Angel Dollars, Not Deals Down in 2008

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.

Angel investors continue to be the primary source of seed and startup capital for entrepreneurs. In 2008, 45 percent of angel deals invested in companies at the seed and startup phase, up from 39 percent in 2007. A majority of angel capital recipients, 63 percent, are in their first sequence of fundraising, a number that has held steady for several years. Angel investors are becoming less interested in expansion-stage deals, which received only 14 percent of total angel dollars.

Healthcare/Medical Devices and Equipment took the lead as the most popular sector for angel investment, passing Software in 2008. Healthcare companies received 16 percent of all investment. Despite becoming the top sector, healthcare's total share of investment actually declined by three points from 2007. Software saw its share of total investment fall even more, from 27 percent of investment to 13 percent. The Biotech and Industrial/Energy sectors held steady while both Retail and Media increased their share.

In 2008, only ten percent of companies that were reviewed by angel investors actually received angel dollars. This continues the decline in acceptance rates that has occurred since the industry's peak acceptance in 2005, when 23 percent of companies were approved. CVR releases statistics on application and acceptance rates for women and minority entrepreneurs as well, and found that although their acceptance rates were in line with the total population of entrepreneurs, they are less likely to seek angel funding. Women-owned ventures accounted for 15.7 percent of firms seeking angel capital and minority-owned firms accounted for only 3.7 percent.

The full 2008 Angel Market Analysis is available at: http://wsbe.unh.edu/files/2008_Analysis_Report_Final.pdf