Wednesday, June 06, 2007

Early stage funding report

An interesting report was just released by an angel funding network in my home state of Wisconsin.

I focus on Micro Entrepreneurship where self funding and micro funding is the norm, but there's all kinds of early stage financing possible these days, and the game is getting more interesting by the day.

If you're in an enterprise that's considering an early stage investment round with outside investors, the news is hopeful. A rising financial tide seems to be lifting many small boats.

The two pieces of the report I find interesting are the comparisons of the overall volume of early stage investing with investments placed by the formal angel groups.

"Early-stage investing: Total early-stage investing tracked in Wisconsin rose to $102.9 million in 2006, an increase of 54 percent over 2005. The complete early-stage risk capital market includes angel networks, individual angels, informal angel groups and early-stage funds. Improvements in reporting could account for some of the increase in individual angel investments, which was a new reporting category in 2005."

"Angel investing: Angel investing in Wisconsin rose dramatically in 2006. Data from several sources confirm that angel investing in the state rose much faster than the national average, estimated at 11 percent by the University of New Hampshire Center for Venture Research. The number of Wisconsin group angel investing deals and dollars invested increased substantially in 2006 when compared to 2005. The dollar amount of network investing increased 38 percent to $7,427,170 while the number of deals rose 50 percent from 18 deals in 2005 to 27 deals in 2006."

Obviously, when you take in all early stage investors, the total will be much larger than taking just the totals from the formal angel networks. $102.9 million VS 7.4 million is quite an eye opener though.

When you work the math the average deal done by the formal angel networks is about $275,000 per deal.

Having been through these wars, I know that the larger pool of seed stage investors includes investments that are much smaller than the network angel deals.

Conclusion? If you're an enterprise that needs outside funding in small amounts, avoid the formal angel networks. You're wasting your time. However, if you're looking for smaller amounts, it appears the world is turning your way.

There is some VERY interesting news about some of the bigger venture capital firms leapfrogging both of these financing levels into the world of micro finance, but I'm saving that for another post.

In the money world of small biz financing, it's a jungle out there friends, but you can do it. The world is looking for your creativity and your drive.

Go get 'em.

Download full text at WI Angel Network (WAN)

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