A new report from the University of New Hampshire’s Center for Venture Research details the give and take for Angel Investors in the U.S. for 2008. Emphasis was placed on “give and take” because the Angel market saw considerable contraction in total investment dollars from the previous year, but exhibited little overall change in the number of investments made. 2008 Angel investments were valued at $19.2 billion, a drop of 26.2% compared to 2007. A possible silver lining to the situation is that a total of 55,480 entrepreneurial ventures received angel funding in 2008, a modest 2.9% decline from ’07. These numbers combined to see average deal sizes shrink by 24% for the year.
All this means is that in a severely slumping economy, Angels are being more cautious in how and where they invest their money (further backed up from the lack of people fleeing the Angel world. The number of active investors in 2008 was 260,500 individuals, virtually unchanged from 2007). This is important to note because Angels have, in large part, taken over the investment niche that Venture Capitalists held twenty years ago before VC became more-or-less institutionalized and moved farther along the investment cycle into later stage ventures, thus avoiding the increased levels of risk associated with seed investing and helping to allow their LPs to sleep a little better at night.
A sector breakdown of the investments shows Healthcare Services/Medical Devices and Equipment accounted for the largest share with 16% of total U.S. Angel investments in 2008, followed by Software at 13%, Retail with 12% and Biotechat 11%. Industrial/Energy accounted for 8% of investments (reflecting a continued appetite for green technologies), and Media with 7% of Angel investments rounds out the top six investment sectors.
Annual returns for Angel’s exits (mergers and acquisitions and IPOs) were 22%, however, these returns were quite variable. Exits were broken down into mergers and acquisitions at 70%, IPOs at 4% and bankruptcies accounting for the remainding 26%. Angel investors invested in 10% of the opportunities they were presented.