Angel Funders Report 2021 - Flipbook - Page 30
Size Matters: Revenue and Employees
While angels prefer early-stage companies for initial investments, they still favor
companies that have begun to generate revenue, even if that revenue is very
small. Nearly 50% of revenue stage companies funded by angels had less than
$1 million in revenues, with most having revenues under $500K, as shown in
Figure 17. There was a 50% increase in the funding of pre-revenue companies,
representing one third of angel investments in 2020, perhaps a reflection of
unusual market conditions. Many of these pre-revenue companies were in health
care and information technology sectors.
FIGURE 17. Angels Continue To Invest Early in the Revenue Cycle
Many angels’ portfolio companies have very few employees at time of investment.
Figure 18 shows that 75% of companies have 5 or fewer employees at time of
funding. Often, angels play a unique role in providing essential expertise in the
early stages of company growth, in addition to their financial investment. One
important use of seed funding is building out management teams and other key
positions needed to drive company growth.
While growing revenues did not drive larger group investments, company
maturity, as indicated by number of employees, did correlate with the amount
of capital that angels invested. Figure 18 shows that companies with more than
5 employees received 20% more funding and that companies with 50 or more
employees received double the funding of less mature businesses.
It is likely that companies with smaller teams were still in product development or
pre-revenue stages, while larger teams indicate a need for significant investment
in sales, marketing, business development, people, and programs, requiring much
FIGURE 18. Most Companies Have 5 or Fewer
Employees When Angels Invest
28 | Portfolio Companies
Angel Funders Report 2021 | 29