Giving Compass’ Take:
• Jia Wertz, writing for Forbes, discusses how the landscape of angel investing is changing during coronavirus.
• One of the more substantial changes will be that angel investors are going to diversify funds, supporting more minority entrepreneurs, and we may see an influx of innovation due to increased diversity.
Amid the coronavirus outbreak, angels are telling founders to scrutinize their sales forecasts, hiring plans, costs and every other assumption about their business. Upheaval can also create opportunities, as changing markets and obstacles create new challenges to solve and ways for startups to scale their companies.
Some angels will be slightly more hesitant about dumping millions of dollars into companies, at least for the time being, thanks to the COVID-19 crisis.However, seasoned investors actively working with investment groups have made investing a habit. They are not oblivious to concerns around COVID-19, nevertheless, they may look for opportunities to enhance their portfolio as more novice investors are sitting on the sidelines.
Matthew Stafford, an angel investor in the UK, says he’s “carrying on as normal for now.” He has just invested in one company (for the third time) and is beginning due diligence on another. And, entrepreneurs want angels investing. As reported by the Kauffman Foundation, a study conducted by William Kerr and Josh Lerner of Harvard and Antoinette Schoar of MIT, angel investment significantly increases a startup’s success rate. In fact, startups receiving angel investment were 20-25% more likely to survive after four years and 16-19% percent more likely to have grown to 75 employees.
Despite the current funding ecosystem and pandemic, there are sweeping foundational changes that are being made across the angel investment sector, as a whole.
With that said, a current trend taking place is that angel investors are now diversifying funds by investing in a portfolio of companies, and business owners directly, within diverse silos. Investment silos reflect industries such as technology, energy/green tech, consumer products, real estate, and life science and other sectors.
Read the full article about angel investing by Jia Wertz at Forbes.
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