Investors Now Eager to Invest in Small Businesses
| 4 | Aug 2010 |
Small businesses struggling to raise cash can take heart. Venture capitalists are more confident and optimistic about investing than they were a year ago.
Venture capitalists (VC) are investors who traditionally invest large sums in businesses in exchange for an equity stake. A new VC survey found that 56 percent think the opportunities for investment are better now than they were last year.
They are particularly interested in investing in clean energy technology, consumer Internet/Web 2.0 (web sites that allow for user-generated content) and Internet marketing companies. They cited Silicon Valley and Boston and New York as the hottest markets for investing in businesses, according to the study, conducted by executive search firm Polachi, Inc.
For small businesses, the news is good. While VC tend to invest in businesses after they’ve gotten off the ground and proven themselves, their investment cousins, Angel Investors, are also feeling good about writing checks to small business owners.
“The quality of ideas from small businesses has never been higher,” said John Huston, manager of Ohio TechAngel Funds and former head of the Angel Capital Association. “Business valuations have returned to being reasonable.”
Huston agreed with the VC assessment regarding Internet and clean energy. He added that medical devices are also an industry in which investors are particularly interested.
Startups and small businesses looking to grow should consider looking for Angel Investors, who are often willing to invest smaller sums much earlier in a company’s development. They are also able to commit to an investment period of three to five years, longer than VC investments typically last, Huston said.
“We can disregard what’s going on in the public markets and focus on the social aspects of what we’re doing,” Huston told BusinessNewsDaily. “We share a desire to grow jobs and birth new companies.”