The angel investor market in 2015 had a slight increase in investment dollars and in deal size according to a new report from the Center for Venture Research (CVR) at the University of New Hampshire.
The State Science & Technology Institute provides the following analysis:
In The Angel Investor Market in 2015: A Buyers Market, CVR reports that total angel investments in 2015 were $24.6 billion – an increase of 1.9% over 2014. CVR also reported that the total number of entrepreneurial ventures that received angel funding in 2015 declined by 3.1% from 2014 – in total 71,110 start-ups received funding. The result of these two trends was larger deal sizes for 2015 – an increase of 5.1% from 2014. CVR concluded that these findings, combined with yield rates and valuations data, indicate that angels were selective in their investment behavior in 2015.
While CVR contends that the angel market was robust in 2015 – approximately $24.6 billion in investments – they also believe that the selectivity of angels and decrease in valuations over the last three years indicates a continuing market correction in valuations. Other findings include:
Software maintained its top sector position with 18% of total angel investments in 2015
Other key industries include Healthcare Services/Medical Devices and Equipment (16%), Biotech (13%), Industrial/Energy (11%), Retail (10.6%), and Media (9%)
Angel investments contributed to the creation of 270,2000 new jobs in the U.S. – 3.8 jobs per angel investment
The average angel deal size was $345,390
The average equity received was 14.89% with a deal valuation of $2.3 million
Angel investment in the seed and start-up stage (28% of deals) was largely unchanged from 2014 (25% of deals)
Fort-five percent of all angel deals were early stage investments (46% in 2014)
Expansion and late stage investments also remained consistent with regard to percentage of total deals
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The good news is that angels are still investing. No, the dollars are not quite the same as during the glory days. But the numbers of deals in the first six months of this year increased by 6% over the same period in 2008.
Angels are also sprouting their wings differently in other ways. The Center for Venture Research (as reported by the State Science & Technology Institute) has the details:
The average deal size has fallen by 31 percent since early 2008.
The report attributes the change to lower company valuations and to angel investors taking a more cautious approach to investing without decreasing their level of activity. Investors have also begun shifting their focus away from seed- and startup-stage firms in order to support their portfolio companies and reduce their risk.
Seed- and early-stage deals have made up only 27 percent of angel investment in the first half of the year, its lowest point in several years. While expansion-stage investment remained unchanged, post-seed- and startup-stage investment rose to 58 percent of angel activity. Though angel capital still has a reputation for a focus on early-stage investments, later-stage deals have represented a majority of angel activity since 2008.
Health care has expanded its lead as the most popular sector for angel investment with 28 percent of all angel deals, according to the report. Software, once the leading angel recipient, represented only 14 percent of investment. The industrial/energy sector grew to 13 percent of deals, up from 10 in the first half of 2008, which the report attributes to a continued interest in green technologies.
Read the full report from the University of New Hampshire Center for Venture Research.
The consensus appears to be that those looking to start or expand their business can’t find the necessary financial resources. As is often the case, perception does not equal reality.
Angel investors are only one part of the financing mix. But in a 2008 analysis from the University of New Hampshire’s Center for Venture Research, the State Science & Technology Institute reports that while fewer dollars flowed to entrepreneurs last year, the number of deals held steady.
Some of the highlights:
Investment fell 26.2% to $19.2 billion
Deals declined only 2.9% and the number of individual investors actually increased
Forty-five percent of angel deals involved companies at the seed or start-up phase, an increase from 39% in 2007
Health care/medical devices and equipment passed software as the most popular investment category
10% of companies reviewed by angel investors received funds, continuing a downward trend from 23% acceptance in 2005
The latter figure, however, has little to do with the economy. What it shows, and what should be taken from the numbers, is that the best ideas and organizations can still have their angel aspirations fulfilled. Isn’t that the way it should be?