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2010 Shows 14% Increase In Angel Investor Funding & Deals

  
  
  
  
  
  
  

center for venture researchThe angel investor market in 2010, following a considerable contraction in investment dollars in 2008 and 2009, exhibited a rise in investment dollars and in the number of investments. Total investments in 2010 were $20.1 billion, a robust increase of 14% over 2009, according to the Center for Venture Research at the University of New Hampshire.

A total of 61,900 entrepreneurial ventures received angel funding in 2010, an increase of 8.2% over 2009 investments. The number of active investors in 2010 was 265,400 individuals, a small growth of 2.3% from 2009. The significant increase in total dollars, coupled with the rise in the number of investments resulted in a larger deal size for 2010 (an increase in deal size of 5.4% from 2009).  These data indicate that angels have significantly increased their investment activity, and are committing more dollars resulting from higher valuations. It appears that a cautious optimism to
investing is taking hold. Noteworthy changes did occur in the critical seed and start-up stage investment landscape.

Sector Analysis

The following is a breakdown of angel investments by sector:

  • 30 % Healthcare Services/Medical Devices and Equipment
  • 16% Software
  • 15% Biotech
  •  8% Industrial/Energy
  •  5% Retail
  •  5% IT Services

Job Growth

Angel investments continue to be a significant contributor to job growth with the creation of 370,000 new jobs in the United States in 2010, or 6 jobs per angel investment.

Return Rates

Mergers and acquisitions represented 66% of the angel exits, and bankruptcies accounted for 27% of the exits in 2010. About half of the angel exits were at a profit and annual returns for angel’s exits (mergers and acquisitions and IPOs) were between 24% and 36%, however, these returns were quite variable.

Stage

Angels again reduced their investments of seed and start-up capital, with 31% of 2010 angel investments in the seed and start-up stage, a decrease of 4% from 2009. Angels also exhibited an increased interest in post-seed/start-up investing with 67% of investments in the early and expansion stage, an increase from 2009. New, first sequence, investments represented 41% of 2010 angel activity, also a decline from the last year of 6%. This decrease in seed/start-up stage and first sequence investing is of concern. However, as existing investments move to an exit and thus reduce the need for follow-on investments, it is anticipated that angel capital will become available for new seed stage investments.

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 2010 the yield rate was 18.4%, an increase from the 2009 yield rate (14.5%). While a higher yield rate is an encouraging development for entrepreneurs seeking angel capital there is a question of the sustainability of this rate. As the yield increases, more entrepreneurs may begin to seek angel capital and as this supply increases it is possible that the yield rate will retreat to the historical average of 10% to 15%.

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. For more information visit Center for Venture Research or contact the CVR at 603-862-3341.

Original article credits:

Jeffrey Sohl, “The Angel Investor Market in 2010: A Market on the Rebound”, Center for Venture Research, April 12, 2011.

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