The unexpected changes brought about by the COVID-19 pandemic have significantly altered how the world does business. Startups are among those feeling the pinch right now, as potential investors hold back from making substantial or solid investments during the pandemic.
Angel investors, those who happily put their money in new companies, are also evolving in these unusual times and err on caution before investing.
What Angel Investors are Doing Now
Much of the money that angel investors put into startups is usually spare cash that they have on hand. In these economically trying times, even these staunch supporters of small businesses have to be more careful about where they invest their money, resulting in the following changes in their investment habits:
Angel Investors err on the side of caution
While there are numerous investment opportunities on the rise, many angel investors are now extra careful about where they put their funding. You can consider this level of caution a knee-jerk reaction to the pandemic, but angel investors are exerting keener due diligence before shelling out money.
Angel Investors are diversifying their investment channels
Many angel investors now opt to invest in more diverse silos, particularly in fields that will have a direct and immediate benefit. These include life sciences such as medicine (particularly microbiological research groups working on vaccines and retroviral drugs), green energy, consumer goods, and real estate.
Angels and startups alike are resetting their expectations
The world – and, by extension, the global economy – will recover. Still, both investors and entrepreneurs are becoming more realistic with the goals they’re setting. Both look forward to more immediate accomplishments rather than goals set for the distant future.
Multiple financing rounds are a no-no
Companies that need to do several financing rounds are too big a risk for investors. Therefore, angels now opt to work with more frugal enterprises with a higher chance of giving returns.
Women are leading the way
Women helping their fellow women succeed in business are becoming a visible trend in angel investing. This push for empowerment through entrepreneurship and self-reliance has become particularly prominent among women of color.