Founders: It’s time to look beyond VCs, and approach angel investors

Global VC funding reached $143.9 billion in the first quarter of 2022 — down 19% from the previous quarter.

Amidst the current recession and looming uncertainty, VCs seem to be pulling out of the market, which means that startups need to turn to alternative sources of funding — like angel investors and funds.

Speaking at TNW Conference 2022, Tim Mills, Managing Partner at the ACF Investors Angel CoFund, explained:

Many angel investors are pleased to see VC funding retreat. With the current dip in startup valuation, they find it risky to provide seed funding to emerging companies.

The big advantage of angel investments is that financing is much less risky than debt financing. Unlike a loan, invested capital does’t have to be paid back in the event of business failure. And most angel investors understand business, and therefore take a long-term view.

Co-panelist Tessa Wanders, investor at VNV global, elaborated:

We’re not calling ourselves a fund and that really changes the dynamic in the way we invest. We are really aligned with the founders and we don’t see the IPO as an exit moment, but a milestone — we keep investing as long as we see a growth opportunity.

This doesn’t mean, however, that founders should welcome every and any angel investor.

Wanders, a founder herself in the beginning of her career, noted:

I should have been more selective with investors. As a founder you’re in selling mode, but it’s also important to flip the table and ask what they can do for you.

Mills offered the same advice:

When cooperating with angels it’s absolutely critical to know what they’re looking to get out of your business. The selection approach should always be made with caution and skepticism. There’s no preemptive way of doing it, you have to see if an amicable exit is possible.