As the economy finds it increasingly difficult to free itself from the clutches of the proverbial bear, it is safe to assume that the eagerness with which investors rallied to fund tech startups has been consigned to history, at least for the time being. The tenebrous economy has also made angel investors nervous. Angels are now trying to maintain a safe distance from tech start-ups just like all other investors.
Most tech start-ups count on angel investors for funds in their infancy. However, the economic meltdown has sapped their otherwise unbridled optimism. According to a survey conducted by the Angel Capital Association in November, fifty percent of investors invested well within their expectations in 2008. And one in every three angel investors feels that the slide in investments will continue.
The abysmal lack of confidence isn’t the only thing to blame, but the dearth of liquidity has also forced them to pull in their horns. However, the doughtier investors are still investing, though at a decreased pace, as they want to make the most of plummeting company valuations.
Dan Martin, a San Francisco-based angel investor, told CNET that stocks are a better investment avenue than “investing in the friend of a friend who wants to open a green Chuck E.” But there is still hope for budding tech entrepreneurs as many angels are expected to make joint investments with others in their fraternity.