Angels Shift Evaluation Criteria but Still Investing During Tough Times
March 15, 2009
ShareThisInvestors Placing More Emphasis on Hands-On Mentoring with Portfolio Companies
The American Capital Association recently reported that angel investments in 2008 decreased and it is anticipated they will decrease further in 2009. However, there were angel groups who increased their investments in 2008 and anticipate making new investments in 2009 as opportunities arise from difficult times.
“I am certain that today there is a lot of angel capital available to fund promising ventures,” says John Huston, founder of Ohio TechAngels and chair of the Angel Capital Association.
What may be changing though is the criteria used to evaluate a deal. “At Ohio TechAngels we ask every entrepreneur to explain how their solution is more needed in a prolonged recession,” says Huston. “Why is it more essential now than a couple of years ago?”
Many angel investors have lived through a number of economic downturns including the bursting of the dot com bubble. In response to this, they are working more closely with their existing portfolio companies, providing mentoring and hands-on support in helping entrepreneurs reduce expenses, increase revenues and conserve cash.
“Those companies that can stay standing through this downturn because they have achieved cash flow breakeven – those who make it through this storm will be more valuable than ever,” says Huston.
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