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Bad News, Good News on Seed Stage Financing
Getting good science from university labs and startup companies to the marketplace requires plenty of risk capital. Problem is, institutional investors are putting more and more of their money into late-stage venture capital firms, which disparage what they call the “spray and pray” venture financing model in favor of information technology and biotechnology companies that already boast revenues and profits, reports the Wall Street Journal (subscription required).
That’s obviously not good for tech entrepreneurs looking for seed stage financing, or universities seeking to commercialize potentially marketable science. So what’s the good news? Well, The Seed Stage tells us about the latest report on angel investors, who financed eight percent more seed- and early-stage venture financing deals in the first half of 2007. 140,000 angel investors accounted for this investment flow, according to the report by the Center for Venture Research at the University of New Hampshire, with the money flowing to a fairly well diversified selection of information technology, biotechnology and medical devices startups.
Angel investors accounted for 42 percent of the all the money flowing to these early-stage tech companies, with traditional venture capital firms accounting for the remainder. The total amount of money invested by angel investors was down 6 percent, to $11.9 billion, from the first half of 2006, yet the size and diversity of the angel community and their tech investment targets is probably more important as more venture firms move toward late-stage venture financing.
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