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Angel Investors Investing Less?

  
  
  
  
  
  
  


investing lessUNH Center For Venture Research: Angel Investors Flee Seed and Start-Up Stage in First Half of 2010

October 26, 2010

According to the Angel Market Analysis done by University of New Hampshire's Center for Venture Research, angel investors committed fewer dollars in more deals in the first half of 2010, the lowest level in several years.  This trend could soon impact new ventures and job creation.

Total investments in the first half of 2010 were $8.5 billion, a decrease of 6.5 percent over the first half of 2009.

A total of 25,200 entrepreneurial ventures received angel funding in the first half of 2010, a 3 percent increase from the same period in 2009, and the number of active investors in the period was 125,100 individuals, a drop of 11 percent from the same period in 2009. The decline in total dollars, coupled with the small increase in investments, resulted in a 9 percent decline in deal size for the first and second quarters of 2010 compared with 2009. 

“These data indicate that while angels remain committed to this investment class they do so with a cautious approach to investing. Angels are committing fewer dollars in more deals, a result of the lower valuations,” said Jeffrey Sohl, director of the UNH Center for Venture Research at the Whittemore School of Business and Economics.

“Historically angels have been the major source of seed and start-up capital for entrepreneurs, and this declining interest in seed and start-up capital represent a significant change in the angel market. Without a reversal of this trend in the near future, the dearth of seed and start-up capital may approach a critical stage, deepening the capital gap and impeding both new venture formation and job creation. This change in investment behavior is likely an indication of both a need to increase investments in existing portfolio companies in order for these portfolio companies to survive the recession and an extended exit horizon,” Sohl said.

Healthcare services/medical devices and equipment accounted for the largest share of investments, with 24 percent of total angel investments in Q1 and Q2 2010, followed by biotech (20 percent), software (12 percent), industrial/energy (11 percent), which reflects a continued appetite for green technologies, retail (9 percent) and media (5 percent).  Retail and media have solidified their presence in the top six sectors, mainly due to a continued interest in social networking ventures.

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 http://wsbe.unh.edu/cvr or contact the center at 603-862-3341.

Source:http://www.unh.edu/news/cj_nr/2010/oct/lw26market.cfm

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