Angels Spread Risk as well as Wings

Angel investors have become more conservative over the past couple of years, as reflected by the survey released recently by the Center for Venture Research at the University of New Hampshire's Whittemore School of Business and Economics. The survey reveals several concerns reflected in the data based on 2007 numbers. Potential borrowers should be aware of these trends.

The Center notes several figures of concern.

• Total investments made reached $26.0 billion, a mere 1.8% increase over 2006.
• Entrepreneurial firms receiving funding grew 12%, and the number of active investors increased 10.3%, indicating a smaller average deal size - probably an indication that investors were seeking to spread their risk further.
• Software, Healthcare, and Biotech netted 58% of total dollars invested.
• The Yield Rate, that is the number of proposals that were funded by angels, declined from 23% in 2005 to 14% in 2007, further reflecting a tightening market.

If you are considering approaching the angel market for funding, keep these trends in mind and have a full read of this study for more information.

Disintermediation - Watch Out for it in Your Business

Disintermediation - this is what is happening to the traditional music labels as they fight the changing market. The change has come about because of the proliferation of digital downloads of various types. Selling music on CD's and other physical media is declining fast. Learn some lessons from this kind of trouble, it could be you.

Middle men everywhere are in trouble. In the music business that includes the Labels, who come between the artists and the public. Their primary business is to market and distribute the music. Now artists can easily distribute themselves via the internet. The labels spend enormous money on finding and marketing bands, then make up for it with ridiculous distribution charges (the marginal cost of making a CD is less than a quarter). But if they don't distribute - all their money is gone, eh?

So although distribution has changed drastically, marketing is still needed by all but a few bands. After all, it is still a very competitive market - witness the great number and variety of acts at the recent South by Southwest festival. The labels have to find a method to get paid for their marketing prowess, that is all they have left. They may have found a solution with the recent agreement to work with Myspace.

Lesson - if you do several things well, and something or someone takes away one of your markets, you must decide to continue with what you do best, and get paid a premium for it, or find another business.

A Good Time to Review Your Real Estate Needs

Common knowledge says that commercial real estate follows the home or retail market by 12-18 months. That is, if home prices start tanking (like they have now or probably started last April) then commercial will follow. For commercial renters, this portends a good time to start negotiating for more flexible terms and/or cheaper space.

As Tery Pristin writes in the Square Feet column of the New York Times today, landlords have started to respond more quickly to smaller renters looking for space. It might not be cheaper, but you can find shorter leases and/or better options.

If your footprint needs are changing and you seek more or a different type of commercial space, now is the time to keep a close eye on your local market for good deals which should become more plentiful over the next year or so.