First-half angel investments climb 5 percent

Filed under Financial

By the Center for Venture Research at the University of New Hampshire

DURHAM, N.H. – The angel investor market in the first two quarters of 2011 showed signs of stabilization with total investments totaling $8.9 billion, an increase of 4.7 percent over the same period in 2010, according to the Center for Venture Research at the University of New Hampshire. That compares with a 30 percent market correction in the second half of 2008 and the first half of 2009, the center reported.

A total of 26,300 entrepreneurial ventures received angel funding during the first half of 2011, a 4.4 percent increase from the same period in 2010. And the number of active investors in the first two quarters of 2011 totaled 124,900 individuals, virtually unchanged from the year-ago period. The average deal size was $338,400 in the first half of 2011, compared with $337,300 in the same period of 2010.

“These data indicate that angels remain committed to this investment class and at slightly higher valuations than in 2010. While the market exhibited a stabilization from Q1 and Q2 2010, when compared to the market correction that occurred in 2008, these data indicate that the angel market appears to have reached its nadir in 2009 and has since demonstrated a slow recovery,” said Jeffrey Sohl, director of the UNH Center for Venture Research at the Whittemore School of Business and Economics.

Angel investments continue to be a significant contributor to job growth with the creation of 134,130 new jobs in the United States in 2011, or five jobs per angel investment.

Angels have significantly increased their penchant for seed and startup stage investing, with 39 percent of first- and second-quarter angel investments in the seed and startup stage, marking a 13 percent increase the year-ago period. This increase was reflected in a decrease in post-seed/start-up investing, with 60 percent of investments in early and expansion stage, compared to 70 percent in the first half of 2010. New, first-sequence investments represent 49 percent of first-half 2011 angel activity, an increase of 3 percent from the same period in 2010.

“Historically angels have been the major source of seed and startup capital for entrepreneurs, and this return to seed and start-up investing is an encouraging sign. While there remains a need for seed and startup capital and a capital gap in this stage, if the return to seed and startup investing continues, this will signify an improvement in both new venture formation and job creation,” Sohl said.

Healthcare services/medical devices and equipment accounted for the largest share of investments, with 25 percent of total angel investments in the first and second quarters of  2011, followed by industrial/energy (17 percent), biotech (14 percent), software (11 percent), media (8 percent) and retail (8 percent).

“Industrial/energy has shown a continued increase since 2010, reflecting a growing interest in clean tech investing by angels. Retail and media have solidified their presence in the top six sectors, mainly due to investing in social networking ventures,” Sohl said.

For more information, visit http://wsbe.unh.edu/cvr.

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