As Angel Investors Pull Back, Valuations Take a Hit – WSJ

Posted in Start-up Scenes

The number of active angel investors climbed to 316,500 in 2014, the most recent year for which data are available, from 259,500 in 2009, according to the Center for Venture Research at the University of New Hampshire, while the amount they invested rose to $24.1 billion from $17.6 billion.

But some investors are concerned that the growth in the market has pushed valuation levels too high, similar to what happened with so-called unicorns valued at $1 billion or more.

As 2016 revs up without much economic gusto its interesting to read posts like this all over the place.  Here, the Wall Street Journal relates frustration US investors are feeling now that the economy is correcting the last couple years of inflated tech startup valuations.

These investors should better understand the risk they are taking (plus the contextual dynamics of how those companies were priced) when investing in emerging enterprise… but then again there are a lot of folks experimenting in startup investing without an understanding of what they are investing in, and that holds true for personal money going into companies directly (or through platforms like Angelist) and institutionally (through the myriad of VC firms which have popped over the past 5 years to place supposedly risk-tolerant money which previously may have gone into bogus instruments of the sub-prime mortgage millieu.)

As with the gold and oil rushes of days gone by, its important for investors to make sure that there is actual value determining the valuations they buy into.  Of course, digging in for the medium or long term is also a good approach as most Get Rich Quick schemes invariably fail.

Source: As Angel Investors Pull Back, Valuations Take a Hit – WSJ