An overwhelming majority (94 percent) of active investment angels believe it helps to have subject-matter experts weigh in when they evaluate a startup investment opportunity, according to a Propel(x) survey of 200 aspiring and active angel investors in the United States.
The survey found the majority of active angels have invested in a science and technology startup (68 percent), but half of respondents very frequently (21 percent) or somewhat often (29 percent) decide not to invest because they don't believe they understand the technology well enough.
"I was pleased to see an overall high interest in science and technology startups, and it’s good news that only 1.32 percent of those who haven’t invested are not interested in science and tech companies," Swati Chaturvedi, CEO and co-founder of Propel(x), told eWEEK. "The disconnect often comes down to a lack of understanding the technology well enough to invest; helping investors overcome this information or knowledge gap is crucial to facilitating investing."
When asked to rank the top three types of science-based companies that are of most interest, the three categories receiving support from more than half of angels were information technology and communications (66 percent), life sciences (56 percent) and energy and green technologies (53 percent).
Survey results found that while nearly half of active angel investors (49 percent) ranked the potential for investment returns as their top motivator for investing in startups, nearly one-third (31 percent) ranked solving some of the world’s biggest challenges as their main motivation.
"Angels will continue to play a larger and more important role in funding early-stage startups," Chaturvedi said. "There is a huge funding gap in the early stages—this is a well-researched phenomenon—called the ‘valley of death’ and other more colorful terms. This gap is being filled by angels. This is a great thing for speeding up innovation."
Less than a quarter of active angel investors (21 percent) cited a legacy of other investors among their top three reasons for investing in a specific opportunity.
Three-quarters of active angels cited the management team as their top reason for choosing to invest in a specific company. More than half (52 percent) noted their ability to understand the technology and 42 percent claimed the potential return on investment.
"Investing goes in waves and we are coming off a huge wave in life sciences that's not abating," Chaturvedi said. "We are now also seeing a re-emergence in energy. This sector had been dormant, but we’re seeing an increased interest and investment in clean tech, with almost half of the angels surveyed having already invested in clean tech. This tells us to expect some clean tech startups coming down the line for VC funding."