On November 7th, Dealum hosted the Angel Investing Health Check, a webinar that gathered global experts to discuss the state of angel investing. John Harbison (Angel Capital Association, USA), Alessandro Craglia (European Business Angels Network, Belgium), and Ruben Osipyan (Science and Technology Angels Network, Armenia) shared their insights on trends, challenges, and opportunities in this dynamic space. The session combined data and various perspectives to offer a comprehensive picture of the evolving angel investment ecosystem.
The Global Angel Ecosystem: A Snapshot
Angel investing has become a critical driver of innovation globally, bridging the gap between early-stage funding and venture capital. On the Dealum platform, only about 2% of applicants end up in investors' portfolios and it takes a median of 37 days (on average, 66 days) for a company to get the investment from angels. These numbers reflect both the competitiveness of the funding landscape and the efficiency gains in recent years.
"Angel groups are the critical bridge between friends-and-family funding and venture capital," said John Harbison during the webinar.
However, 2023 brought challenges. The U.S. market experienced a 33% decline in angel funding, while Europe saw a 13% drop in total invested capital and a 24% decrease in deal count compared to 2022. Despite these setbacks, optimism for the future remains as markets adapt to global economic pressures.
Regional Insights
John Harbison highlighted the resilience of the U.S. market, even during challenging times. He noted that syndication has become essential, with most Tech Coast Angels (TCA) deals involving partnerships with other angel groups or funding sources. Syndication, particularly in the U.S., has become a cornerstone of successful investing. "Even a large group such as TCA rarely fills an entire round, so syndication is important," Harbison said. "Syndication allows us to share deals and bring in other groups, which is critical to the overall ecosystem."
In Europe, Alessandro Craglia described a fragmented ecosystem yet brimming with potential. He shared that 25% of all European angel investments occur in the UK, with France and Germany making up another significant share. However, smaller countries like Estonia and Finland are leading in investment-to-GDP ratios. Craglia noted, "When it comes to GDP-to-angel investment ratios, certain countries outperform others, such as Estonia and Denmark, and Finland, which invest a large proportion of their capital relative to GDP."
Armenia, as Ruben Osipyan explained, is a fast-growing ecosystem with unique strengths. "Armenia is supercharged with our diaspora, and as the nation is small, the connection between the top influencers and the ecosystem players is very close," he said. Armenia’s tech sector employs over 60,000 professionals, nearly half of whom are women, a notable example of gender diversity in the industry. However, challenges remain, including the overvaluation of startups and a limited pipeline of investable companies. "We lack people who have exited and can give back to the ecosystem, sharing their experience, mentoring, and also investing in the startups," Osipyan emphasized.
What Drives Success in Angel Investing?
A recurring theme throughout the webinar was the importance of collaboration and engagement.
Craglia emphasized the role of cross-border collaboration in Europe. "It is a large market; however, there are issues at a later stage," he said. "Once startups reach a certain level and need higher levels of funding, that is generally when we see them going to the U.S. or to China to receive more money effectively."
For Osipyan, engagement with the Armenian diaspora has been transformative. "The Armenian diaspora is very successful in Silicon Valley, and many of them are establishing support organizations focused on transforming Armenia into one of the innovation hubs," he explained. However, he also cautioned against a purely charitable mindset: "Doing charity as an angel is a sin. Instead of doing charity, angels need to be really, really focused on a capitalistic approach in identifying the teams they want to invest in."
Another critical factor is portfolio diversification. Harbison emphasized: "In every portfolio I've seen, 10% of the companies produce 90% of the returns." This is also evident in TCA's investments where 70% of the companies failed to earn back the capital that was given to them, but the top 3% brought 77% of the return. Harbison presented data showing that angels need to invest in at least 15 companies to achieve consistent returns. He explained, "If you did five investments, you’d only have a 26% chance of getting to the average return, and that increases with diversification."
The Future of Angel Investing: Opportunities and Challenges
Despite the current challenges, the panellists expressed optimism for the future. Harbison pointed out that market downturns often create opportunities for savvy investors. "If you find a good company, it's good to invest both during the up cycle or the down cycle. Don't focus on one versus the other," he said.
Craglia highlighted Europe’s growing commitment to supporting female founders, with an increasing number of women-led startups securing funding. "The proportion of startups that have female founders has increased, and the amount of funding to them has also increased," he said. "Studies have found that startups which have a mixed board and mixed gender of the founders, do better."
For Osipyan, the next step for Armenia is diversifying its startup ecosystem. "We need to explore the opportunities of doing some cross-border collaborative projects with the founders from the region," he said. "Co-founder matching, for example, can create extra synergies by using the strong skills that founders in different countries have."
A Data-Driven Path Forward
The Angel Investing Health Check webinar showed the power of data and collaboration in shaping the future of angel investing. Whether through syndication, cross-border partnerships, or diaspora engagement, the strategies discussed offer a roadmap for navigating the complexities of early-stage investing.
As Harbison aptly summarized: "It’s a high-risk, high-return area. But if you have a sufficiently diversified portfolio, there’s the potential for very high returns."
Whether you’re an experienced angel or just starting out, these insights provide a valuable foundation for success.
You can watch the full recording of the webinar on our LinkedIn page.
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