Angels in Decline
Entrepreneurs are not just imaging it. Start-up funding is becoming more scarce. The Center for Venture Research at the University of New Hampshire reports that total angel investment in the first half of 2010 dropped 6.5% from the previous year. More ominously, the number of active angels decreased 11% and their start-up and seed investments comprised only 26% of their deals, compared to 35% in 2009 and 45% in 2008.
A scary trend indeed … considering that angel investors, according to the Kauffman Foundation, have historically provided 90% of early-stage capital to spawn an estimated 30,000 to 50,000 companies per year. The bottom line is that entrepreneurs must get even more creative in tapping alternative sources of high-risk capital, such as grant funding, and use whatever capital they have more efficiently.
Michael P. Kurek, PhD, MBA, Partner, BBC