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Angel deals see big increase in female firms and greater geographic diversity, according to HALO Report

April 26, 2018
By: Robert Ksiazkiewicz

In 2017, 25.7 percent of all angel capital group deals went to a founding team with at least one female founder, up from 17.0 percent in 2016, according to the Angel Resource Institute’s (ARI) HALO Report: 2017. The report also found a sizeable increase in the number of deals made for companies that included at least one minority female founder – 5.5 percent in 2017 (1.0 percent in 2016).

The HALO Report: 2017 is based upon data collected from angel groups as well as individual angel groups across the country. To collect the data, ARI uses both survey responses and PitchBook online resources. In total, the study’s database includes 3,617 deals made by angel groups. ARI, however, excluded deals with first-time investment rounds greater than $4 million to avoid skewing the data. ARI also excluded deals made by individual angel investors outside of groups in 2017 – they report that 1,499 such individual angel investor deals were made.

ARI and researchers from Florida Atlantic University (FAU) also found that geographic diversity of deals increased in 2017 especially due to increased deal activity in Texas (8.7 percent in 2017; up from 5.9 percent in 2016); the Southwest (9.8 percent; up from 4.8 percent); and, the Southeast (13.4 percent; up from 12 percent). In comparison, California’s percentage of deals dropped from 30 percent in 2016 to 20.6 percent in 2017.

The report highlights that angel groups are seeking more diverse industry portfolios with declines reported in the percentage of deals for software companies (26.8 percent of deals in 2017; down from 34.3 percent in 2016) and healthcare (15.5 percent; down from 17.3 percent). The industry sector that most benefited from this diversification was consumer products and service sector (20.9 percent of all angel group deals – up from 10.3 percent in 2016). The 10 percentage point jump placed consumer products and services sector as the second most active sector in 2017.

Other key findings for 2017 include:

  • The median pre-money valuation for an angel-group-backed startup was $3.5 million (down from $3.7 million in 2016 and $4.6 million in 2015);
  • The median deal size was $285,000 with the median angel group investment of $200,000;
  • Over 89 percent of angel group deals reported in 2017 were classified as first time deals;
  • Approximately 11 percent of deals captured represented follow-on investments; and,
  • The most common deal structures include preferred stock (62.3 percent) and traditional convertible notes (33.8 percent).

The report also found a trend worth monitoring – angel groups are increasingly using convertible notes for their first-time investments in new portfolio companies. ARI contends this could be due to lower valuations and increased differences between investors and founders on the pre-money valuation of startups.

This report marks a new collaborative relationship between ARI and FAU to publish the HALO Report. Previously, ARI published Halo Reports in concert with Rob Wiltbank and researchers at Willamette University.

angel capital