The Federal Reserve’s response to COVID-19 boosted investment in 2020 and 2021, but the party is over and the hangover is here. Venture capital has pulled back to a one-year low, falling $5 billion from March to April, followed by another drop in May.
Should you give up hope of securing funds for your business? Hardly, and here’s why:
Angel Investors Are Still Everywhere
Despite the current economic turbulence, the past couple boom years got a lot of individuals into the game:
- In 2020, the number of active angel investors grew to nearly 335,000, funding a total of 64,480 entrepreneurial ventures.
- In 2021, venture capital firms raised an astonishing $128 billion in new money, a 47.5% increase over the previous year.
- Even these figures understate the true impact of angel investors, because not all angel investments are publicly reported or tracked.
It’s Not That Difficult to Meet Them
Many new entrepreneurs mistakenly believe that the only sources of finance are a few huge venture capital firms in Northern California. In fact, wealthy individuals provide the majority of equity funds.
Not only are they located all over the country, but you can access them through websites called “angel networks” — although being introduced to them by a mutual acquaintance can expedite the process.
You Don’t Need to Be Afraid of Them
It’s natural to feel nervous when meeting with an investor or lender, but they need you as much as you need them. Without a steady stream of good investment opportunities (“deal flow,” as they call it), they can’t earn the fat returns they seek. This quarter’s GDP or unemployment stats may be irrelevant to an investment that spans three or more years.
Optimism Will Make a Comeback
The pace of venture investment has ups and downs. Bearish stock market conditions and a general economic downturn can curb investment — for a while. Angels may pull in their wings until their portfolios recover; venture capitalists may devote more time and attention to helping their existing companies navigate the choppy waters rather than focusing on new investments. But optimism always returns. Always.
Don’t let the power of negative thinking keep you from obtaining vital funding for your business. The money is out there.