The pain being felt on Wall Street is certainly being experienced by well-heeled angel investors.

The amount of angel investment capital and the number of angel investment deals have declined significantly this year, according to a new report from the .

Based on a across the country, the association says angel funding is down 10 percent to some $1.72 million.

Worse for entrepreneurs, the number of investments per group is down to an average of 6.1 per group, a drop of 16 percent.

More bad news may be coming, too, said Bill Warner, chairman of the Triangle Accredited Capital Forum and managing director of the consulting firm Paladin and Associates. He noted that the entire venture capital industry is under stress, not just angels.

“We are only seeing the early signs of what is happening to the private equity world,” said Warner, who is a frequent contributor to Local Tech Wire. “The whole venture capital industry is in turmoil and could undergo significant changes in their investment priorities and opportunity selection. This will have significant implication on angel investors, who may have to carry more of the load to bring companies through their early life. Stay tuned.”

However, the average size of an investment did grow to $280,936, up some 6 percent from a year ago. Many groups also said they do not expect to reduce investment activity in 2009. Another growing trend next year could be more syndicate investments with angel groups collaborating on deals.

The survey, which was conducted Nov. 6-18, included some two-thirds of association members. Several angel groups are active across North Carolina.

“Clearly the economy is having an impact on what angel groups will do to fund startups,” said John Huston, the association’s chairman and managing director of the Ohio Tech Angel Funds. “However, a majority of groups expect to see the same or more investment opportunities in 2009. Some of these groups might aggressively seek new deals as they see new advantages in lower company valuations but also in fields such as green technologies, health care, mobile media and renewable energy.”

The survey report included a variety of responses from angels about 2009 and short-term implications of the Wall Street meltdown:

  • “Non-lead investors who like to dabble in angel investing will be less likely to participate based on their portfolio taking a negative hit.”
  • “Members have stated that this will not slow them down any, but will likely increase their chances of making more angel investments, as the stock market will not likely be the primary method to invest as it has been in the past – or at least as significant a portion of their overall investment portfolio as it has been in the past.”
  • “Nervousness on the part of angels will make them more careful and insist on lower valuations.”
  • “While it is a good time to invest in early stage companies, some angels’ net worth has been hammered to the point that they are not likely to invest for some time yet. And when they believe the market is going to improve, they may put a lot of money in the stock market to make up for the losses they have absorbed during 2008. So, in the next year I doubt the market will be kind to angel investments.”
  • “Increase in number and quality of deals as other sources of capital have diminished. Angel investing may represent reduced risk relative to a more risky stock and bond markets. Clearly the amount of side-car investing has diminished as members’ available resources have been negatively affected by the economic conditions.”
  • “Angels are definitely more cautious, and several deals that were begun prior to the meltdown have imploded. However, since then, we have one new deal that has garnered significant interest, which proves there is still money available for the right deal.”
  • “The ability to syndicate deals to fill out the round will become a competitive advantage, making angel groups a significantly more attractive source of funding than lone wolf angels (who therefore might decide to join groups).”
  • “Valuations will be significantly lower at all stages for the next 18 months. Angels will see the opportunity to invest in good companies at a significant discount to even six months ago. Current portfolio companies are going to need to revamp their financial plans to get to cash flow positive.”