Angel Investment Continues Rebound in First Half of 2012

Angel investment activity continues to recover from the crash that hit startup capital markets in late 2008, according to the latest report from the University of New Hampshire's Center for Venture Research (UNH CVR). During the first half of 2012, the number of ventures receiving angel funding grew by a modest 3.7 percent over the same period in 2011. Healthcare remains the dominant target of angel investments, comprising about a quarter of angel dollars into the first half of the year. Internet sector investments, however, dominate angel group investments, according to the recent Halo Report on angel group activity.

Total investments by angels in the first half of the year reached $9.2 billion in 27,280 companies, according to the UNH CVR report. Both angel investment dollars and deals modestly grew over the first half of 2011, increasing by 3.1 percent and 3.7 percent respectively. The number of individual investors reached 131,145, a 5 percent increase over the previous year. Average deal size remained steady.

The modest increases seem to reflect a new, more gradual, course of growth in the angel market, distinct from the rapid rise and fall that characterized the past decade. The UNH CVR report refers to the crisis that affected angel investment in late 2008 and early 2009, as a course correction, bringing the volume of investment activity more in line with the realities of the market.

Forty percent of all angel investments in 2012 have been in seed and startup stage businesses, in line with the past few years. Before 2008, seed and startup stage investments had hit a historical peak of 55 percent of all angel dollars. Meanwhile, expansion stage deals have become significantly more important since 2008. Expansion stage financing grew from 13 percent to 22 percent of angel investment dollars this year. The report surmises that this reflects angels positioning a larger number of investments for exits in the near future.

Healthcare accounted for the largest share of investments in early 2012, as it has since 2008. Software led in the first half of 2008, and occasionally traded off with healthcare as the top industry in the mid-2000s. Since then, healthcare has led by a sizable margin. During the first half of the year, software sector investments represented about 14 percent of angel dollars, followed by biotech and retail. Interest in the Industrial/Energy sector, which had been buoyed by investment in cleantech, appears to have dissipated.

Read the Center for Venture Research release...

Internet sector investments, however, lead in the angel group community, according to the Halo Report, published by Silicon Valley Bank and the Angel Resource Institute. In the first half of the year, Internet investment represented about a third of all angel group dollars. Healthcare investments followed, with 26.5 percent of all dollars. Investments in healthcare fell considerably from early 2011, when healthcare investments led by a wide margin, representing 40.8 percent of all angel group dollars.

Angel groups are showing an increasing preference for co-investing, according to the report. In early 2012, deals in which angel groups co-invested in companies rose to 72.5 percent from 58.9 percent in early 2011. Also, angel group activity appears to be increasing in the Great Plains and Southwest U.S., which grew their share of national angel group deals considerably during the first part of the year.

View the Halo Report...