Angel investors can give wings to startup companies

It’s hard to know exactly how many angel investors there are in the U.S., and it’s not possible to measure exactly the total angel investment market, as many investments are made as individuals and not subject to disclosure.

What we do know is that angel investors are a mainstay of seed and early stage investment for entrepreneurs and startup companies, especially in the last three years as the number of VC rounds in technology companies has gone from 19,000 to about 10,000, with nearly all the decline occurring in early stage deals.

Now there’s a new report out that presents the results of the largest ever study of the profile and investment behavior of angels.

Commissioned by the Angel Capital Associate and the John Huston Fund for Angel Professionalism, The American Angel is based on a survey of more than 1,600 accredited angel investors in the U.S. It’s informative reading for any Oklahoman with a vested interest in the job creation that comes from successful startup companies, and that includes most of us.

In our industry, we often talk about the virtuous circle in early stage investing. The way I say it is that capital begets capital. This study backs that up — 55 percent of angel investors report that they were previously a founder or CEO of their own startup. And not only that, more than half of angels who have been entrepreneurs become advisors and engaged board members in their portfolio companies. They also invest more money in more deals.

Another finding from the study, in both geography and gender, angels are more diverse than venture capitalists. Two-thirds of the angels in this study were located outside of Boston, New York, and San Francisco.

True, angel investors are mostly men — 75 percent in the report. A contributing factor may be that half the angels in the study came from technology — one more reason it is so important to increase the number of girls and women in STEM (science, technology, engineering, and math).

But, of angels who started investing in the last two years, 30 percent of these are women, and these female angels are upping the focus on investing in startups with women founders.

Angel investors, whether individuals or in groups, are doubly important here in Oklahoma, where venture capital has always been a challenge. Since i2E helped found the group in 2009, SeedStep Angels has been a vital part of our state’s continuum of capital.

With more than 50 accredited investors throughout the state, the group has invested in more than 40 companies. Most of the deals have been i2E-led but the group has also sourced deals from other angel groups in the region, and has attracted investment from out-of-state angels to Oklahoma deals.

SeedStep Angels, whether investing as individuals, through the group, or in syndication with other investors, including strategic partners, such as Mayo Clinic Ventures, is a cornerstone of our statewide entrepreneurial capital strategy.