Brie Austin

Angel Funding NYC Promising for Early Stage Companies

Angel funding NYC might be the new catch-phrase. Venture capital in thevery earliest stages has seen a steep increase over the past two years. Dow Jones VentureSource measured a 52% increase in venture-capital seed investments in consumer Internet companies nationally in 2011 compared with 2010. A report last month by research firm CB Insights found that quarterly seed-stage funding for Internet companies has jumped dramatically over the past 10 quarters. In the first quarter of 2010, there were 20 seed deals; in the second quarter of 2012, there were 111, more than five times as many.

Only a few years ago most people — familiar with raising venture capital — would have told you that it was easier to raise five million dollars than it was to raise fifty thousand dollars.

Now the trend seems to be to look at early-stage companies much sooner, or risk being too late to get on board. Seed funding is usually considered to be somewhere between two hundred thousand dollars up to five million dollars.

For most first-time entrepreneurs, if they have a good business plan, two to three hundred thousand dollars is now more likely to be obtained.

Low-end seed capital will likely carry much higher rate of failure according to Roger Ehrenberg, managing partner of IA Ventures, a seed-venture fund that specializes in big data companies, who stated in the article that “The mortality rate will skyrocket.” But the entry fee for them to get involved into start ups is so small — relative to what they’ve historically invested in later stage deals — that they only need one hit in 10 or 20 to see good returns.

While Dow Jones VentureSource didn’t break out the number for New York regarding the increase in seed-capital activity, CB Insights CEO Anand Sanwal estimates they’re probably even higher: “The trend is probably is even more stark in New York,” he said. “New York has become a seed hub.”

So for all you NY based start ups, this might be the year for you to get your business plan finalized and start knocking the doors.

SOURCE of quotes for this article: Crain’s New York

Published in my column at Examiner

About Brie Austin

Co-author of I'd Do It Again, he is a columnist/reporter for a variety of magazines in the areas of music, lifestyle, nightlife, travel and business. He also writes business documents and creates copy for websites.