The New Normal — This Is How the Angel Investment Landscape Will Look Like Post-COVID19

Angels play a significant part in determining a startup’s success rate. According to recent research, startups receiving angel investment are 25% more likely to survive in the first four years and 19% more likely to have grown to 75 team members.

Angel investing has gradually changed in 2020 due to COVID-19 — the global pandemic that affects every aspect of businesses and personal lives. The outbreak, which has so far affected around 20 million people and is likely to claim over 1 million lives globally before the end of the year, has effectively curtailed what had been a steadily growing sector.

Over just a few months, companies have shifted from seeking new ways to grow to finding new ways to merely survive. Angels have shifted their focus from investing in new businesses to helping their existing portfolio navigate the crisis. Recent data from CB Insights for the fintech sector shows a reduced number of deals being struck but the value of deals are increasing; this underlines the trend for investors to follow on and protect what they have.

Despite the condition, however, seasoned investors and investment groups are more active now than ever. In this case, investors channel their investments to select startups, which are too vital in the fight against the current and future pandemics.

While investments have declined in most industries like travel and tourism, communication, health, and energy industries have recorded an influx of funding in the last few months. But the process is not as it used to be.

Transformations in Angel Investments

The effects of the COVID-19 outbreak will reverberate through society and the economy for decades to come. The pandemic has the potential to transform how the world operates for the foreseeable future. The Angel Investment Sector is not an exemption.

In a nutshell, changes that would typically happen gradually over years are happening too fast. The changes, which are slowly becoming the new normal, points to what awaits in the post-COVID world. Here is a sneak peek of how Angel Investment landscape will look like going forward.

New Enhanced Business Models

The past decade belonged to disruptive technological innovations. Investors preferred consumer-oriented business models that redefine relationships between brands.

On the other hand, based on the current trends, the current decade calls for the above features plus more: models that rethink the role of humans within a transaction and prioritize contactless transactions, remote working, efficiency, adaptability, and sustainability.

Tighter Valuation Measures

Entrepreneurs should expect more impenetrable force in valuation exercises from investors going forward. Funds will no longer flow as freely as it nearly has in the past. Growth rates are uncertain and therefore the time to breakeven or profitability are also now uncertain. Consequently, there’s going to have an acceleration of another force to counterweight the constriction.

Active Participation of Angel Investors

For a long time, Angel Investment has been about investors who fund a startup and watch from the side as the entrepreneur drives the business. This trend is slowly fading after COVID-19 pushed many enterprises to deathbed within days. Angels are becoming much careful in guiding their investments. Going forward, expect the investors to take part in the business strategy and decision-making increasingly.

Increased Competition

There are already newcomers who provide new technologies that fit the new norms; work from home, contactless payment, telecommuting, and new health and security measures. Competition in this space will be tighter in several industries due to the newcomers in the market and other startups pivoting to offer services on demand during the crisis.

It comes down to this,

Like most sectors, Angel investment is not immune from the impacts of Coronavirus. Investors and entrepreneurs must be prepared to address re-emerging terms as investors seek to de-risk their finances, and entrepreneurs seek financing alternatives in response to rapidly changing market conditions.

Inevitably, just like other transitions in the past, there will be a pain in this one, but also progress.

A lot of startups may not survive the pandemic and subsequent recession. This is particularly true for those that are slow to evolve. Also, Investors will be keen to align themselves with the new generation of companies that stand ready to meet consumers’ post-COVID needs more safely. A time has come for entrepreneurs and investors to re-orient their mindsets and business models for the future.



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Trevor Townsend

CEO Startupbootcamp Australia Founder, Board Member and Startup Investor: Energy, FinTech and Sports.