Venture capital companies are businesses themselves investing in new businesses, but angel investors are on their own. They tend to invest smaller amounts in more companies. There are ways for angels to network and pool their resources. Here in the Bay Area the Keiretsu Forum is one of them.
Angel investors and entrepreneurs who want their money came together in San Francisco Thursday night. The Keiretsu Forum is the nation's largest angel investor network. Keir Beadling's Mavericks Surf Ventures got some angel funding through them a year ago. Even in these bleak economic times, he thinks it hasn't gotten any harder to find.
"With the angel community it's different than raising money in the public markets or raising money from venture capital firms. Most angels tend to be off the grid," said Beadling.
Estimates are that in the third quarter, venture capital companies put more than $5 billion into startups, which would be down 27 percent from last year.
Angel investors funded more than 23,000 startups in the first half of this year, and while that's a nearly four percent drop from last year, it's still $12.4 billion, a more than four percent monetary increase.
"$50 billion or even if it's $25 or $30 billion flowing into startups, those are thousands of small companies getting funded. You multiply that by a dozen jobs or two dozen jobs and you start to see some real recovery coming out of that segment," said Greta Mowry, an angel investor.
Angels like Mowry say investors who are not hurt by the economic downturn are more likely to put their money in startups than the stock market or real estate, and this could actually be a good time to start a business.
"For an entrepreneur, there's never been a better time to start a company. If you have the capital you can hire people, can have access to office space which is less expensive, good lawyers are easier to get," said Colin Wiel, an angel investor.
"To think that these people, angel investors and venture capitalists are funding, for that matter, are paying attention to startups is very important to the economy because that's the future of the city, future of the economy," Dennis Conaghan, from the San Francisco Center for Economic Development.
Keiretsu is a Japanese word used to describe a variety of holding companies unrelated to each other, but who do business together. There are more than 300 angel investor networks in the United States.