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New report highlights trends in habits, outcomes of angel investing

September 24, 2020

A recent report by PitchBook indicates that angel investing is seeing fewer unique participants and a greater share of activity from groups than individuals. The same report provides an analysis of startup outcomes based on whether the company began with an angel or venture capital (VC) round and finds companies with angel backing initially look stronger but have a more mixed record over the long-term.

Angel investing has been robust the past decade, with about $3 billion invested each year since 2014. While angel participation by deal value has been static, the total VC market has doubled, bringing angels’ share of the market down from four percent in 2014 to two percent last year.

From 2014-2019, participation in investment deals by angels appears to have declined overall,[1] but more sharply among individual angels (from a peak of 2,615 deals with individual angel participation in 2014 to 1,078 in 2019) than for angel groups (from a peak of 1,034 deals with group participation in 2014 to 615 in 2019).

Paralleling this decline in deal activity is a decrease in the number of different angels (individuals or groups) participating in deals in any given year, which has dropped by about half since 2014 and 2015 to 2,483 in 2019. Both trends suggest that angel investing is trending away from individuals and toward groups.

The report provides an analysis of how startups financed with investment from an initial angel or VC round in 2006-2014 fared through up to six additional investment rounds as of July 2020. When looking at the difference between angel- and VC- backed companies when raising a second round, nearly three-quarters of angel-backed companies raise additional investment and 10 percent have failed at this stage, while about 60 percent of VC-backed companies raise additional funds and 15 percent have failed. As those companies advanced through a possible seventh round, companies with initial angel investment are nearly twice as likely to still be seeking investment (8 percent v. 4 percent) and less likely to have exited (29 percent v. 32 percent), although they are also less likely to have failed (22 percent v. 26 percent).

Of course, a company that begins with an angel round would be expected to be at an earlier stage of its development than a company that begins with VC, so these outcomes should not necessarily be viewed as an indictment of the companies, angel investors or angel investing.


[1] As we have noted in the past, private investment data is systematically more likely to undercount recent deals than older deals. Therefore, the size of these differences should be treated with caution.

angel capital, investing, capital