The Finnish Business Angel Network’s (FiBAN) November member study examined the current investment sentiment of angel investors. The member study shows that nearly 90% of FIBAN members are ready to invest but some find it challenging to find suitable companies to invest in.
Majority of portfolio startups in need of more help from investors
The hard-to-predict market situation affects angel investor’s portfolio companies in various ways. “Over 60% of FiBAN’s angel investors are currently spending more time with their portfolio companies than usual, as some of the startups need more help," says FiBAN’s Managing Director Amel Gaily.
However, 25.9% of the respondents say that their portfolio companies do not need any additional help. "Challenging times divide not only angel investors, but also startups," Gaily adds.
Finding investment-ready startups has become a slowing factor for angel investing. As much as 45.3% of the respondents say that it’s difficult to find suitable startups to invest in. On the other hand, 20.8% of FiBAN’s angel investors see that there are many potential investment opportunities.
General factors for investment-readiness are that the startup’s business model must be easy to understand, and the startup has acquired early customers already. "Growth, scalability and a well-functioning team are essential for me to get onboard," says angel investor and FiBAN board member Eljas Repo.
The general investment sentiment has become weaker. "Shares have dropped in value, interests are making profits. The willingness for risk-taking has decreased. This shows on how capital for startups and VC funds are raised,” Repo adds.
The general market situation affects the possibilities of exits
Angel investors aim for an exit. Typically, the exit happens within about seven years of the investment. The results of the survey reflect the general uncertainty of the market and the threat of recession, as more than 50.9% of respondents do not see exit opportunities for their portfolio companies in the near future. At the same time, 17% of the respondents said they believed in the possibility of an exit up to tenfold.
However, Repo is cautious about the likeliness of ten fold exits.
"There is a lot of hype in startup investing. One expects a tenfold exit, although in reality in many cases the value of the investments drops to zero," Repo reminds.
Angel investing is not only about finding the right company for the angel, but also finding the right angel for the company. "At best, angels both invest and share their know-how for growth companies. In most cases, the advice from more experienced people is useful. However, it is difficult to invest into something without understanding the business and if one is not able to recognize the paying customers. In the end, there is always funding available for quality startups," Repo coincides.
Understanding the impact of angel investing relies heavily on data
- The November member study was a general survey that mapped FiBAN’s members’ investment sentiment.
- 54 angel investors responded to the questionnaire.
- In addition to smaller member studies, FiBAN annually conducts a study collecting and assessing the scope and the impact of angel investing. See the results of our previous annual study here.
- The investment figures for 2022 will be announced in the Spring of 2023.
Source: Finnish Business Angel Network’s (FiBAN)