Market Size. The angel investor
market in 2013 continued the upward trend started in 2010 in both investment dollars
and in number of investments.
Total investment in 2013 was $24.8 billion, an increase of 8.3% over 2012, according to the Center for Venture Research at the University of New Hampshire. A total of 70,730 entrepreneurial ventures received angel funding in 2013, an increase of 5.5% over 2012 investments. The number of active investors in 2013 was 298,800 individuals, an increase of 11.4% from 2012.
Total investment in 2013 was $24.8 billion, an increase of 8.3% over 2012, according to the Center for Venture Research at the University of New Hampshire. A total of 70,730 entrepreneurial ventures received angel funding in 2013, an increase of 5.5% over 2012 investments. The number of active investors in 2013 was 298,800 individuals, an increase of 11.4% from 2012.
The increase in both total dollars and the number of
investments resulted in a deal size for 2013 that was slightly higher than in 2012
(an increase in deal size of 2.6% from 2012).
These data indicate that angels were active investors in 2013 but those
that did invest decreased their individual investments from $85,435 in 2012 to
$83,050 in 2013, a decrease of 2.8%. The
$24.8 billion in total investments is close to the market high of $26.0 billion
that occurred in 2007.
Job
Growth. Angel investments were a significant contributor to
job growth with the creation of 290,020 new jobs in the United States in 2013,
or 4.1 jobs per angel investment.
Sector Analysis. Software
remained in the top sector position with 23% of total angel investments in 2013,
followed by Media (16%), Healthcare Services/Medical Devices and Equipment (14%),
Biotech (11%), Retail (7%) and Financial Services/Business Products and
Services (7%). The jump in Media
investments from 6th place in 2012 to 2nd in 2013 reflects the growing investor interest in social media and applications.
Stage.
Angels increased their investments in the seed and
start-up stage, with 45% of 2013 angel investments in the seed
and start-up stage, up from 35% in 2012.
The biggest factor in this increase was in the seed stage with 21% of
angel investments in 2013, up from 9% in 2012.
Angels also exhibited an increased interest in early stage investing
with 41% of investments in the early stage, up from 33% in 2012. Expansion financing exhibited a significant decrease
to 12% of deals in 2013, down from 29% in 2012.
Investment activity was evenly divided between new, first sequence
investments and follow-on investments, unchanged from 2012. This increase in seed/start-up stage is an
encouraging sign since seed capital is the stage of need for our nation’s
entrepreneurs.
Valuation. The average angel deal
size in 2013 was $350,830, an increase of 2.6% from 2012, and the average
equity received was 12.5% with a deal valuation of $2.8 million.
Yield Rates. The
yield rate is defined as the percentage of investment opportunities that are
brought to the attention of investors that result in an investment. In 2013 the yield rate was 21.6%, virtually
identical to 2012 (21.3%). While a high
yield rate is an encouraging development for entrepreneurs seeking angel
capital there is a question of the sustainability of this rate and it is possible
that the yield rate will retreat to the historical average of 15%.
Women
and Minority Entrepreneurs and Investors. In 2013, women angels
represented 19.4% of the angel market, similar to 2012 (21.8%). Women-owned ventures accounted for 23% of the
entrepreneurs that were seeking angel capital and 19% of these women
entrepreneurs received angel investment in 2013. It is interesting to note that fewer women
entrepreneurs were seeking angel capital in 2012 (16%) but more of those women
received angel capital in 2012 (25%).
This high yield rate for women entrepreneurs in 2012 may have attracted
more women entrepreneurs to the market and account for the increase in the
percentage of women seeking angel capital in 2013.
Minority angels accounted for 4% of the angel population
and minority-owned firms represented 7% of the entrepreneurs that presented
their business concept to angels, figures comparable to 2012. The yield rate for these minority-owned firms
was 13%, which is below the market yield rate in 2013. Thus, the goal would be to both increase the
percentage of minority entrepreneurs seeking angel capital and increase the quality.
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The Center for Venture Research (CVR) has
been conducting research on the angel market since 1980. 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.
The Center for Venture Research would like to thank
all the angel groups and individual angels that participate in our research
efforts. The response rate for this
survey was 29%. The Center for VentureResearch also provides seminars to angels and entrepreneurs, and research reports on aspects of the angel market are also available.
The full citation for this report is: Jeffrey Sohl, “The Angel
Investor Market in 2013: A Return to
Seed Investing”, Center for Venture Research, April 30, 2014.
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