Monday, July 12, 2010

Future of angel investment

Last week the VANTEC angel investors relaxed over wine and hors d’oeuvres at the annual year-end Appreciation Reception at the Jericho Tennis Club for the sponsors and volunteers. We had seen presentations from 67 companies – prescreened from over three times that number – over a period of 11 months at the VANTEC meetings. If earlier reported investment patterns persist, then almost half of these companies will get funding through the VANTEC network; and some of these companies will eventually secure next-stage growth capital from venture capital firms.

All present agreed that the fund raising environment for entrepreneurs is very tough. While it’s generally acknowledged that the angel investment community in the province of British Columbia certainly stepped in to provide much needed capital for startups, the sources of capital are harder to come by – particularly for the beleaguered venture capital firms who have had a rough go of fund raising recently. Many wondered whether the local angel community can continue their level of capital infusion to the local startups. A lively discussion ensued about the future of investments amongst our local angels (in no particular order):

• NO EXITS! Lack of exits by current portfolio companies hamper the efforts of angel investors to “re-circulate” their investment winnings.

• No liquidity – Related to exits, this speaks more to the ability of the portfolio companies to pay back their earlier investors. One angel investor lamented that some of his investments are in their second decade and he has no way of liquidating his initial investments.

• Shrinking personal portfolios – Angel investors invest their personal monies in startups; unlike venture capital firms or other sources of institutional funding. This problem of smaller investment portfolios was particularly acute just after the economic meltdown in late 2008.

• Next generation of angel investors? Many of the VANTEC angels have been investing/mentoring local startups for a couple of decades.

What do you think? Please let me know your opinions about the future of angel investment in BC - and in general.


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