As alternative investments rapidly go mainstream, angel investments that have typically been the domain of the ultra rich are opening up to a broader swath of mass affluent investors.
“The world of angel investing, which was virtually nonexistent 20 or 30 years ago, has now become very, very serious,” says David S. Rose, chief executive of Gust, an investor-relations platform.
This new landscape raises all sorts of questions, and Gust hopes to find some answers during its second annual Venture Forward Conference in New York City on June 18. The conference will focus on mass affluent investors and their impact on early-stage investing.
Gust’s platform allows new companies to manage their investor relations and investor groups to manage their deal flow. Today, 200,000 startups have put their financial and business information on the platform, which is accessible to more than 1,100 angel groups searching for investment opportunities, according to Rose.
In the 1980s, angel investing was the preserve of mega-wealthy individuals capable of putting a couple of million dollars into a new company. Today, mass affluent investors are elbowing into the early-stage market, often as members of angel investing groups.
At the same time, the cost of starting companies has fallen due to technology, causing the angel investing market to expand even more.
“The typical amount put in a company by an angel investor these days is about $25,000,” says Rose.
One session at Gust’s conference will look at platforms that help people discover and make early-stage investments. Besides Gust’s platform, which caters to investor groups, crowd-sourcing sites such as Kickstarter, FundersClub and AngelList also provide entry into startup investing.
A second session will examine the implications for the early-investing market of new investors and new capital.
One impediment to doing angel investing today is the lack of a secondary market and hence liquidity. The average hold for an angel deal in the U.S. is about nine years, and an angel investor has no recourse. This is bound to change, says Rose.
A third conference session will look to the future of secondary markets for private companies and other ways to get liquidity.
The tsunami of new entrepreneurs looking for seed capital presents a problem: How do you do due diligence on 200,000 startups? A fourth conference session will address curation, or mechanisms that make the task more manageable. Perhaps most promising are new entities called accelerators, which rigorously screen new companies, then whip a select few into shape to present to potential investors.
