MoreLIP: There's Something about Angels
05/22/2009 — George Lipper, Development Capital Networks
This week the Angel Capital Association released statistics on angel group activity for 2008. While the number of investments dropped slightly from the previous year, they roughly parallel those of the National Venture Capital Association for the full year.
While venture capital statistics drew a lot of ink as a consequence of the sharp fourth quarter drop, angels did not attract such attention because the ACA data is for the full year, rather than by quarter; and thus not directly comparable. Yet it is welcoming news to see angels remaining so active and apparently optimistic in a slowing economy. They have become the entrepreneurs' first best hope for seed and startup funding.
Yet as valuable as angel investing seems to be, it will take several more years to measure their long term impact on the capital markets. Angel groups are, for the most part, pre-puberty. Most were formed during the current decade, as nearly half the states jumped into angel investing incentives as a means of enhancing economic growth.
That's all to the good. But the statistics do not yet tell us if angel investment performance over the long term will be a lasting trend. The time required to determine if angel groups will become long term players in the capital markets awaits maturity of their investments, results and investor satisfaction that it works for them.
Except for a few well established groups and funds that were in place well before state government discovered their potential, we have yet to confirm that angels will ring the cash register often enough to remain a primary source of capital for seed and startup stage entrepreneurial capital.
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