Tuesday, April 30, 2013

Rep. Schweikert Speaks on the ‘JOBS’ Act at the ACA Summit; Golden Seeds Jean Peters tells congress about Angels

During his keynote address at last week’s ACA Summit, Congressman David Schweikert (R-AZ), Chairman of the Small Business Subcommittee on Investigations, Oversight, and Regulations, spoke passionately of the importance of creating an ecosystem conducive to entrepreneurial investment. 

“Capital formation is the future of job creation, and therefore our economy,” says Schweikert.  “I believe that by the end of the decade the way we finance will look very different than it did when we grew up, and it is our responsibility to ensure that legislation supports present day needs.”

In the 112th Congress, Schweikert was the leading author of investment legislation which became part of the ‘JOBS’ Act, signed into law by President Obama.  In Congress, Schweikert is a prominent voice in driving the Securities and Exchange Commission (SEC) to promulgate rules on the ‘JOBS’ Act.  The ‘JOBS’ Act, passed more than a year ago, includes a number of initiatives aimed at increasing access to capital for startups and high growth firms, and requires the SEC to publish detailed rules before activities such as equity crowdfunding may begin.

“We were honored to have Congressman Schweikert join us at the Summit,” says ACA Chairman David Verrill.  “He is a leading voice for angel investors and a tenacious advocate for driving the SEC rulings related to the ‘JOBS’ Act.  We also appreciate his advocacy for an expanded Regulation A and IPO onramp, the two pieces of the JOBS Act he spearheaded and which are leading to exit opportunities for investors and to growth for entrepreneurial companies.”

Just a week prior to the Summit, Jean Peters, ACA Board Member and Managing Director of Golden Seeds, testified before the subcommittee chaired by Mr. Schweikert to advocate on behalf of angel investors and entrepreneurs. The “JOBS Act Implementation Update” hearing was hosted by the House Small Business Subcommittee on Investigations, Oversight, and Regulations and witnesses included representatives of the SEC, entrepreneurs, investors, and academics. 

“Angels fund the majority of early stage deals," Peters told the subcommittee. 

“Let me briefly describe angel investing: Angels are accredited investors whose capital comes from our personal pocketbooks. Most are former entrepreneurs, or were successful in business – and want to help others up that ladder. We invest at the most primal point of capital formation -- small startups with high growth potential.

“These companies come out of university research, local business incubators and economic development efforts. They reflect the entrepreneurism that is addressing the business, education and health care challenges we face as a nation today.

“Angels are the only source of capital for most startups, and supply up to 90% of outside equity raised by seed-stage companies after they exhaust any resources from friend and family, according to Kauffman Foundation estimates. 

“In fact, angel investors fund 20 times the number of seed-stage companies than venture capital. In 2011, angels invested $23 billion dollars in 66,000 early-stage companies, while VCs put a few billion into 1,800 startups, plus $20 billion in 2,000 later stage companies. 

“Angel-funded companies are in every state and industry sector. They are crucial for job growth. According to Census Bureau data, startups comprise less than 1% of companies, but generate 10% of new jobs in any given year. 

“Without angel funding, these businesses would simply never get off the ground.”

Of Peters’ involvement in the hearings, Congressman Schweikert comments: “We greatly appreciate Jean coming to DC to help tell this important story and further drive the SEC rules forward.   ACA plays an important role in providing a voice for public policy makers on the critical needs of angel investors and our mandate to do no harm in furthering our vision for economic growth of start-up enterprises.”

The 2013 ACA Summit, held last week in San Francisco, was the largest ever worldwide professional gathering of angel investors, with over 650 attendees.

Thursday, April 25, 2013


“The angel investor market in 2012 continued the upward trend started in 2010 in investment dollars and in the number of investments, albeit at a moderate pace. Total investments in 2012 were $22.9 billion, an increase of 1.8% over 2011,” according to the Center for Venture Research at the University of New Hampshire.  “A total of 67,030 entrepreneurial ventures received angel funding in 2012, an increase of 1.2% over 2011 investments. The number of active investors in 2012 was 268,160 individuals, a reduction of 15.8% from 2011. The small increase in both total dollars and the number of investments resulted in a deal size for 2012 that was virtually unchanged from 2011 (an increase in deal size of 0.6% from 2011). These data indicate that while fewer angels were active investors in 2012 those that did invest have increased their individual investments substantially, from $70,690 in 2011 to $85,435 in 2012, an increase of 20.9%. It is possible that given the robust returns in the public equity markets, some angels may have reallocated their portfolios and reduced their angel investing activity but those angels that continued to invest remained quite active.”

The official title of this report is: Jeffrey Sohl, “The Angel Investor Market in 2012: A Moderating Recovery Continues”, Center for Venture Research, April 25, 2013, available HERE. The Center for Venture Research (CVR) has been conducting research on the angel market since 1980 and coined the term “angels” to refer to early stage business investors. The CVR’s mission is to provide an understanding of the angel market through quality research. The CVR is dedicated to providing reliable and timely information on the angel market to entrepreneurs, private investors and public policymakers.

Other findings for 2012

Software remained the top sector for investing with 23% of total angel investments in 2012, followed by Healthcare Services/Medical Devices and Equipment (14%), Retail (12%), Biotech (11%), Industrial/Energy (7%) and Media (7%). Industrial/Energy investing has remained a significant sector for angels for the last few years, reflecting a continued appetite for clean tech.

Angel investments were a significant contributor to job growth with the creation of 274,800 new jobs in the United States in 2012, or 4.1 jobs per angel investment.

The average angel deal size in 2012 was $341,800 and the average equity received was 12.7%, resulting in a deal valuation of $2.7 million.

Angels decreased their investments in seed and start-up capital, with 35% of 2012 angel investments in the seed and start-up stage, down from 42% in 2011 and matching seed and startup investing in 2010 (31%). Expansion financing exhibited a significant increase to 29% of deals, up from 15% in 2011. Investment activity was evenly divided between new, first sequence, investments and follow-on investments, the same as in 2011. This decrease in seed/start-up stage is of concern since that is the stage of need for our nation’s entrepreneurs.

In 2012 women angels represented 21.8% of the angel market, a significant increase from 2011 (12.2%). Women-owned ventures accounted for 16% of the entrepreneurs that were seeking angel capital and 25% of these women entrepreneurs received angel investment in 2012. While the number of women seeking angel capital is low, the percentage that received angel investments (25%) is above the market yield rate and these data indicate that when women do seek angel capital they lead the market yield rate by 4%.

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Jeffrey Sohl, director of the UNH Center for Venture Research

Tuesday, April 16, 2013

Halo Report infographic summarizes full year angel activity for 2012

The HALO report on angel activity for 2012, sponsored by CB Insights and Silicon Valley Bank, was released this morning.  You can download the entire 33-page report from the Silicon Valley Bank website by clicking here.

Like many sports fans, we delight in rooting  for the underdog; our special congratulations to the Maine Angels, a group from a small and economically distressed state, and to Chair Sandra Stone, for joining the list of the ten most active angel groups.

Friday, April 12, 2013

Twenty Kiwi Angels to Attend ACA in San Francisco

Lest you underestimate the international scope of the angel group movement, or the influence of the Angel Capital Association (ACA) and US based angel groups, note that 20 angels from New Zealand will be attending the ACA summit in San Francisco next week. 

"What you get is a great feel for the scale of investments that are being done around the globe," says Ken Erskine, Director of the ICE Angels.  "What you soon recognise is that angel investing is popular around the world but the real focus in leadership tends to come out of the US."

ICE Angels is New Zealand’s largest group of Angel investors, with 130 members from all over New Zealand and overseas. Since founded in 2003, the ICE Angels have invested over $38 million in 39 companies over 70 investment rounds.

The group with Erskine includes Robbie Paul of Auckland business incubator The Icehouse, Angel Association New Zealand chairman Ray Thomson, and Brian Casey, chairman of the Ice Angels investment group. Founded in 2001, The Icehouse  has worked with over 3,500 ambitious owner managers – from start-ups, to established multi-million dollar companies, helping to raise over $50 million in capital, accelerating business growth and driving wealth creation.

Four New Zealand start-ups are also traveling to San Francisco to attend an event at the Kiwi Landing Pad - an organization which helps New Zealand tech companies establish and grow their businesses in the US. Erskine said the event would give companies a chance to pitch their business plans to a panel of US-based New Zealand entrepreneurs, including Claudia Batten - one of the founders of video game advertising firm Massive, sold to Microsoft in 2006 - and Victoria Ransom, who sold her social media marketing firm Wildfire to Google for US$250 million ($292 million) last year.

The four start-ups are intellectual property solutions provider Parrot Analytics, BigLittleBang, which has developed an online 3D virtual world for children, agri-tech business CropLogic, and biotech developer PolyBatics.

BigLittleBang founder Chris White, who is coming to California, said the trip would also provide the opportunity to pitch to US angel investors. "We're looking for advisers and potential board members in the US," he said. "We're looking for expertise [from people who] also want to have skin in the game."

White said the US was BigLittleBang's biggest market and the company was looking to establish a presence here.

Erskine believes New Zealand will  have the largest contingent of investors, apart from the US, at the summit.

Our Editor, on left, working in a real ice house 50 years ago