “garbage in, garbage out,” I figured that anyone who lied to me up front about something I easily discovered was likely to lie later on about something important I might not detect. With 7 billion people on the planet, I endeavored to avoid those mendacious people and work with honest ones.


What appalls me is the frequency with which I have encountered grown-ups who lie, easily, smoothly, and frequently to get something they want, based on merits they lack. Obviously, their blarney must work on some of the people some of the time. I'm also dismayed by the number of companies and individuals who don't do background checks before they hire or recommend people, or who part with their money or let someone into their homes or lives without asking a few logical questions first. So shame on both parties!


The following article shares easy, cheap or free research that anyone can do in less than an hour and examples of falsehoods I have uncovered in the areas of education, business experience, lawsuits, and crimes.  Protect yourself with a healthy dose of skepticism, a few minutes on the Internet, and some judicious questions.

Tiny Kitchen? Sumptuous Brunches in 30 Minutes

If breakfast is the most important meal of the day, then what is brunch but a celebration of that importance? You don't gobble up brunch – you savor it. The entrees tend to be special treat versions of comfort foods. But many people don't cook such brunches for themselves. Why not?

Even in my tiny home (two rooms totaling 750 sq ft), with few pots and pans and little counter space for preparation and assembly, this grumpy, not-a-morning person routinely churns out the following breakfast egg entrees for family and occasional friends within 30 minutes (after my coffee) such as:

• Fried eggs on tomato basil bruschetta,
  
• Huevos rancheros (eggs over refried beans and cheese, on tortillas topped with salsa)
  
• Scrambled eggs over crab, salmon or pike cakes, topped with a lemon aioli
  
• A frittata of roasted potatoes with sausage, peppers, onions, cheese and eggs
  
• Eggs on creamy spinach sprinkled with bacon and chives
  
• Cheesy potato slices topped with smoked salmon and an egg
  

My go-to secret for quick, interesting breakfasts? Appetizers. You might not think of those two words in the same context, but I serve delicious and innovative morning meals throughout the week by utilizing prior hors d'oevres (and other foods cooked for prior meals). And with breakfasts as hearty as these, I tend to cook only two meals a day, which usually are – guess what – brunch (a late breakfast) and hearty appetizers (another sort of celebratory meal) for an early dinner. (I've never understood how people can sleep on a full stomach after a heavy, late meal)

Meditation While Weeding with the Chickens

Many harried people I know seem to answer requests and invitations with a breathless, “I can't; I have too much to do.” But have you ever noticed that the most productive people you know are often both busier and calmer than the rest of us? I think this is because they are often visionary – they can picture a project completed – and, in an organized, deliberate manner, they get things done.




By contrast, the first group may get overwhelmed by the immensity of an endeavor. I often fit in this group. We don't know where to start so we don't, or we start and then give up, leaving behind the detritus of several abandoned hobbies and projects. The other population is more dogged. They aren't deterred by the immensity of an effort. So they start. They slog on through, like untwisting and unknotting a ball of twine that others might toss aside in frustration.

Alaska Float Plane Follies

We finally bought a small, ancient float/ski plane to help us get to and from our off-road home. What a difference this has made to my sense of isolation and worry about emergency medical care. We aren't at the “honey, we're out of milk” stage, but we can much more easily and spontaneously fly half hour to a nearby town when we are out of basics or to a lovely lake for a picnic or to one of the fun festivals around Alaska.

Our excellent carpenter leaves our dock

Getting in and out of the plane itself, though, is not so easy. The Piper PA-20 has two doors, but the one on the port side is behind the front seats, for cargo access. The pilot and passenger enter through the door on the starboard side. Since my husband prefers to fly from the port seat (a plane has two pairs of steering wheels, rudder pedals, etc), he enters first. Once he is ready to go, I untie the float ropes from the dock cleats, step onto the float with one leg while pushing us away from the dock with the other. Then, I climb as quickly as I can up into my seat, since he doesn't start the propeller until I am inside and meanwhile, we are drifting with the wind.




At some locations, and virtually all summer at our lake because of wind direction, the access door is on the side AWAY from the dock. To get in, we have to walk across a tight wire stretched between the fronts of the two floats, grabbing onto the cowling and nose cone (but not the propeller) for balance. Once on the other side, we walk along the float, swing under the two angled wing struts and THEN climb up into the plane. I have to do this AFTER I have kicked the plane away from the dock, while it is floating toward wherever, and as my husband is invariably yelling, “Hurry up! The wind is pushing us the wrong direction!”