An all-island business angel conference saw investors, venture capitalists, start-ups and those from the legal and financial space converge in Dublin today to learn more about angel investing in start-ups. One of the speakers was venture capitalist and angel investor John May, who talked about the evolution of angel investing from a US perspective.
The business angel event itself was organised by the Halo Business Angel Network (HBAN), the joint InterTradeIreland and Enterprise Ireland initiative that operates as an umbrella group for business angel investing across the island of Ireland.
As part of the speaker line-up, May, who focuses on early-stage investments in the mid-Atlantic markets, talked about trends in the US regarding business angels and early stage start-ups.
He is also managing partner of New Vantage Group, a Washington, DC, area company that specialises in early-stage venture funding. The company has organised five angel investing organisations in the Washington, DC, area since 1999, placing funds in more than 60 companies.
May started off by drawing on how the business angel phenomenon is still in its youth. In comparison to the venture capital (VC) industry, which he said is around 56 years old, structured angel investing has only been in existence for the past 10-15 years.
Looking at the state of US entrepreneurial financing, May spoke about the decline of the VC market. He pointed out how there is 50pc less money being managed by venture capitalists than 12 years ago. Therefore, he said the opportunity for high net worth individuals to join angel investing syndicates is "amazing".
Right now, however, May said there are only between 10,000 and 15,000 serious practising business angels in the US.
Syndicated angel groups
He also touched on the potential for syndicated groups to co-invest with each other in start-ups.
In relation to ‘early exits’, May said not every angel investing deal has to be a three, five or 10-year opportunity and that sometimes business angels can exit after 12 to 24 months, for instance.
He also spoke about the terms "warm money" and "active angels" and whether angels should be working with the entrepreneurs they invest in, rather than just being passive angel investors.
One of the big drivers in the future for business angels, according to May, will be return on time when they invest in companies.
When it comes to start-ups, May looked at business plans and whether it’s necessary for companies to have such plans ready when meeting potential investors.
"More and more US business angels are tipping away from 40-page documents, but going towards people, people, people," he said.
Interestingly, May also touched on the recent crowdfunding phenomenon to get start-ups up and running, alluding to how it doesn’t seem to sit well with business angels in the US in general.
"Should the public be able to invest in high-growth start-ups?" he asked, pointing to how the movement could affect the way business angels invest.
Finally, May spoke about how the average business angel in the US is putting in between US$25,000 and US$35,000 in an investment.
Business angel image via Shutterstock