Would Angel Investors Invest in Oil Startups?
When considering the investment landscape, it's important to recognize that what angel investors are willing to invest in often differs from what they should invest in. Angel investors, known for taking on risky endeavors, often prioritize capital that they can afford to lose. This makes the investment landscape for startups, especially those in the oil sector, volatile.
General Angel Investor Behavior and Performance
Angel investor performance is not always commendable, which often leads them to invest in startups where decent returns can be expected, or in ventures that appeal to the next in a chain of greater fools. Despite skepticism, there are still opportunities in oil-related startups, albeit in declining numbers as the focus shifts towards more sustainable and renewable energy sources.
Investment in Oil Startups
The feasibility of angel investment in oil startups largely depends on the market conditions and the stage of the venture. For instance, investing in a down market is not typically advised for the faint of heart. However, if an angel investor has previously made significant investments in the oil and gas sector, they may recognize the aberrations and potential value still present in the market.
Alternative Investment Scenarios
From a technological standpoint, oil startups can also attract angel investors looking for profit in the development of new wells, which can be compared to real estate investments. However, even in this scenario, the traditional risk versus reward dynamic applies. New wells often require significant capital and come with inherent risks that many angel investors are hesitant to undertake.
Historical Funding Models
Oil startups have traditionally been funded by individual investors, both within and outside the industry. This model has been a cornerstone of the oil and gas sector for decades. However, as the market evolves, more standardized funding models are emerging, such as corporate venture capital, private equity, hedge funds, and other financial institutions that enter the fray in later stages of funding when more uncertainties have been resolved and the ventures start looking like a sure thing.
Specific Considerations for Oil Startups
In oil and gas towns like Houston and Calgary, there's a notable trend where most angel investors are limited to investing in energy businesses. This specialization can make it challenging for oil startups to secure funding. Therefore, for startups looking for angel investors, it's important to explore angel groups specifically in these regions to increase the likelihood of finding supportive investors.