What are your odds of attracting startup capital from angel investors?
Better sit down first.
Ok, are you ready?
According to AngelSoft:
... only 51 companies out of 20,395 that were processed through their system over the last 12 months received funding. The odds of writing a New York Times Best Seller are greater than the odds of getting funded by an angel!
Even though I have been writing about this problem since 1995, I had no idea that the odds could be so poor. The typical numbers are one out of every 500 companies applying for venture capital gets any and perhaps one in every 200. The Angelsoft numbers translate to one in 400.
That's why it's called the Financing Valley of Death. Investors want entrepreneurs to prove their mettle by surviving it before any checks are written.
Don't kid yourself about business plans, Powerpoints, and elevator pitches eliminating this test.
They won't.
It can't be that bad, can it? What about all those angel groups across the country? You list them all on your site? Don't they improve the numbers?
Posted by: Lee Arnett | January 31, 2011 at 04:47 PM
Good luck America in reviving the economy if you choke off start ups from capital. It's a disgrace.
Posted by: Tom Boleski | January 31, 2011 at 10:45 PM
If large businesses are sitting on record amounts of cash, using them to bludgeon concessions out of the government ("We'll start hiring just as soon as you cut taxes and regulations!") then why wouldn't Angels use the same strategy on startups? From what I've seen, Angels now only want to enter the game once you are not only post-revenue, but profitable, need working capital to support your rapid growth and have a fist full of P.O.'s in hand. In other words, they want the entrepreneur to take all the risk, and once the risk is gone provide working capital support at Angel returns.
Yes, it's a disgrace.
Posted by: Jim R | February 02, 2011 at 08:53 AM
I don't think Angel Soft has good numbers. A company I was with last year was in the AngelSoft system, was financed, not through AngelSoft and it is highly unlikely they are aware it was financed.
The number last year were very steep against getting funded (particularly last year), but not that bad.
Posted by: Rich Sun CFA | February 11, 2011 at 03:08 PM