Angel investing drops in 2009
A newly released report has found that angel investors still fear to tread near start-up companies.
According to analysis by Jeffrey Sohl, director of the University of New Hampshire Center for Venture Research at the Whittemore School of Business and Economics, the total amount of angel investments in the United States last year was $17.6 billion, a decrease of 8.3 percent from 2008 investments of $19.2 billion.
The total number of deals, however, increased to 57,225, up from 55,480 in 2008.
"These data indicate that while angels have not significantly decreased their investment activity, they are committing less dollars resulting from lower valuations and a cautious approach to investing," said Sohl.
According to the report, "The Angel Investor Market in 2009: Holding Steady but Changes in Seed and Startup Investments," angels decreased their investments of seed and start-up capital by 10 percent from 2008, with just 35 percent of investments in these earliest stages. At 47 percent of investments, new first-sequence investing also saw a "significant decline" from the 63 percent in 2008.
Conversely, angel investors made 62 percent of their investments in the post-seed/start-up stages -- a big increase from 40 percent in 2008.
"This decrease in seed/start-up stage and first sequence investing is the unfortunate reality of a difficult economy and little or no support from the various legislative initiatives enacted to stimulate the economy," Sohl said. Software accounted for the largest share of investments, with 19 percent of total angel investments in 2009, followed by health-care services/medical devices and equipment (17 percent), industrial/energy (17 percent), retail (9 percent) and biotech (8 percent), according to the analysis.
The study also found that angel investments spurred 250,000 new jobs in the United States in 2009 – slightly more than four jobs per investment – or about 5 percent of new jobs.
A copy of the report may be viewed at unh.edu/news/docs/2009angelanalysis.pdf. – CINDY KIBBE/NEW HAMPSHIRE BUSINESS REVIEW