Angel investors hold onto wallets for established businesses
Early-stage entrepreneurs continue to struggle with securing deals
Jeffrey Sohl, director of the UNH Center for Venture Research
Angel investors are hungry for early stage ventures with an established track record, however investors' earlier retreat from seed and startup stage deals has now stabilized for a second year, concludes an analysis by the University of New Hampshire's Center for Venture Research. The report examines the first two quarters of 2018, which falls in line with historical trend lines, showing the first two quarters of the year are the lowest for seed and startup stage deals.
“Angels continue to keep their investment allocations in the seed and start-up stage low, at 24 percent of investments, which is similar to 2017 (20 percent) and 2016 (27 percent),” said Jeffrey Sohl, director of the UNH Center for Venture Research. “Historically angels have been the major source of seed and start-up capital for entrepreneurs and while that stage remains close to a quarter of angel investments, angel seed/start-up investments have remained consistently below the pre-2008 peak of 55 percent. This steady decline in allocations signifies that there continues to be a need for seed and start-up capital for both new venture formation and job creation.”
Entrepreneurs now have less than a one in five chance of receiving angel capital, with a yield acceptance rate of 17.2 percent, lower than the first two quarters of 2017, with a yield of 21 percent.
Healthcare and software continue to account for the largest share of investments, with 22 and 20 percent, respectively. They were followed by retail (10.6 percent), financial services/business products and services (10.4 percent), clean tech (9 percent) and IT services (7 percent). Investments in biotech declined by 1 percent from a strong first and second quarter in 2017, now down to 6 percent share of investments.
The center’s analysis found the average angel deal valuation in the first half of 2018 was $3.7 million, an increase of 14 percent from the 2017 average deal valuation of $3.24 million.
Angel investments continue to contribute to job growth with 3.2 jobs per angel investment.