Towards the end of each year we survey our angel investors to get their thoughts and insights into how the year has been, and what they expect to see in the coming year.

So to begin, their thoughts on 2023

  1. Interest rates and the slow economy dominated the headlines.

  2. Follow-on rounds became tougher and the number of flat or down follow-on rounds increased a lot.

  3. The number of failures increased.

  4. The number of startups seeking first time capital seemed to increase though as one angel put it, "despite the doom and gloom too many founders were trying to raise with inflated expectations and there was a massive increase in the number of 'no hopers' looking for investment.""

  5. That said, the angels agreed that they’ve become more thorough in their due diligence and wanted to see founders looking to raise for 24 months instead of in previous years where raising for 12-18 was enough. This correlates with our data showing that the average round size we participated in this year has increased. Fewer deals overall are getting done, but there's an increase in the round size to ensure companies can make it through what is expected to be another tough year.

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Looking ahead to 2024

While many sites are reporting VCs sitting on a record level of dry powder, the angels don’t believe this will change much in 2024 but are already optimistic about it for 2025. Overall, there is optimism as companies raise more and focus more on their path to profitability.

What this means for 2024 is that valuations are expected to remain lower than they were from 2020-2022 and fewer deals will get done, but rounds will remain larger than 2020-2022.

As one angel characterised the year ahead: “Businesses need to be properly funded to weather this environment.”

The majority of the angels believe they will invest about the same as they did last year with AI, life sciences, and green investments foremost among the sectors they believe they will make investments in in the new year.

The biggest challenges the angels say they’ll face in 2024 is choosing which portfolio companies to back again and which to let go. Though as one angel put it “there’s an opportunity to invest in the down rounds of startups invested in by others at near bargain prices - assuming they don’t go bust”.

“Good, long-term-committed angels will find they have better opportunities as fair weather angels drift away” one investor stated.

Despite 2023 being a challenging year, the super angels are still committed.. As one put it “I love helping disruptive young people who are sticking it to the Man.” Though another is just happy they’ve been able to make “a 3x return on my portfolio, probably more,” and cites their motivation as “impact and returns.”

For those just getting started with investing in startups, a bit of useful advice from one of our angels: “Invest in at least 50 companies. Don't lead rounds. Invest in what you understand and have a strong network.”

To find out more about how the Access EIS Fund can work for you or your clients. Use the button below to schedule a call with our expert, Ben Charrington.

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