Bay Area angel investing takes flight amid pandemic

By Mark Calvey  –  Senior Reporter, San Francisco Business Times

Feb 8, 2021 Updated Feb 8, 2021, 3:57pm PST

Early year-end numbers indicate that 2020 was a banner year for angel investing, with wealthy investors putting their shelter-in-place time to good use.

“We found our members had more time to invest instead of being in their cars or traveling all around the world,” said Randy Williams, founder and CEO of Keiretsu Forum, founded in 2000 to help angel investors vet investment opportunities.

The San Francisco-based angel network, which operates 55 chapters around the globe, said it funded more than 300 deals worldwide, totaling about $82 million. The number of deals reached a record, up 16% over 2019. The total dollar amount invested was essentially flat with 2019 as investors spread their investments across more companies and pulled back from real estate investments. The growth in deals is expected to continue this year.

“We project substantial growth across the board in 2021,” Williams said, adding that he’s seeing increasingly active family offices accessing Keiretsu Forum’s syndicated deal flow to put money to work in follow-on fundings to late-stage companies.

Many of Keiretsu Forum’s 2020 investments were in life sciences and medical devices as the pandemic grabbed headlines. Real estate, a long popular investment among Keiretsu Forum’s 3,600 members, saw a pullback, except for self-storage facilities.

Keiretsu Forum members work together to find and evaluate investment opportunities and then invest directly in the startups. Companies in the greater Bay Area that received funding through Keiretsu Forum last year included SageMedic, a Redwood Shores company pursuing better cancer therapy; San Francisco-based Health Hero, a telehealth company that helps schedule services and coordinate care; and Cargo Chief in Millbrae, which relies on its technology to boost efficiency in shipping by truck.

The University of New Hampshire’s Center for Venture Research is expected to release its report on angel investing for all of 2020 by the end of March. The center’s first half report for 2020 captured the early days of the pandemic, when things looked grim. 

But angel investing showed a dramatic improvement in the second half of the year, Jeffrey Sohl, UNH’s Center for Venture Research told me Monday, adding that Main Street’s small businesses got hit hard, but that angels focus on fast-growing promising startups, as venture capitalists do.

“My earlier predictions were off. The pandemic won’t affect the angel investor market as much as I had thought,” Sohl said.  

He said software solidified its place as the most popular area of investment, getting 30% of investment dollars in looking at full year 2019 and the first half of 2020, followed by health care, getting 23% and biotech, 11%.

The pace of IPOs and large amounts of cash held by Apple, Microsoft and other big companies also bode well for angel investors and their chances of a successful exit on earlier investments.

“Buyouts are the best exits for a company, even better than an IPO,” Sohl said. “Being bought out by a big company for cash means you don’t have to worry about underwriting, road shows and the vagaries of the stock market.”

--Original article published on San Francisco Business Times