In a recent blog by Mr. John Backus published in the Washington Post, Mr. Backus claims he would rather be a venture capitalist (VC) instead of an angel as there are too many companies being funded by angels. The angel investments will provide VCs with broad choices and limited competition for them as they make investments as 1 in 40 companies or less than 2.5% of angel funded companies will be able to obtain VC funding. He claims that we are in an “angel bubble” which will be exacerbated by the coming of crowd funding in 2013.

While he may be correct with his numbers I disagree on the outcome. A recent University of New Hampshire study noted that in 2010 angels invested on average $323,000 per company in 61,900 companies for a total of about $20 billion. Back in 1996 to 2000 Mr. Backus’s predictions may have held true. Today them might be self-serving hoping to drive down valuations of companies he is looking to invest in.

Technology is much less expensive these days. Companies can be started for less. Most CEOs are more realistic controlling expenses and consequently burn rates. Many with seed capital are able to bootstrap the rest of the way. It is possible to build a great company with limited capital, prove the metrics and then raise capital in other ways if required from sources other than VCs.