Can 124,000 Investors All Be Wrong?


A very bright spot in the U.S. economy right now is angel investing. According to the Center for Venture Research, angel funding activity in the 1st 6 months of 2011 totaled $8.9 billion, an increase of 4.7% over the same period in 2010.

The numbers tell the inspiring story of entrepreneurial, “can do” America – more than 26,000 companies raising capital from more than 124,000 individual investors.

Some nuggets of interest from the report:

•  39/61: The percent of angel capital that went to seed stage companies and the percent that went to more mature companies, respectively
39 (again): Percent of angel funding that went to healthcare / life sciences-related companies
•  5: From the report: “Angel investments continue to be a significant contributor to job growth with the creation of 134,130 new jobs in the United States in 2011, or 5 jobs per angel investment

Not included in this report are the changing rationales / reasons as to why angels invest.

Making a lot of money, obviously, is at the top of this list. There is no form of investment - not the stock market, not real estate, not gold, not commodities nor art nor collectibles - that can even remotely compare to the life-changing returns that a successful angel investment can yield.

I have a friend who was one of the first investors in a startup media and entertainment company that grew to become one of the largest firms in Europe in its market niche.

Even though his investment into that company was only in the mid five figures, and even though he had been otherwise unfortunate with a slew of other angel investments and with his own business ventures (and unlucky in love to boot!), that one successful angel investment transformed his life.

He now lives on a spectacular hundreds of acre estate with its own lake, multiple guest houses, and with panoramic views to five different states from his master bedroom.

He has gone on to invest in dozens more startups and early - stage companies, and puts most of his “work” time into various charitable and philanthropic efforts.

And oh yes, he is also now very happily married with a wonderful, young family.

And all of this because he carefully listened to everyone that told him that most companies fail.

That investing in early-stage companies is extremely risky.
That the CEO of the company he invested in had never had a successful exit before.

That the “economy” was unstable and that a recession was looming.

My friend listened very carefully to all of this well-meaning advice.

And, praise to be, he ignored it all and invested anyway.

Now who knows how many of the 124,000 brave souls who were angel investors in the 1st 6 months of 2011 will have outcomes as life-changing as my friend’s.

But, unlike the 300+ million Americans that have NOT made an angel investment this year, our 124,000 at least are in the game.

They both are and they are enabling the “doers” of our entrepreneurial land.

And win or lose, for that they deserve our thanks and our praise.

And hopefully a lot of them will, like my fortunate friend, have one or a few of their angel investments transform their lives.

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