It was a rough year for a lot of established startups.
Nearly 20% of all startups raised money at a lower valuation than they had in previous rounds. In 2021, that number was 5%. Those so-called ‘down rounds’ sent shock waves through the tech ecosystem, while many startups layoff staff and started tightening their belts. Venture capital funding into global startups fell by more than half since last year, according to new Pitchbook data. The annual fundraising figure for 2023 is set to hit its lowest level since 2015.
But what about startups just getting off the ground? Typically, founders will raise their first bit of outside capital from angel investors before pitching established VC firms. These angels naturally have a very different investment thesis than their late-stage counterparts, since they are willing to back founders who haven’t yet brought in a massive number of customers.
As we wrap up 2023, we wanted to check in with angel investors across Atlanta to get a sense of how the year went for them. We heard from both established individual investors and angel network groups across the city. Here’s how they thought about writing checks this year:
A YEAR IN REVIEW: LOCAL ANGEL INVESTING
Sid Mookerji, managing partner at the Atlanta-based VC firm Silicon Road Ventures and current co-chair of the angel investment group TiE Atlanta Angels, said TiE looked at a handful of potential companies each month and ultimately invested in 15 companies over the course of the year.
Mookerji said that deal flow did not slow down over the course of the year. In 2023, TiE Atlanta Angels invested in healthtech, agritech (hydroponic farming, platform for lawn maintenance companies), future-of-work, fintech, insurtech startups.
The organization also expanded in unique ways this year. TiE Atlanta Angels created two mini-funds this year, one to invest in Venture Atlanta companies (called the “Venture Atlanta Angel Edition”) and one to invest in minority and women-led startups (called the ACCESS fund).
Sig Mosley, the Godfather of Atlanta’s Tech Investing, ended up investing in five new startups and participated in two other angel deals through an angel group in town. Those investments went into a wide range of industries, including ConferenceTech, CPG, gaming, and consumer apps.
Atlanta Technology Angels (ATA) backed seven deals this year, a number that Matthew May, co-founder of Acuity and outgoing president of ATA, said was low for the group. Investment thresholds were down this year for the organization since interest rates spiked early in the year and it took some time for angels to adjust to the new economic realities, said May.
While May said the number of super angels (somebody who invests $25k or above in a deal) in the group dropped, the organization is stronger than ever. ATA has grown to around 50 angels right now, of which 40 made investments this year.
“There are more people in every deal than I’ve ever been before, just in smaller dollar amounts. So people are making much more sustainable investments based on data we have now,” May added.
Other investors were less optimistic as they reflected on the year. Hesom Parhizkar, an Atlanta-based CTO and angel investor, said he didn’t make any investments this year and the one deal that looked “promising” ultimately fell through when the team couldn’t get the round allocated.
“Back in 2021 and early 2022, I was receiving about 1 to 2 opportunities a week to invest. Opportunities still exist today, but it takes more effort seeking out the deals,” Parhizkar told Hypepotamus.
NEW ANGELS, NEW OPPORTUNITIES
Despite the rocky macroeconomic climate, a new group of angels started investing this year. One of the groups that helps educate new angels is Angel Lounge, a monthly meetup group started by Atlanta investor Charlie Paparelli and now run by Silicon Road Ventures’ Frank Tighe.
Tighe said that Angel Lounge, which helps people learn to be better angel investors, has seen its membership grow as business owners and tech founders with new successful exits under their belts started looking for ways to invest in the next generation of founders.
Other new local angels started the investing with the help of the Atlanta Chapter of Golden Seeds, the largest angel network in the US that invests exclusively in women-led companies. The local chapter provides educational opportunities to women looking to become check writers in the angel space. Rachel Stuve, Managing Director and incoming chapter lead for the Atlanta chapter of Golden Seeds, said groups like Golden Seeds are important since angel investing is more of a “team sport” than just becoming an LP (limited partner) in a venture capital fund.
Stuve said the organization looked at over 100 startups this year in search of “founders that have scalable businesses solid, business plans, and a clear exit strategy.”
The overall economic climate has opened up some unique opportunities for angels, Tighe said.
“In 2021, valuations were just really high and it was difficult for angels to get into a round if they weren’t in on the very earliest introduction to a company. Companies now need cash, valuations have come down, and cash is not as available,” which Tighe said has meant more startups have come back to angel investors to close bridge rounds this year in order to get in a better position to raise a Series A down the road.
May from ATA agreed. “If you’re committed to investing for the sake of returns, it’s more important than ever to continue to invest with these down cycles, making sure you’re deploying money as a part of a strategy as opposed to based on the market conditions.”
For Mosley, patient investors can see outsized returns during quieter times like what we’ve seen over the course of 2023.
“It can be a good time to invest, but as an angel, you have to know you may be in a deal a little bit longer than you normally would be because we are not seeing exits,” he added.
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Featured photo: Members from the Atlanta chapter of Golden Seeds, one of the largest and most active angel networks in the US. Photo provided by Golden Seeds
