When the pandemic hit, we were all left with a bitter taste in our mouths — especially as business owners. Uncertainty was a constant, sales and customer interest were wildly volatile and for many businesses, it became less about planning for the rest of the year and more about surviving the next few months.
My company, Circle 5 Books, which focuses on web and marketing copy, did not take much of an active stance on the pandemic. We have and still work remotely, and thankfully, writing is always in style.
That being said, I cannot imagine the pressures indulged upon other small businesses. Those that were immediately and repeatedly impacted, such as hospitality and physical retail, are now facing closures.
Does that mean we, as small business owners, are done for? Or, are there actually more opportunities for growth if we just take the time to look?
Funding during a crisis
During a lengthy crisis, it can be easy for potential and current business owners to ditch any thoughts of seeking out funding. Banks are tightening credit qualifications, friends and family have their own concerns, and crisis funds, like the PPP, are limited in their scope.
But what about angel investment? Are those investors, who have a personal stake in funding small businesses, still doing so during an economic downturn? Well, that really does depend on what your business is and the industry it serves.
If you are opening a pet grooming business, do not seek angel investment. Try to find a secure bank loan. But if you are seeking an industry that solves a COVID-related problem, you are more likely to attract Angels to your pitch.
Investors are looking for solutions to COVID-related problems
So, saying the market is down is merely a great excuse for not trying. It is not so idyllic. If you think you cannot open your small business’s doors because there is no funding, you are wrong.
Right now, Angels are looking for savvy investments, mostly as dire solutions to the world’s current needs.
In fact, right now there are three crucial areas of business that are capable of withstanding that first elevator pitch: healthcare, technology, and education. These are sectors of small business that are in high demand.
If you have an idea for something that solves the current crisis, you are looking at much larger Seed rounds and a much more extenuated investment. Seed rounds have grown substantially, and angels are actually investing twice as much in Seed rounds since the pandemic hit. The standard Seed round was once around $75,000 to $150,000 startup. It is now up to $300,000.
This is because Angels make their money by investing in startups. When there is a lack of such, their stomachs rumble! They need small businesses to make a buck, and they potentially lost hundreds to thousands of companies due to recent closures. They need to find viable opportunities to invest in.
The pool of small businesses to invest in is smaller
The hardest investment decision an Angel investor has to make is finding the company. With over one-half of small businesses closing their doors this year or last year, there is now far less competition for startups to gain an investor’s attention. And, we are seeing higher investment amounts for longer periods of time.
Again, investors are looking for smart solutions that tackle these problems, and that have the potential to remain viable even after the pandemic ends. That is because they know that by putting in $300,000 in Seed funding for a small business specializing in fixing the issue, they can expect a larger ROR (rate of return) over an extended period of time.
Risks are more acceptable
There’s a good chance that investors are more likely to take risks right now. This is again because fewer and fewer people are seeking funding from them. This leaves them with fewer investment opportunities unless you provide them.
That doesn’t mean that their standards or expectations have changed. An Angel right now will be looking for a startup that seeks to fix the problem at hand with a great outlook for future applications later on in time. If you want to succeed right now, jump into the game with an idea that will assist or renovate the current crisis while also seeking growth in later stages as time goes on.
Is now the best time to start a business?
Many of today’s most known companies were founded during an economic downturn. As an example, General Motors was founded in 1907 during The Great Depression. This may be due to the need for inexpensive transportation options at a time where most people’s wallets were exceedingly tight.
When a recession hits, that means there needs to be an entrepreneurial “umph” that allows us to solve the problem. Just like any great business plan, you must have a problem and a viable, valuable, and cost-effective solution to it. In this case, General Motors provided faster processing of information and transportation of vital resources across the country.
The Great Depression was an opportunity, not a death sentence. That is how we need to be thinking right now because that’s how Angel investors are thinking of it.
Now, here is the part to pay attention to — the cost of starting a small business right now can be virtually penniless. Because everything has gone virtual, overhead costs on furniture, office space, and equipment are at an all-time low. That means that what would cost us $300,000 in investment two years ago is now nil. Why not start now?
So, if you have an idea for a business, now is the time to jump into the game. Even if not in tech, healthcare or education, take into consideration the changing landscape for Angel investors.
In fact, look at it from their viewpoint. They just lost almost half of their investments that went to small businesses now closing their doors. so obviously the amount they can invest in is ten times higher when there is ten times less business. In turn, seek an investment with the state-of-mind of longevity.
Imagine tomorrow’s future problems, and how this pandemic might be a golden opportunity for success. Start your business now, get to know your industry, and research the history. Then, go and write that business plan and find an Angel investment group. Gust.com is the capital of Angel investors. You need to get on there and start pitching now before this opportunity proceeds our grasp.
Well, what are you waiting for? Get to it and start your business now!