Analysis released of angel investments for 2007 reflects modest growth spread across a greater number of entrepreneurial enterprises, according to research completed by the Center for Venture Research at the University of New Hampshire (UNH).
Angel investments represents $26 billion in 2007, an increase of 1.8 percent over 2006. This funding infused 57,120 entrepreneurial ventures which is a 12 percent jump for the past year. The number of active investors also increased 10.3 percent to include 258,200 individuals.
“These data indicate that angels are exhibiting a cautious approach to investing in light of the recent volatility in the economy,” aid Jeffrey Sohl, director of the UNH Center for Venture Research at the Whittemore School of Business and Economics. “The modest increase in total dollars, coupled with the increase in investments and more angels participating, resulted in a smaller deal size for 2007. In contrast to venture capital, in which money must be invested during the life of the fund and is in part based on the size of the fund, angel investing is an individual decision and angels invest from their net worth.”
The software sector led angel investment dollars during 2007 accounting for 27 percent of the total, followed by health care services/medical devices and equipment at 19 percent. Other top categories included: biotech at 12 percent, industrial/energy at eight percent, retail at six percent, and media at five percent.
“While angels continue to represent the largest source of seed and start-up capital, market conditions and the capital gap are requiring angels to engage in more later-stage rounds,” Sohl added. “New, first sequence, investments represent 63 percent of 2007 angel activity, unchanged from 2006, indicating a continued preference for new, as opposed to follow-on, investments.”
In 2007, mergers and acquisitions represented 65 percent of the angel exits, and IPOs four percent. Another 27 percent were bankruptcy exits. Overall annual returns for angel’s exits reached 27.7 percent; however, these returns were quite variable. Angel investments also continue to be a significant contributor to U.S. job growth with the creation of at least 200,000 new jobs.
