By just about any measure, Utah’s economy is strong. That certainly applies to angel investing.
The 2018 Angel Worx Report on investment activity by angel groups and early-stage venture firms in 2017 shows that Utah investment comprised 86 deals totaling nearly $42.8 million. Idaho had 22 deals totaling $1.1 million.
The 10th annual report was produced by VentureCapital.org and Preferred CFO and tracks a general trend of growth in Utah.
A typical angel investor is an affluent person who provides his or her own money for a business start-up, usually in exchange for convertible debt or ownership equity. They are not part of the startup owner’s friends and family and they differ from institutional venture capitalists who invest other people’s money.
“In the past, it has shown that angel investing in Utah has been great, and this report is no different,” said Jerry Vance, founder and managing partner at Preferred CFO.
The 2017 total in Utah and Idaho of $43.9 million compares with $36.4 million in 2015 and $24.3 million in 2016. “Even though it shows a major dip in ’16, I think there really has been an upward trend in the last few years,” Vance said.
“We are one of the hottest markets on the planet,” said Brad Bertoch, president of VentureCapital.org, an entrepreneurship/technology commercialization organization. “Our venture industry is robust. Our entrepreneurial industry is robust. And trust me, it’s a handful in the United States that are rocking like we are.”
The economies of the nation and Utah are strong, “so right now we’re enjoying a pretty successful time in the angel investing area,” Vance said.
“The money is there [for entrepreneurs]. There’s lot of money available. Years ago, it used to be in Utah, the complaint was that there wasn’t enough money here to finance all the good deals. The money is here now. There’s lot of money available. We just need to continue to improve the deal flow.”
In Utah, the Kickstart Seed Fund led the way with 40 deals funded for about a $20.8 million total. It accounted for 47 percent of deal dollars and 37 percent of the number of deals. Idaho was led by the Boise Angel Alliance, accounting for 18 deals and $896,000.
Among trends Vance cited are that Utah angel investors are becoming more sophisticated and organized, resulting in them being more selective before investing, and there is a greater amount of investing happening in seed funds.
“Angel investing has been strong. It will continue to be strong for the next while. There’s a lot of deal flow and repeat entrepreneurs, consequently startup companies and first-time entrepreneurs will need to improve their businesses if they’re going to get funding,” Vance said.
“So, if you’re maybe a first-time entrepreneur trying to do a startup, the money is there … but you’ve got to rise to the top and become more a needle in the hay, if you will, and your deal will get funded. But you have to work really hard at it, prove yourself as an entrepreneur and your skill set and surround yourself with people who can help you do that, and find the right opportunities.”
Despite the robust situation in Utah, Bertoch expressed concerns about trouble spots he has seen since 2009 that can affect angel investing nationwide. U.S. entrepreneurship has slipped from 10.5 percent of the workforce in 2009 to only 3.5 percent in 2016. “Never has it dropped down this low,” he said. Meanwhile, student debt has risen from $100 billion to $1.2 trillion. “It’s causing a problem with new entrepreneurs coming along. You wouldn’t notice that in Utah because Utah has been an anomaly,” Bertoch said.
Another concern that arose during a meeting of the Angel Capital Association earlier this year in Boise was about the survivability of angel investing over time. In the next decade, 70 percent of U.S. wealth will be held by women, he noted.
“That’s not bad, but what is bad is that angels are predominantly men — and they’re predominantly old men — and they have not been training their wives to be angel investors. So, their wives are going to inherit this illiquid stock and not know what to do with it, let along go in and invest in new companies.”
He suggested that spouses be involved in angel meetings and decisions “so that there can be a continuation of angel investing in our households.”
Also being left out are angel investors’ children, he added.
“Seasoned angel investors who will pass on pretty good wealth to their children have not been including their children in this asset class as well. Consequently, when everybody dies off — the husband and their wife — the kids aren’t being angel investors. Now, hopefully maybe some of that will change organically, but at the moment that’s not what’s going on, and it brings a concern around what’s happening with angel investing.”