It is a commonly held belief that angel investment generally reduces during the period of an economic recession. The reasons behind this idea is not far-fetched as it is believed that when there is a crash in the market, angels that would have otherwise been interested in investing in business ventures become a little more cautious with their funds as a result of bad economy.
For instance, a report from New Hampshire Center for Venture Research indicates that the level of angel investments went down by as much as 2.9% in year 2008. This figure was done in comparison with the level of deals done by angels in 2007. In order to get a proper picture of this analysis, it is necessary to also consider the rate of angel deals done in 2009 where the level of investments further reduced from that of 2008.
In recent times the economy has being embroiled in a dire financial crisis unlike any other since the period of the Great Depression. There is a high level of unemployment and governments all over the world have introduced fresh funds running into trillions of dollars into their economies as stimulus to get things back on a solid footing. However, it is quite instructive to note that there was also still some level of activities by angel investors.
This is in opposition to the view of business analysts that the state of the world economy would dry up the channels for seed capital investment in business ventures, although angel investment was down by as much as 25% and a larger number of new entrepreneurs were probably not able to raise as much capital as they expected for their business ideas, the level of angel investment was still significant enough to help in oiling the wheels of the business circuit.
However left between a choice of better funding for a lesser number of entrepreneurs and insufficient capital funding for a larger number of entrepreneurs, the second option is probably a better idea. Funding for just a few entrepreneurs would mean that only a few companies have the chance of emerging onto the business circle. Although, lesser capital may reduce the survival chances of a business venture, it does not mean such a business cannot succeed. In some instances great companies have risen far above the limitations of little capital to become thriving business concerns. This is usually as a result of the entrepreneurs going back to the drawing board and evolving new strategies that would make their business run better on the amount of capital funding available to them.
More new business ventures translate into new jobs, new stimulus for the economy and an increase in the general standard of living. Hence, it is welcome news that angels are still putting in the level of investments that make some of these new business ventures possible.