Measuring Up Startup Investment Opportunities

keiretsuJust finished lunch with a good friend, Young Lee, who was one of the senior executives at turnitin.com, which recently sold to iParadigms. After the sale he moved back to Seattle from the Bay Area.

We talked about various early-stage investment opportunities in this down market. We agreed that the current equity market or the real estate market seem rather unappealing, especially when neither of us envisioned an economic bounce back in the foreseeable future.

The startups in today’s market need to be more fundamentally sound than during the more optimistic times of the past. Business plans are scrutinized to a greater degree, money is tighter, and self-sustainability is expected in a relatively short period of time. Those business plans still standing are the fittest for survival.

Given this climate, the startups now represent a better ‘potential return versus risk ratio’ than during previous times. I’ve noticed some vibrancy in the local angel investment community. Obviously, others have come to the same conclusion as well.  

Another thought is that smaller companies that are born of today’s business environment are better organized to deal with the current economic times. The larger companies born of another era are mostly cutting fat overhead to survive. The bottom line is that many of them just don’t have the DNA for the changing environment. “You cannot change the stripe of a tiger.” 

If you are interested in the local angel investment community, there are many good groups. Some are more institutionalized like Alliance of Angels or Keiretsu Forum. Others are more informal networks of interested investors. Good luck to all those investing in our entrepreneurs.