It has never been a better time to be an angel investor

Paul Geyer – one of the most successful and respected Vancouver-based angels – won the AngelForumBC Angel Investor of the Year” award yesterday and sent a very simple message in his acceptance speech: “This is a fantastic time to be an angel investor”. Paul (who focuses most of his investments in the medical device area) cited the currently low valuations at the tail end of the recession at the major reason. While low valuations are not really the case anymore in Consumer Internet (some might even see early signs of a bubble again), there are more fundamental changes going on in this sector that makes it a great time to be an angel investor:

  • As the cost of building software has come down dramatically over the past decade start-ups require significantly less capital to start and build a business. This development is most beneficial for angels and other early-stage investors: it means a quicker path to break-even / and or an exit, less dilution for the early investors of a company, and less risk as more investments can be done with a given budget. All in all, it means better returns for angel investors.
  • In the same way that the founder’s ability to raise capital has lost in importance given the lower capital needs, we have seen a wave of (mostly technical) first time entrepreneurs start companies. Most of these entrepreneurs are hungry for advice from mentors helping them to navigate the difficult waters of starting a company. Angel investors that have seen, done that can create enormous value in such a situation – given their operating experience they usually understand the needs of start-ups very well.
  • Last but not least, access to deal flow and the ability to co-invest with other angels has improved dramatically over the past years. This first happened locally through events like the AngelForum and has now moved to a national level with AngelList as the prime example for efficiently matching entrepreneurs and angels.

Just last week, Dorsey & Whitney – a Silicon Valley law firm that specializes in advising start-ups – published a new survey showing that start-ups are increasingly turning to angels, not just for their initial rounds of funding but for subsequent rounds as well. So I fully agree with Paul: it has never been a better time to be an angel investor – let’s go!

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