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Angel Investing

By June 4, 2018Commentary

Angel investors are typically individuals or networks of individuals who provide very early and critical financing to start-up companies.  Without angel investors, most firms would find it difficult to get to the stage of attracting venture capital.  A report from the University of New Hampshire’s Center for Venture Research describes the current state of angel investing.   (UNH Report)   In 2017 angel investors put $23.9 billion into 61,650 companies.  The dollar amount was up 12.6%, but the number of deals was down 4.4% from 2016.  This indicates a larger deal size, at $389,000 on average, at an average valuation of $3.2 million.  This valuation is slightly higher than in 2016.  About 27% of opportunities presented to angel investors actually received funding, an increase from the 20% that did in 2016 and well above the longer-term average of 15%.  297,380 investors participated in angel investing in 2016 and this number declined slightly, to 288,380 in 2017.

Software firms accounted for 30% of deals, followed by health care, including services, products and biotech, at 29%, retail at 10%, industrial and energy at 7% and financial and business services at 5%.  41% of angel deals were at the start-up or seed stage, up from 31% in 2016.  51% of investments were the first funding for a company.  About half of the exits in the year of companies that had received angel investing were profitable.  The companies funded created over 209,000 new jobs, according to the authors.  Overall, the angel market appears very healthy, likely reflecting good exits by individuals for a variety of investments, so that they are looking for new places to put money to work.  And health care is getting its share of the money. As we have noted before, this is crucial to continued innovation in our economy and in the health care sector.

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