Startup failure rate, lack of liquidity fail to dim Asean angel investors’ optimism: survey
Nearly three-quarters of them indicated that they spread their capital across three to four asset classes to reduce risk
ANGEL investment network, AngelCentral, on Wednesday (Sep 4) said its annual investment survey has found that 80.6 per cent of angel investors were optimistic about the startup ecosytem over the next five to 10 years.
This is despite investors’ recognition of major risks such as a lack of liquidity and the high failure rate of startups weighing on the economic environment. Nearly three-quarters of angel investors (74 per cent) indicated that they spread their capital across three to four asset classes to reduce risk.
AngelCentral defines angel investors as individuals who have committed their personal money, time and network to early-stage companies, which are typically in the first 12 to 36 months of their operations.
The survey this year, which polled more than 70 Asean angel investors, sought to understand their views and investment approach amid a changing environment.
The angel investment network noted that the funding in the technology startup landscape dried up in 2022, and the drought extended over the next two years. The total funding in the first half of 2024 tumbled 58 per cent year on year to about US$1.4 billion, it said.
In response to the economic climate, 26.4 per cent of those polled said they further reduced their investment sizes in 2024. The usual ticket is now US$10,000 to US$20,000, with 40.3 per cent of investors saying their ticket size was in this range.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
For comparison, the most common ticket size in 2023 was US$20,000 to US$50,000. About 41.2 per cent of angel investors indicated their investment size fell within this range then.
About 70 per cent of those surveyed kept their angel portfolio at below 10 per cent of their total holdings.
Angel investing, which is considered risky, can offer significant returns. Outcomes can, however, often be “binary”, AngelCentral added.
Despite it being a highly illiquid investment class, and a high-risk activity, 36.1 per cent of those surveyed said they have not been actively tracking their returns.
Only 11.1 per cent of angel investors achieved returns exceeding three times their invested capital; 16.7 per cent of investors realised returns between one and three times their initial investment, and 22 per cent of them ran up overall losses.
“This gels with our findings that many angels invest not primarily for financial return,” AngelCentral noted.
A majority of angel investors (70.8 per cent) said they do not follow an overarching, explicit investment strategy; the remaining 29.2 per cent said they prefer to focus on particular sectors or concentrate on geographical areas such as Asean or Singapore-based startups.
While risks continue to weigh on the angel investment climate, about 30.6 per cent of respondents noted they are new to the investment activity, with under two years of experience.
Still, the overall profile of angel investors is stable. More than 80 per cent are men aged between 40 and 50, and are either employed in a corporate role or are business owners.
Copyright SPH Media. All rights reserved.
