Angels in Recovery—But Still Have a Ways to Go
According to the latest survey from the Center for Venture Research a the University of New Hampshire, the angel investor market is showing promising signs of recovery—across the board in terms of dollars invested, total numbers of investments and total number of investors.
The first two quarters of 2012 showed total dollars invested at $9.2 billion, an increase of 3.1 percent over the same period in 2011. Those investments reached a total of 27,280 entrepreneurial ventures, which is a 3.7 percent increase from the same period in 2011. Meanwhile, the number of active investors in Q1 and Q2 2012 was 131,145 individuals, a 5 percent increase from Q1 and Q2 2011. The increase in total dollars and the matching increase in total investments resulted in an average deal size of $336,390 in the first half of 2012, comparable to the deal size in the same period in 2011 of $338,400.
“These data indicate that angels remain major players in this investment class and at valuations similar to the first and second quarters of 2011. While the market exhibited a stabilization from the first and second quarters of 2011, when compared to the market correction that occurred in 2008, these data indicate that the angel market has demonstrated a steady recovery since 2008,” said Jeffrey Sohl, director of the UNH Center for Venture Research at the Whittemore School of Business and Economics.
The Center for Venture Research is commonly cited here by the Policy Dialogue on Entrepreneurship and has been conducting research on the angel market since 1980.
Angels continued their appetite for seed and start-up stage investing, with 40 percent of Q1 and Q2 2012 angel investments in the seed and start-up stage, which is virtually unchanged from the 39 percent in the same period last year. There was, however, a shift to expansion stage financing to 22 percent of investments in Q1 and Q2 2012 from 13 percent in Q1 and Q2 2011, indicating that angels are positioning their investments for exits in the coming year. New, first sequence, investments represent 49 percent of Q1 and Q2 2012 angel activity, unchanged from the same period last year.
“Historically angels have been the major source of seed and start-up capital for entrepreneurs and while this stabilization in seed and start-up investing is an encouraging sign it remains below the pre-2008 peak of 55 percent, signifying that there remains a need for seed and start-up capital for both new venture formation and job creation,” Sohl said.
Healthcare services/medical devices and equipment accounted for the largest share of investments, with 24 percent of total angel investments in Q1 and Q2 2012, followed by software (14 percent), biotech (12 percent), retail (10 percent), IT services (7 percent) and media (6 percent).
“After a favored status in the top six sectors for industrial/energy since 2009, which reflected an interest in clean tech investing, interest in this sector waned in the first and second quarters of 2012. Retail and media have solidified their presence in the top six sectors, mainly due to investing in social networking ventures,” Sohl said.
Angel investments continue to be a significant contributor to job growth, with the creation of 106,400 new jobs in the United States in 2012, or 3.9 jobs per angel investment.