I started investing in startups in April of 2021, like a lot of other angels. But looking around 3 years later, many of them seem to be gone.
I found an interesting data set from Jason Saltzman at Live Data Technologies. It shows a huge slowdown in new angels.
The data shows how many new people put “Angel Investor” on their LinkedIn profile in a given month.
Fewer angels are coming into the market. And my guess is that if fewer people are becoming angels, many existing angels have stopped investing.
Both stem from the same cause: people are scared.
“If They Won’t Invest In This…”
I’m definitely seeing a pullback among angels in the deals I do.
I did a deal last summer in an amazing startup with a couple million in revenue growing fast. The valuation was around $15 million.
You could have never done this deal in 2021. It might have been priced at $100 million or even $200 million — if you could get an allocation at all.
But in 2023, the allocation for angels filled only about halfway!
It didn’t make sense to me. If you don’t want to invest in this, what would you invest in?
The only explanation I can think of: angels are exiting the market.
Many syndicates I’ve spoken to have slowed their dealmaking considerably. They know that the appetite just isn’t the same as in 2021.
Talking to some fellow angels, I’ve heard several say they’re pulling out. On the other hand, a brave soul jumps in every now and then.
How I Learned to Stop Worrying and Love the Down Market
People got scared in 2022. Heck, I got scared!
As markets crumbled around us, I wondered, what did I get myself into? Is this a viable business? Should I be doing it?
Then I thought, “Well, other people have succeeded investing in startups. Why not me?”
So I kept at it.
It turns out, this down market is amazing!
Companies are building faster than ever before using AI. Many outsource a lot of their staff, saving on costs and getting access to great talent.
I see more and more startups becoming profitable even at the early stages. And today, you can invest in these great companies at a fraction of 2021 prices.
The business has gotten a lot better for angels, not worse! And even as the opportunities look better than ever, most of your competition is smoked.
It’s a good time to be in startupland.
Wrap-Up
So, when do angels come back? Whenever there are some big, juicy exits.
Exits get people excited about investing again. Once Stripe goes public, we’ll all be calculating how much we would’ve made if only we’d invested.
Exits also give investors and early employees liquid cash. They can use that money to back more startups.
“And on and on it goes, this thing of ours.” – Paulie Gualtieri
What are you seeing in early stage tech? Leave a comment and let us know!
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