Cautious optimism and new deals ahead for Angel Investors

Angel investment is a key milestone for many startup entrepreneurs — that important moment when they can boost their company’s prospects with external validation, funding, and mentoring. 

But like every aspect of modern business, the COVID-19 pandemic has impacted angel investors, leaving many early-stage entrepreneurs wondering if there will still be that financial lifeline available to their emerging company? 

Luke Krueger, Valhalla Angels

The good news, according to Valhalla Angels co-founder Luke Krueger, is that angel funding will still be available, but entrepreneurs seeking it will have to strengthen their pitches and plans because it’s going to more challenging to obtain. 

As the head of one of Canada’s most active and successful angel groups, Krueger has been in constant contact with his group of investors and has found cautious optimism, and even an appetite for increased deal flow – under the right circumstances. 

“We did a survey of about 60 in our group, and interestingly there have been very different responses” Kruger details. “45% said they were sitting on the sidelines for a while. The other 55% were either investing the same, or more than before. That’s a sizeable part of the investor community that won’t waste a crisis and are acting boldly.” 

“They are going to expect valuations to come down, and back companies that are resilient or pivot their product to adjust to the new world order, but there is still money out there.” 

Luke Krueger spoke to TechAlliance’s first GROW Accelerator cohort about Investor Readiness.

Krueger also sees his investors playing a key role in helping the Canadian economy emerge stronger and more resilient, even as we are still experiencing the immediate effects of the pandemic.  

“Funds that have capital to deploy are still investing, and most aren’t going to stop for any significant amount of time. The types of companies and winners that emerge, with different products and business models, will be critical for Canada after this is — not over — but more under control. “  

That cautiously optimistic outlook doesn’t mean there haven’t been valid concerns expressed amongst investors and entrepreneurs about the long-term impact that COVID-19 might have on the availability of investment capital. 

“For now, I think there is a certain amount of pearl clutching, just until everyone sees what normal looks like, but we have already seen that starting to loosen.” Krueger explains. ”Long term, I don’t think it will change all that much other than the expectations will be different for who gets funded. “ 

For the early-stage entrepreneur who had intended to seek angel capital, Krueger believes they shouldn’t feel dissuaded, but they need to focus on where the world is going, not where it may have been.  

“Build a business around a product that fits for the new world order, with good economics and I think you will be just fine. Assume the recovery will be longer term, and some of the learned behaviour will stick, meaning economics, work from home, large events etc., are things that are probably changed forever now.” 

“The resilient founders who can see where the ball is going will still be able to raise.” 

That aligns with advice that TechAlliance’s Venture Growth & Corporate Innovation has been offering to clients, according to Ubong Umoh, Business Services Coordinator. “We always advise startups to have contingency plans when it comes to funding. In the wake of COVID-19, it’s even more important to look at your costs and funding options, and see what would make the most sense for your current situation.” 

By Greg Picken May 26, 2020

For Tech Alliance