Introduction
Did you know that 16 million US citizens are eligible for what’s called accredited investor status. Quick definition, an accredited investor is someone who has accumulated $1 million dollars of net worth or makes $200K/year for 2 years and more.
Think about that staggering number, that’s not just a few folks. So yes the millionaire next door is a reality. Why is this important, as the stock market has taken a dive, there are more investors with smart money looking for diversification to maximize their returns ? The new push in the investment community is for the next generation to see angel/VC investing as one of the primary alternatives.
The Story
Large angel organizations, for example, Kierusu Capital are among those seeing to educate and bring into the fold investors seeking this option utilizing their experience and basically managing the risk and rewards.
In the VC arena, a number of “educational” groups are both educating and launching quarterly new VC firms. The competition is heating up and not unlike the harried activity of the stock market we are now seeing a plethora of new players all looking for their next limited partners (LP) to join the fray.
The next investment cycle will see a broad array of opportunities for the above-average investor. The offering will increase in their range with a combination of some education to deep knowledge and participation. As one example, the largest angel organization, the Angel Capital Association(ACA) with 15,000 members offers significant certification education levels for investors. Then you have multiple organizations such as the VC Lab for those wanting to hone their VC level skill set. On the other side of the coin, you have those investors who fill a selective niche wanting to be silent passive partners.
Which fits your best option will be totally dependent on an array of factors. Do you want a dilution with the large organizations where you may be contributing a very small percentage both fiscally and in terms of involvement however, will ride on their coattails with a well-oiled organization that does excellent due diligence and has deep resources to further their investments ? Or do you choose a smaller operation with less experience that may still have the expertise and offer some assistance to launch a firm to an IPO or M&A ?
The number and both failures and successes between the funding firms may actually be similar. New outliers showing higher IRR’s have been leaning toward very specific team composition and other focused criteria. Curiously those using the investment AI models are still trying to work their magic to determine the best indicators of a successful startup exit, without much real success. It’s Interesting the lack of percentage gains between investment styles when comparing those using AI and those with more conventional approaches.
The Bottom Line
For the investor, it’s still a toss-up between being an individual angel, joining a group or placing their investment into the VC basket of options.
One consideration is that democratization of deal flow is in the works. Previously it was all about who you knew and your network. Thats not to say that a warm introduction is not a great starting point however, COVID and other technological changes have broadened the potential availability for every startup founder. Global reach is no longer difficult when looking for funding. This movement is only going to increase over time making finding and landing the ideal startup/founder more competitive.
Perhaps the real investment message comes down to your needing accurate metrics, coupled with a gut instinct and a deep understanding of the industry space.
With the launch of InvestorMatch.ai founders will have a means of matching with a global array of funding opportunities specifically laser-focused on their field and already knowing that they fit an individual or funders criteria. Funders have the ability to custom-craft very specific criteria that meets their needs.
Less work and making more time available to really make the business connections that bring success, for all parties…….