Angels want longer runway as Startup valuations drop

The majority of Angel investors have changed the sectors they are looking to invest in as a result of the Covid-19 crisis. They have also changed their investment requirements and have seen valuations drop and round size reduce.

• 83% of Angels have seen deal terms change
• 65% of Angels have changed their sector focus
• 54% of Angels have changed their Investment Requirements
• Fintech, Health/Med Tech and Remote Education lead focus
• Longer Runway, Revenue Generative prioritised
• Vast majority of Angels are seeing reduced valuations

Angels have adapted to the Covid-19 crisis and have changed their sector focus and investment requirements.

65% of Angels have changed their investment sector focus during Lockdown, 35% of Angels stated “No Change” to their sector focus, of those Angels who have changed their focus Fintech, Remote Education and Health/Med Tech lead the way.

54% of Angels have adapted to the changing environment and have updated their investment requirements. 64% of Angels stated “No preference” to their investment focus.

Of those Angels who have changed their investment requirement, 56% want Startup’s to have longer runway, 34% are looking for revenue generative businesses and 32% want recurring revenue, only 8% are looking for profitable businesses.

The vast majority of Angels (83%) have seen [though not necessarily asked for] deal terms change, of those Angels that had seen a change, reduced valuations counted for 68% and smaller rounds was 37%, only 1% of Angels have seen increased valuations.

Full results

Are there any sectors that you are specifically interested in during the Covid-19 crisis? (choose 1 or more) — 186 of 223 answered

• No Preference — 35%
• Preference — 65%
  - Fintech — 50% (32.8% of total)
  - Remote education — 30% (19.7% of total)
  - Health/Med Tech & Life Sciences — 29.2% (18.8%)
  - Gaming — 27.5% (18% of total)
  - Flexible working — 26.7% (17.5% of total)
  - Collaboration/video conferencing — 23.3% (15.3% of total)
  - Remote training — 20% (13.% of total)

Have you changed your investment requirements as a result of Covid-19? (Choose 1 or more) — 186 of 223 answered

• No Change — 46.2% (86 respondents)
• Changed — 64.8% (100 respondents)
  - Longer Runway — 56% (30.1% of total)
  - Revenue Generative — 34% (18.3% of total)
  - Recurring Revenue — 32% (17.2%)
  - Only Co-investing — 23% (12.4% of total)
  - Strong Balance Sheet — 20% (10.8% of total)
  - Other — 19% (10.2% of total)
  - Later Stage — 15% (8.1% of total)
  - Profitability — 8% (4.3% of total)

Have you seen deal terms change as a response to Covid-19?
(Choose at least 1) — 186 of 223 answered

• No Change — 17.2% (32 respondents)
• Change — 82.8% (154 respondents)
  - Reduced Valuations — 82.5% (68.3% of total)
  - Smaller Rounds — 44.8% (37.1% of total)
  - Other — 9.7% (8.1% of total)
  - Large Rounds — 20% (10.8% of total)
  - Increased Valuations — 1.3% (1.1% of total)

Methodology

Are Angels investing? This is the key question that Activate our Angels was created to answer. If they are investing, what has changed, if not, when will they start again?

The anonymous survey was distributed to leading Angel investment clubs, Angel Networks, Early Stage VC’s and Funds, with the aim of measuring the rate of active early stage investments during the Covid-19 crisis.

• The survey created on 29th April 2020, the data was analysed on Friday 15th May.
• 262 respondents completed the survey
• 39 responses were removed from the data as they identified as not being an angel investor
• 223 respondents were used to calculate the results
• For ranges of investments the median was used when calculating average
• For “5+” deals the results were rounded down to 5, “Prefer not to say” and “blanks” were removed for calculating averages

Founding Partners

If you would like further information on this study please contact Nick Thain on nicholasthain@gmail.com / https://www.linkedin.com/in/nickthain