The Eastern New York Angels fund has $600,000 to invest in new startups in the area. And it’s had that capital ready for two years.
The problem: They’re not finding the right fits.
“We’ve looked at a number of companies, but they weren’t ready,” Joe Richardson, managing partner of ENYA, said.
Richardson said in the last few years he’s noticed some trends changing the current landscape of thestartup scene, including slowed deal flow in 2022, meaning the number of early-stage startups and entrepreneurs seeking capital early on has dipped this year. ENYA specifically looks to invest in promising early companies using pooled capital from angel investors.
“We’re hoping that this will rebound in 2023,” he said.
Here are some of Richardson’s observations on the recurring patterns he’s seeing from startups seeking funding.
Where’s the business plan?
Of the businesses that are seeking investment, Richardson said many aren’t writing business plans. Instead, they’re presenting crowded PowerPoint slides.
Richardson said for investors — especially at ENYA — a business plan shows a level of preparedness.
“It’s the process of thinking through what you’re trying to develop, and how you’re going to market, how you’re going to sell it, and who’s going to buy it. Who are your customers? And how do you differentiate from someone else that might be in the same space?” Richardson said.
That lack of preparation is at odds with another trend: Investors are looking for businesses that are farther along in their development — a big change from when ENYA formed over a decade ago.
“One of the first things I’ve observed recently is that in the seed and startup market, it’s become a predominant stage for angels,” he said. “And what I mean by that is that we’re not investing in ideas that come out of a garage. Investing is really taking place more where there is a more formal product or service, that customer discovery has been done. And in many instances now, where there has been an indication of generating first-stage revenue.”
The hottest startup concepts right now: medical devices and life sciences technology.
There’s been a slowdown in startups focused on apps or software, Richardson said. Instead, there’s been a rise in companies focused on medical devices, medicine, life sciences, and software applications in health and health care.
ENYA’s made investments in this area. Glauconix, which is a specialty pharma research company that uses technology to reduce the cost of ophthalmic drug development, received a $600,000 seed investment from ENYA, won $100,000 in the NY Business Plan Competition, and was awarded $975,000 in SBIR grants from the federal government.
The company becameprofitable in 2019.
The area’s startup scene needs more engagement from colleges as well as entrepreneurs in the community.
The drop in deal flow could be reflective of less engagement in startup activities in higher education. Richardson said there’s less innovation coming out of thecolleges, and some are even raising the amount of prize money for pitch and business plan competitions to encourage more people to participate.
Another group he thinks could step up its engagement: successful local entrepreneurs.
“We’ve had a lot of exits [in the Capital Region]. And some folks created a lot of wealth. It’s not the most robust region in the country, but we still have a lot of wealth here. And we, at times, lack participation in supporting the startup community,” he said.
“I just feel that it’s important that we get our entrepreneurs more engaged here and help them to develop successful businesses. And it’s all about mentorship.”
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