Angel Investing in 2013 Approaches Record High; 298,800 Individuals Invested $24.8 Billion Says UNH Study

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. 

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 6^th place in 2012 to 2^nd 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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Sustainable Growth in U.S. Angel Investor Market Shown In New UNH Center for Venture Research Study

The U.S. angel investor market in the first two quarters of 2013 showed signs that sustainable growth has taken hold since the correction in the second half of 2008 and the first half of 2009. Total investments were at $9.7 billion, an increase of 5.2 percent over the same period in 2012, according to the Center for Venture Research at the University of New Hampshire. 

The Center released new data about the state of the U.S. angel investor market today, Wednesday, Oct. 16, 2013.

A total of 28,590 entrepreneurial ventures received angel funding during the first half of 2013, a 4.8 percent increase from the same period in 2012. The number of active investors in Q1 and Q2 2013 was 134,895 individuals, a 2.9 percent increase from Q1 and Q2 2012.

The increase in total dollars and the matching increase in total investments resulted in an average deal size of $337,850 in the first half of 2013, comparable to the deal size in the same period in 2012 of $336,390.

“These data indicate that angels remain major players in this investment class and at valuations similar to the first half of 2012. While the market exhibited a pattern similar to the first half of 2012, 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 Peter T. Paul College of Business and Economics.

Seed Investing

Angels continued their appetite for seed and start-up stage investing, with 38 percent of Q1 and Q2 2013 angel investments in the seed and start-up stage, which is virtually unchanged from 40 percent in the like period last year. There was, however, a shift in early stage financing (post-seed and start-up) to 51 percent in the first half of 2013, an increase from 38 percent from the previous period. New, first-sequence investments represented 49 percent of Q1 and Q2 2013 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 has remained consistently below the pre-2008 peak of 55 percent, signifying that there continues to be a need for seed and start-up capital for both new venture formation and job creation,” Sohl said. 

Software accounted for the largest share of investments, with 24 percent of total angel investments in Q1 and Q2 2013, followed by health care services/medical devices (21 percent), industrial/energy (10 percent), retail (8 percent), biotech (8 percent) and IT services (6 percent).

“Industrial and energy investing has been a consistent performer since 2009, which reflects an interest in clean tech investing. Retail and biotech have solidified their presence in the top six sectors,” Sohl said.

Angel investments continue to be a significant contributor to job growth, with the creation of 111,500 new jobs in the United States in the first half of 2013, or 3.9 jobs per angel investment. 

CVR vs HALO 

Our regular readers will note that today we have published first half 2013 survey results from both the CVR and and the Angel Resource Institute.  Discrepancies  in numbers such as average investment size are easily explained by the fact that this CVR report covers all angels in the US,  including a great number of individuals and informal groups, while the HALO reports covers investments by recognized angel groups. You can find the results of the HALO report here  and a summary Infographic here.

Center for Venture Research

The Center for Venture Research has been conducting research on the angel market since 1980. The center’s mission is to provide an understanding of the angel market and the critical role of angels in the early stage equity financing of high growth entrepreneurial ventures. Through the tenet of academic research in an applied area of study, the center is dedicated to providing reliable and timely information on the angel market to entrepreneurs, private investors and public policymakers. For more information visit https://paulcollege.unh.edu/research/center-venture-research or contact the center at 603-862-3341.

The UNH Peter T. Paul College of Business and Economics offers a full complement of high-quality programs in business, economics, accounting, finance, information systems management, entrepreneurship, marketing, and hospitality management. Programs are offered at the undergraduate, graduate, and executive development levels. The college is accredited by the Association to Advance Collegiate Schools of Business, the premier accrediting agency for business schools worldwide. For more information, visit paulcollege.unh.edu.

The University of New Hampshire, founded in 1866, is a world-class public research university with the feel of a New England liberal arts college. A land, sea, and space-grant university, UNH is the state's flagship public institution, enrolling 12,300 undergraduate and 2,200 graduate students.

Jeffrey Sohl

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Proportion of women angel investors continues to rise

A guest post by  Stephanie Baum

 

Are women shaking up angel investment? That could be one conclusion made from a new report showing that the proportion of active women angel investors allocating funds to healthcare and biotechnology, among other sectors, nearly doubled in 2012. Angel investors who are women rose from 11 percent in 2011 to 22 percent in 2012, according to the report analyzing angel investment trends over the past year.

Although the increase coincided with a decrease in the overall number of active investors in 2012, it’s a notable development that reflects a long-term trend, according to Jeffrey Sohl, the director of the Center for Venture Research at the University of New Hampshire which published the report.

“One has to surmise that more women are coming in than leaving,”said Sohl in a phone interview with MedCity News. “It’s a healthy development and I’m optimistic that the trend will continue.”

Although women-led angel groups like Golden Seeds and Seraph Capital are contributing to the increased number of women angel investors and more entrepreneurs, Sohl called attention to the influence wielded by women in other angel groups — the focus of a report published by the center in 2011. “When there are fewer women in the group they are not seen as viable players.” But when more than 10 percent of the investors in an angel group are women, they increase the investment activity of the group.

Another factor contributing to the trend is that there are more women than men in universities right now.

Women-owned ventures accounted for 16 percent of the entrepreneurs that were seeking angel capital and 25 percent of these women entrepreneurs received angel investment in 2012, according to the report.

Among some of the other significant findings in the report by the Center for Venture Research at the University of New Hampshire, the angel investors who did participate in 2012 contributed 20 percent more than 2011. Average investments were $85,435.

“The women investors we speak with at the angel groups are pretty adamant that they they are not doing it for philanthropy,” Sohl said. “They are looking for a good deal and when it’s a choice between a good deal with a startup led by a man versus a bad deal with a startup led by a woman, a woman-led business won’t overcome that risk.” But if there is a good deal to be done with a woman-led business, it’s seen as a win-win.

The healthcare category, which includes healthcare services, medical devices and equipment, came second to software as far as investment priorities were concerned, with companies in the sectors getting 14 percent of the $22.9 billion in total angel investments in 2012. Investments in biotechnology companies accounted for 11 percent of investments, closely following retail.

And yet, angel investment at the early stage fell to 33 percent of investments in 2012 compared with 40 percent in 2011, a trend that suprised Sohl.

’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,’ Sohl said. “We really need that investment at the seed stage. My hope is that this is an anomaly.”

Reprinted by permission from Stephanie Baum.  She is the East Coast Innovation Reporter for MedCityNews.com where she covers healthcare startups across health IT, drug development and medical devices; and innovations deployed to improve medical care. She graduated from Franklin & Marshall College in Pennsylvania and has worked across radio, print and video. She's written for The Christian Science Monitor, Dow Jones & Co. and United Business Media.

  

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UNH Report Released: THE ANGEL INVESTOR MARKET IN 2012: A MODERATING RECOVERY CONTINUES

“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