By Scott Meacham
Copyright © 2015 The Oklahoma Publishing Co.
Angel investors are those critical investors who invest at the very earliest stage in start-ups. Recently, Marianne Hudson, executive director of the Angel Capital Association (ACA), came to Oklahoma to share the ACA’s perspective on current trends in angel investing.
SeedStep Angels, which is managed by i2E, is a member of the ACA, the world’s largest association of accredited angel investors, having more than 13,000 investors in every state and five Canadian provinces. The ACA best practices and education helped get SeedStep Angels started, and now SeedStep has active angel members across Oklahoma.
Angel investors provide 90 percent of the outside equity for start-ups. In 2013, angels invested $24.8 billion in 71,000 deals. Venture capitalists invested $29.6 billion in 4,050 deals — the majority of which were later stage. Clearly, it is the angel investors that are providing the majority of funding for startups.
So why do angels join angel groups? They gain access to deal flow and see more and higher quality deals. There’s a lot of work that goes into deal review and due diligence. As Marianne puts it, dividing up that work eases the pain.
Pick and choose
Angels get to pick and choose the deals they like. They learn about investing in this potentially high risk/high reward sector from other experienced angels.
Angels have a desire to stay involved, give back, and they really have an affection for entrepreneurs — many angels being successful entrepreneurs themselves. And there’s a camaraderie, too, of like-minded individuals doing deals.
The bottom line is that angel investors are very good for entrepreneurs and for states that prioritize an innovation economy as the path to economic growth.
In 2014, 30 percent of ACA angel groups had a positive exit — meaning that one or more of the companies they had invested in either went public or was acquired.
In 2014, the Great Plains states delivered just over 4 percent of the country’s angel deals. In contrast, the Southwest had 6.6 percent of the deals and Texas had 11.4 percent, while the Great Lakes region came in at a surprising 13 percent.
These statistics demonstrate the need for our region to step our start-up activities.
There are many, many success stories of angel-driven dollars and deals in the middle of the country. Increasingly, angel groups (30 percent of ACA members) will evaluate deals with no geographic restrictions. Entrepreneurs are showing a willingness to start their companies where ever they find support and early stage funding.
Oklahoma is great place to start a new company. Part of our state strategy should be to leverage our attractive cost of living, our skilled work force, and the energy of SeedStep Angels to attract entrepreneurs to start up their businesses in Oklahoma and to encourage participation from outside angel groups in our deals.
Scott Meacham is president and CEO of i2E Inc., a nonprofit corporation that mentors many of the state’s technology-based startup companies. i2E receives state appropriations from the Oklahoma Center for the Advancement of Science and Technology. Contact Meacham at i2E_Comments@i2E.org.
Did you know? In June, U.S. early-stage deal activity toped 450 deals for only the second time in over two years.
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