angel capital

Angel group valuations and deals continued to rise through the third quarter of 2015, according to the most recent HALO Report, a publication of the Angel Resource Institute at Willamette University in Oregon. While median angel-only round sizes were $500,000 in both the first and second quarters of 2015, the third quarter saw this amount increase 45 percent to $725,000. Through the third quarter, median seed pre-money valuations increased to $4 million, a 33 percent increase from 2015, and the highest valuation in the Halo Report to date. Other notable findings in the report include:

The last decade has seen a rapid expansion and deepening of the types of vehicles that fund startup firms in the U.S. and worldwide, according to The Globalisation of Angel Investments – a new study from Josh Lerner, Antoinette Schoar, Stanislav Sokolinksy, and Karen Wilson. In particular, the authors have seen a growing role for angel groups and other more “individualistic” funding options, such as super angels or crowd sourcing platforms. To support their claim, the authors examine the records of 13 angel investment groups based in 12 countries, with applicants from 21 nations.

Seed stage valuations have risen steadily over the last five years to an all-time high of 3.95 million (Median), a 30% increase over 2014, according to the recently released 2015 Q2 ARI HALO Report from the Angel Resource Institute at Willamette University (ARI). The authors found that all U.S. geographical regions have seen increases in round size in the last six quarters with the largest increases in round sizes in the Great Plains ($0.2 million to $1.1 million), Mid-Atlantic ($0.3 million to $1.5 million), and Northwest ($0.3 million to $1.5 million) regions. While New England and the Southeast maintain a relatively balanced portfolio across sectors, the authors found several regional industry concentrations exist including: mobile and Internet in California and New York; food & beverage in Texas; and, Industrial and Healthcare in the Great Lakes. ARI researchers also found that angel investing activity is equally distributed across the country (50%/50%) when parsed either East and West or North and South. The 2015 Q2 ARI HALO Report data is based on 4,719 deals totaling $7.5 billion in total rounds including co-inventors. Read the report at: http://www.angelresourceinstitute.org/research/halo-report/halo-report.aspx.

Last week, New Mexico Gov. Susana Martinez signed House Bill 2 into law, new tax incentive legislation that, according to the governor, expands the state’s economic development toolkit. The bill received bipartisan support, in the GOP-controlled House, where it passed 60-2, and the majority-Democrat Senate, where it was approved 31-11. According to the Martinez administration, the package is expected to cost between $6.5 million and $11.5 million per year. The bill expands six incentives already established, while two new tax breaks are created. Most notable for New Mexico’s TBED community are the New Mexico Angel Tax Credit and the Technology Jobs and Research and Development Tax Credit Act.

In 2009, only 9.5 percent of venture-backed startups had a female founder, according to a research by CrunchBase. By 2014, that figure had almost doubled, reaching 18 percent. During that period, the absolute number of companies with a female founder quadrupled. More women are also seeking early stage funds. The University of New Hampshire's Center for Venture Research (CVR) reports that more than a third of entrepreneurs seeking angel capital in 2014 were women. Despite this progress, women entrepreneurs remain underrepresented in high-tech entrepreneurship. A recent academic article found that women often have to rely on their technical resumes and personal referrals to overcome the biases of investors.

In 2014, 25 percent of all angel investments supported seed and startup stage businesses, down from 45 percent in 2013, according to the year-end report by the University of New Hampshire's Center for Venture Research. Angels, however, remain a key group in early stage financing, participating in 46 percent of all early stage deals. Angels invested $24.1 billion in 2014, down 2.6 percent from the previous year, though both the number of investors and the number of angel capital recipients had modest increases. Read the full report...

Acceleration in angel activity, as described in the most recent Halo Report, is a continuation of a general trend of increased valuations, deal sizes, and activity by angel groups since the start of 2011. Despite this, relatively little attention has been paid to the impacts of these angel groups on the firms in which they invest. Research by Harvard Business School Professors William Kerr and Josh Lerner, alongside MIT Professor Antoinette Schoar, expands on the entrepreneurial finance literature by drawing empirical evidence on the impacts of angel investments. Using a variety of econometric techniques, the authors find consistent evidence that investments by angel groups are associated with improved likelihood of survival for four or more years, higher levels of employment, and more traffic on firm websites. The authors also find limited evidence that financing by angel groups helps firms achieve successful exits and reach high employment levels.

Many promising technologies created by Oregon startups wither on the vine due to a shortage of high-risk angel capital and many other startups leave the state in search of funding, according to a new report from the Technology Association of Oregon (TAO) – Oregon Angel Investment: The Economic Impact of High-Risk Investment in Oregon's Entrepreneurial Enterprises. The authors highlight the rapidly growing entrepreneurial ecosystem that includes a growing number of willing, talented entrepreneurs and entrepreneurial support organizations (e.g., incubators, accelerators). However, the state still lags significantly behind other areas of the country in terms of actual dollars invested, as well as the number of high-risk investment deals that are made.

In 2014, Angel groups in the Great Lakes region invested more dollars than anywhere else in the country, 17.2 percent of the U.S. total, including angel groups in California (17 percent). This marks the first time a U.S. region other than California led in dollars invested by angel groups since the Halo Report has started to track angel investments.  Rob Wiltbank, an author of the report, indicated that the Great Lakes region’s activity was driven by several large investments made by angel groups. The Angel Resource Institute’s 2014 Annual Halo Report data is based on 870 deals totaling $1.65 billion in total rounds including co-investors.

On November 20, the Securities Exchange Commission (SEC) held its annual Government-Business Forum on Small Business Capital Formation. During the daylong event, panelists focused on two important issues – secondary market liquidity for securities of small businesses and the potential revision of accredited investor definition. The SEC has posted both the panelists’ presentations and an archived webcast of the morning session. Presentations from the SEC and the Angel Capital Association (ACA) provide up-to-date statistics and infographics on the potential economic impacts of revising the accredited investor definition, including current share of angel group deals by U.S. region and number of individual/households who would qualify under proposed increase in the threshold for accreditation.