angel capital

The Minnesota legislature has passed a 25 percent tax credit for individuals and pooled funds that invest in early-stage high-tech businesses as part of a new jobs bill. Up to $17 million in tax credits will be available in FY11, with $12 million a year available in FY12 and afterward. The credits apply to investments in companies with fewer than 25 employees and less than $2 million in private capital.  Read the complete bill.

Gov. Tim Pawlenty recently unveiled his 2010 supplemental budget recommendations, which includes new tax incentives to boost job creation and spending cuts across state agencies to help eliminate a projected $1.2 billion deficit. Announced during his State of the State Address earlier this month, the proposed Jobs Creation Bill is a six-part plan with components aimed at stimulating formation of early-stage capital in new emerging businesses and encouraging businesses to invest in R&D.

Providing access to startup capital, promoting biotechnology, and investing in the green economy to create and grow jobs are among the priorities of Gov. Pat Quinn's Illinois Economic Recovery Plan presented during a speech in December. The governor's plan would establish an Angel Investment Tax Credit program to allow investors making an early-stage investment in a technology startup to receive a capped credit against their Illinois tax bill. The governor also will propose the creation of a state fund to provide matching grants for technology research companies competing for federal funding and explore the idea of establishing a venture capital fund of funds. Additional strategies to incentivize green manufacturers to retool existing operations also are outlined in the governor's plan, which is available at:  http://www.illinois.gov/publicincludes/statehome/gov/documents/Illinois Economic Recovery Plan Final.pdf.

Angel investors are reducing the average size of their investments, according to the latest report from the University of New Hampshire Center for Venture Research. In the first half of this year, total angel investment dollars fell by 27 percent from the same period in 2008, but the number of angel deals increased by six percent. As a result, the average deal size has fallen by 31 percent since early 2008.

Gov. Jim Doyle signed the 2009-11 biennial budget last month, providing funding for university-based research and enhancing tax credits for angel and venture investors supporting high-tech R&D.

The Angel Capital Association's (ACA) latest report on angel group confidence finds little consensus about the state of the industry. While 40 percent believe that their total number of investments and their total investment dollars will decrease in 2009, 30.7 percent believe that their portfolio will increase, 23.1 percent believe it will stay the same.

The results, when compared to findings from a similar survey ACA conducted in November 2008, suggest the angel community is becoming more certain in their outlook on 2009. That might be expected, now that we are five months into the year, but no real trends are appearing other than the number of angels seeing declines is growing at a faster pace than the number expecting growth. In November, only 34.4 percent expected lower deals and yields and only 20.4 percent expected increases.

Though angel investments dropped considerably in 2008, the total number of deals held steady, according to a year-end analysis released by the University of New Hampshire's Center for Venture Research (CVR).  Total investments fell 26.2 percent from 2007 to $19.2 billion, while deals fell only 2.9 percent. Deal size, however, declined by 24 percent. CVR concludes that although the current economic climate has not reduced angel activity significantly, it has caused investors to scale back the size of their investments.

Investment by angel groups declined at least ten percent this year, according to the Angel Capital Association's (ACA) annual survey of angel group leaders. In January and February, about 55 percent of these leaders predicted that both their number of deals and total invested dollars would increase in 2008. Half of them now admit that their predictions for the year were overly optimistic. Still, many investors reported healthy activity during the year and many expect better results next year.

Even in the venture capital-rich state of California during a boom period for clean energy investment, some clean energy entrepreneurs still have a hard time finding the capital resources they desire. As a result, one non-profit venture capital group, with a unique history of its own, is launching a new effort to support early-stage businesses. The California Clean Energy Fund (CalCEF) is currently helping to raise a $20 million angel fund to bridge a perceived gap in seed and start-up stage capital availability. Despite the rapid growth of clean energy investment in the past two years, CalCEF believes that early-stage investment is not yet sufficient to ensure a steady stream of high-quality investments at later stage of development.