I was inspired this week by Scott Kirsner’s article – Mass. IPOs don’t create many angel investors. I thought it would be interesting to pull a few facts and estimates together for our entrepreneurial community. I think these numbers bust a few myths and may surprise some prospective investors.
- There were 318,000 active angel investors in the US last year up some 20%. (Center for Venture Research)
- They invested $22.5Bn up 12.1%. (Center for Venture Research)
- This implies an average angel investment of $70,755. (Center for Venture Research) (larger than I would have guessed)
- The $22.5Bn was invested across 66,230 companies, an increase of 7.3%, implying an average deal value of $339,725, 4% increase. (Center for Venture Research) (larger than I would have guessed)
- The sectors attracting that money were in order: Software 23%, Healthcare 19%, Industrial/Energy 13%, Biotech 13%, IT Services 7%, Media 5%. (that’s 80% of it) (Center for Venture Research)
- Angel investments that exited in 2011 did so 54% of the time by selling out and 24% of the time by going bust. (Center for Venture Research)
- In addition to this analysis, the first ever HALO Report issued by CB Insights in conjunction with Silicon Valley Bank and the Angel Resource Institute attempts to dig deeper into Angel Groups not just individual angels. Their analysis provides even further insight to Angel GROUPS. Specifically these groups invested $873m in 2011. (which implies to me 4% of the total market investment above of $22.5Bn)
- The $873m was invested in 573 deals at an average deal value of $1.5m and a median value of $700,000, up a whopping 40% increase over 2010.
These seem really high to me.
- Regionally the $873m was spent in order: California 21%, Great Lakes 15.5%, New England 14.6%, Southeast 12%, Southwest 8.9%, Mid Atlantic 8.9%, Northwest 7.2%, New York 6.6%, Great Plains 4.1%.
- Sectors wise Angel Groups spent their money 37.4% of the time on Internet and 23.5% on Healthcare, that’s 61% right there. Mobile picked up 10.4% and Energy 4.3%.
- The active Angel Groups were named by Halo as: Tech Coast Angels – Southern California, Golden Seeds CA, MA, NY, Band of Angels (great name) Menlo Park CA, Central Texas Angel Network, Austin, TX and Launchpad in Boston, MA
- I’m quite surprised there as many as 318,000 active angel investors given how few businesses sell out every year for $10m or above (6000) thus creating US angel investors.
- I suspect there is a Powers Law curve at play and that a tiny % of big hitters of the 318,000 are skewing the average towards $70k.
- We need to conduct more research to understand the make up of 318,000 active investors compared with only 573 deals tracked by the Halo Report of active Angel Groups.
- I worry that at both the macro $22.5Bn level and the smaller sample of Angel Group level there remains a dominant software & healthcare mentality at the expense of Energy, Media and IT services. It almost implies that software and healthcare are less risky than other sectors or perhaps the management teams just tell a better story!
Funny…you kill the stats on the inputs but there’s nothing about the returns. I contend that one-off angel investing has no expected value statistically. So, without an angel portfolio (that might have a sliver of expected value at maybe 30 investments or so), individual angels are fundamentally, economically, and statistically throwing away their money. But, they have fun doing it, and they certainly help the entrepreneurial ecosystem. To your point, the angels do have more fun with software and healthcare. Kaufman made a similar point recently questioning the value of venture fund investing.
Great point. I don’t believe anything I’ve read at a macro level on returns!