Moderate Recovery Continues in 2012 for U.S. Angel Investor Market

The angel investor market in 2012 continued the upward trend started in 2010 in investment dollars and in the number of investments, albeit at a moderate pace, according to the 2012 Angel Market Analysis released by the Center for Venture Research at the University of New Hampshire.

Total investments in 2012 were $22.9 billion, an increase of 1.8 percent over 2011 when investments totaled $22.5 billion. A total of 67,030 entrepreneurial ventures received angel funding in 2012, an increase of 1.2 percent over 2011 investments, and the number of active investors in 2012 was 268,160 individuals, a decline of 15.8 percent from 2011.

“The small increase in both total dollars and the number of investments resulted in a deal size for 2012 that was virtually unchanged from 2011. These data indicate that while fewer angels were active investors in 2012, those who did invest have increased their individual investments substantially, from $70,690 in 2011 to $85,435 in 2012, an increase of 20.9 percent,” according to Jeffrey Sohl, director of the UNH Center for Venture Research at the Peter T. Paul College of Business and Economics.
“It is possible that given the robust returns in the public equity markets, some angels may have reallocated their portfolios and reduced their angel investing activity but those angels that continued to invest remained quite active,” Sohl said.

Software remained the top sector position with 23 percent of total angel investments in 2012, followed by healthcare services/medical devices and equipment (14 percent), retail (12 percent), biotech (11 percent), industrial/energy (7 percent), and media (7 percent).

Angels decreased their investments of seed and start-up capital, with 35 percent of 2012 angel investments in the seed and start-up stage, down from 42 percent in 2011 and matching seed and start-up investing in 2010 (31 percent). Angels also exhibited a decreased interest in early stage investing with 33 percent of investments in the early stage, down from 40 percent in 2011. Expansion financing exhibited a significant increase to 29 percent of deals, up from 15 percent in 2011.
“Investment activity was evenly divided between new, first sequence, investments and follow-on investments, the same as in 2011. This decrease in seed/start-up stage is of concern since that is the stage of need for our nation’s entrepreneurs,” Sohl said.

Angel investments continue to be a significant contributor to job growth with the creation of 274,800 new jobs in the United States in 2012, or 4.1 jobs per angel investment. The average angel deal size in 2012 was $341,800 and the average equity received was 12.7 percent with a deal valuation of $2.7 million.