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Is Angel Funding Taking Wing Again?

November 6th, 2012 ::

By Karen Axelton

Small business owners seeking financing from private investors can take heart from the latest data from the Center for Venture Research at the University of New Hampshire. The quarterly study of angel investors found that, as of the second half of 2012, the angel investor market seems to be on the rebound. The total dollar amount invested, total number of investments, and total number of investors all grew compared to the same period in 2011.

For the first two quarters of 2012, total dollars invested reached $9.2 billion, up by 3.1 percent compared to the same period in 2011. Investments were made in a total of 27,280 entrepreneurial businesses–a 3.7 percent increase from the same period in 2011. And the number of active investors hit 131,145 individuals, up 5 percent from the same period in 2011. In the first half of 2012, the average deal size hit $336,390, holding fairly steady with 2011’s average deal of $338,400.

Jeffrey Sohl, director of the UNH Center for Venture Research at the Whittemore School of Business and Economics, says that while many of the figures are holding steady, the survey shows a “steady recovery” of the angel market since 2008.

While the percentage of investments focused on seed and start-up stage investing held steady at 40 percent (compared to 39 percent last year), there’s good news for existing business owners: Expansion stage financing grew to 22 percent of investments in the first half of 2012, up from 13 percent in the same period of 2011.

What industries are most likely to find angel funding? Healthcare services/medical devices and equipment accounted for 24 percent of investments, followed by software (14 percent), biotech (12 percent), retail (10 percent), IT services (7 percent) and media (6 percent). Interest in the industrial/energy sector, which had been one of the top six sectors since 2009 due to an interest in clean tech, dropped in the first half of 2012. Meanwhile, retail and media have “solidified” their place in the top six sectors, driven primarily by investments in social networking-related businesses.

One interesting trend: The percentage of women angel investors nearly doubled in 2012 from the same period last year (from 11.7 percent of angels to 21.8 percent). Meanwhile, 18.4 percent of companies seeking angel investment were women-owned.

Minority angels are less represented, accounting for just 4 percent of the angel population. Similarly, minority-owned firms accounted for only 7.1 percent of the companies that sought angel capital.  Although minority-owned businesses got angel financing at a similar rate to all businesses, the study says the fact that so few are seeking angel capital is cause for concern.

Image by Flickr user GeishaBoy500 (Creative Commons)


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