What Type of “Angels Flee from Tech Start-Ups”?

We see a lot of gloom and doom in the press — both in the US and Australia — about the American economy. There is no disputing that we are in a recession and things may get worse before they get better. When we see a story on the economy that warrants extra scrutiny by ANZA TechNet members — those running innovative start-ups and those who work with them — we post it here.

Yesterday’s story in the New York Times, “Angels Flee from Tech Start-Ups” requires a careful read. Yes, apparently angels who make smaller investments are indeed tightening their wings (or more to the point, the wings of the companies they may have given money to earlier, when times were better). But the professional angels, those who invest as a full-time job rather than as a side project, are still looking to make investments — although, they are applying more scrutiny:

…the best opportunities come during downturns, as companies’ valuations fall significantly. The median valuation of start-ups seeking angel financing fell 25 percent, to $3 million, from the third to the fourth quarter of 2008, according to Angelsoft, a Web service for angel investors and entrepreneurs.

“It’s getting tougher for companies to raise money, but I think the good ones are still getting it done,” said Ron Conway, a prominent professional angel investor in Silicon Valley who has invested in companies including Google and Facebook.

While the line between angel investing and venture capital is getting blurrier, a new trend, called “co-investing” where a few angels band together to make investments is also becoming more common. (Read more)

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