University of New Hampshire Research Finds Growth In U.S. Angel Investor Market; Decrease In Deal Size

November 26, 2014
By Riley McDermid, BioSpace.com Breaking News Sr. Editor

Angel investors are taking a keen interest in the biotech sector, with 9 percent of ventures that received funding in the first two quarters of 2014 going to biotech businesses, found new research released Tuesday from the Center for Venture Research at the University of New Hampshire. The news came via the release of "The Angel Investor Market in Q1Q2 2014: Market Growth but Deal Size Decreases.”

“Angels remain major players in this investment class and at valuations similar to the same period in 2013,” said Jeffrey Sohl, director of the UNH Center for Venture Research. “The market exhibited a sustained growth pattern over a five-year period and the angel market has now recovered from the correction in 2008.”

The first two quarters of 2013 saw increases in both the number of ventures receiving funding and the number of active investors. A total of 30,270 entrepreneurial ventures received angel funding during the first half of 2014, a 5.9 percent increase from the same period in 2013, and the number of active investors in first quarter and second quarter of 2014 was 143,140 individuals, a 6.1 percent increase from 2013.

However, there was a marked decrease in deal size—the average deal size was $332,120 in the first half of 2013, a decline in the deal size in the same period in 2013 of $337,850.

In addition, the research showed that angels aren’t necessarily putting their money in at the very beginning of a business’s life cycle. Although angels continued to have a presence in seed and start-up stage investing, new, first-sequence investments represented 40 percent of angel activity during the same period, down slightly from last year.

“Historically angels have been the major source of seed and start-up capital for entrepreneurs, and while this stabilization is an encouraging sign, it has remained consistently below the pre-2008 peak of 55 percent, signifying that there continues to be a need for seed and start-up capital for both new venture formation and job creation,” Sohl said.

As for the sectors that received the most angel money, software accounted for the largest share of investments, with 37 percent of total angel investments, followed by health care services/medical devices (10 percent), retail (10 percent), biotech (9 percent) IT services (7 percent) and industrial/energy (7 percent).