A recent post by The Entrepreneurial Mind quotes a report from the National Venture Capital Association (NVCA) that venture capital (VC) investments were down 8.5% during the first quarter of 2008 when compared to the last quarter of 2007. The report also found that deal flow was also down.

It is interesting to note, however, that Angel investors appear to be more optimistic as I mentioned in a post in early April. In the Angel Confidence Report survey released by the Angel Capital Association (ACA), 55 percent of the respondents said the number and total dollars invested will increase this year, while 32 percent expected it to be the same as 2007.

But this isn’t the case where Angels are seeing a better class of startup companies than VCs. More than anything else, the disparity may have more to do with the different investment horizons of these two groups of investors.

While more Angels are now pursuing later stage deals (as Dr. Jeff Cornwall of The Entrepreneurial Mind points out), most Angel investors still invest in seed and early-stage companies — the ACA Angel Confidence Report reports that angels expect to invest in seed and startup companies (81%) and early-stage firms (85%). As early-stage investors in startups, Angels have a decidedly longer-term investment horizon than VCs and would need to be more patient and optimistic about their prospects.

© Eye on Startups & The Startup Guidebook