Angel investors are not doling out as much cash as they used to, but they aren't turning away deals. So says a
report from the University of New Hampshire Center for Venture Research.
Angel investment dollars contracted by 26.2% to $19.2 billion in 2008, the report found. But the number of entrepreneurial ventures seeded by angels declined only 2.9%, to 55,480, and the number of active angel investors actually increased a bit to 260,500, up from 258,200 in 2007.
The decrease in dollars committed probably stems from a decrease in valuations, but it might also simply reflect a decrease in the net worth of many of the individuals who make these investments.
While it's encouraging to see the number of seed deals holding steady, some argue that now is the time for angel investing to take off. Storied angel investor Reid Hoffman, who is also CEO of business networking site LinkedIn Corp.,
recently told a Silicon Valley audience that while many seed investors are pulling back, they should be doing the opposite.
He argued that angels are too worried about the lack of exits in private investments, but argued that the average time to liquidity for early-stage investing is so distant that pulling back now smacks of "overprediction."
"The
current market has very little to do with planning other than for
intermediate rounds of capital and valuation," he said.
Other tidbits from the UNH study:
- Sixteen percent of angel investments in 2008 were in the healthcare and medical devices and equipment sector, followed by software at 13%, retail at 12%, biotech at 11%, industrial/energy at 8%, and media at 7%.
- Angels increased their post-seed round investing compared to 2007. Forty percent of their overall investing last year was in this area.
- M&A accounted for 70% of the angel investment exits last year, while bankruptcies made up 26% and IPOs 4%.
- Olaf de Senerpont Domis
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