Angel Investors Get Pickier

The financial crisis and recession have made raising capital more difficult. This is true for the millions of owners of small businesses that rely on debt from banks, credit-card companies, and trade creditors, but it is also true for the founders of high potential businesses—those hoping to reach tens of millions of dollars in sales in five to 10 years—that are trying to raise money from business angels. Although estimates based on Federal Reserve data indicate than less than 3% of young companies raise equity from external investors, the explosive growth of some of these businesses makes them an important group seeking capital. For these companies, the increased difficulty in raising money can be seen in evaluation process, known as the deal funnel, at angel groups.

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