(A
guest post by Loren G. Carlson and Ian Smith)
This is an interesting portrait of
Angels. More and more start-ups are looking to ‘angels’ for seed (and
beyond) financing, even though they know that angels can complicate future
rounds of financing. Buried within all of these statistics one that
caught my eye is only 6000 companies sold for $10m or more. Also, we can
assume that the ‘80-20’ rule applies to angel investing meaning that you need
to work very hard to raise a little money. Based on recent experiences in
CEO Roundtable it seems that high net worth individuals are currently a
preferred source of financing, especially in biotech. VC investing is
returning to some sectors – those that are currently in fashion like high tech
(a new bubble?) and healthcare.
I was inspired this week by Scott
Kirsner’s article – Mass.
IPOs don’t create many angel investors. I thought it would be interesting
to pull a few facts and estimates together for our entrepreneurial community. I
think these numbers bust a few myths and may surprise some prospective
investors.
1. There were 318,000 active angel investors in the US last year up some
20%. (Center
for Venture Research)
2. They invested $22.5Bn up 12.1%. (Center for Venture Research)
3. This implies an average angel investment of $70,755. (Center for
Venture Research) (larger than I would have guessed)
4. The $22.5Bn was invested across 66,230 companies, an increase of 7.3%,
implying an average deal value of $339,725, 4% increase. (Center for
Venture Research) (larger than I would have guessed)
5. The sectors attracting that money were in order: Software 23%,
Healthcare 19%, Industrial/Energy 13%, Biotech 13%, IT Services 7%, Media 5%.
(that’s 80% of it) (Center for Venture Research)
6. Angel investments that exited in 2011 did so 54% of the time by
selling out and 24% of the time by going bust. (Center for Venture Research)
7. In addition to this analysis, the first ever HALO
Report issued by CB Insights in conjunction with Silicon Valley Bank and
the Angel Resource Institute attempts to dig deeper into Angel Groups not just
individual angels. Their analysis provides even further insight to Angel
GROUPS. Specifically these groups invested $873m in 2011. (which implies
to me 4% of the total market investment above of $22.5Bn)
8. The $873m was invested in 573 deals at an average deal value of $1.5m
and a median value of $700,000, up a whopping 40% increase over 2010.
These seem really high to me.
9. Regionally the $873m was spent in order: California 21%, Great Lakes
15.5%, New England 14.6%, Southeast 12%, Southwest 8.9%, Mid Atlantic 8.9%,
Northwest 7.2%, New York 6.6%, Great Plains 4.1%.
10. Sectors wise Angel Groups spent their money 37.4% of the time on
Internet and 23.5% on Healthcare, that’s 61% right there. Mobile picked up
10.4% and Energy 4.3%.
11. The active Angel Groups were named by Halo as: Tech Coast Angels –
Southern California, Golden Seeds CA, MA, NY, Band of Angels (great name) Menlo
Park CA, Central Texas Angel Network, Austin, TX and Launchpad in Boston, MA.
Conclusions
1. I’m quite surprised there as
many as 318,000 active angel investors given how few businesses sell out every
year for $10m or above (6000) thus creating US angel investors.
2. I suspect there is a Powers Law curve at play and that a tiny % of big
hitters of the 318,000 are skewing the average towards $70k.
3. We need to conduct more research to understand the make up of 318,000 active
investors compared with only 573 deals tracked by the Halo Report of active
Angel Groups.
4. I worry that at both the macro $22.5Bn level and the smaller sample of
Angel Group level there remains a dominant software & healthcare mentality
at the expense of Energy, Media and IT services. It almost implies that
software and healthcare are less risky than other sectors or perhaps the
management teams just tell a better story!
--------------------------------------------------------------------------------------------------------
