Market Size
The angel investor market in Q1,2 2010 showed signs of stabilization since the 30% market correction in the second half of 2008 and the first half of 2009. Total investments in Q1,2 2010 were $8.5 billion, a decrease of 6.5% over Q1,2 2009, according to the Center for Venture Research at the University of New Hampshire. However, a total of 25,200 entrepreneurial ventures received angel funding in Q1,2 2010, a 3% increase from Q1,2 2009, and the number of active investors in Q1,2 2010 was 125,100 individuals, a drop of 11% from Q1,2 2009. The decline in total dollars, coupled with the small increase in investments resulted in a smaller deal size for Q1,2 2010 (a decline in deal size of 9% from Q1,2 2009). These data indicate that while angels remain committed to this investment class they do so with a cautious approach to investing. Angels are committing fewer dollars in more deals, a result of the lower valuations. While the market exhibited a stabilization from Q1,2 2009, when compared to the market correction that occurred in 2008, these data indicate that the angel market appears to have reached its nadir in 2009.
Stage
Angels have decreased their appetite for seed and start-up stage investing, with 26% of Q1,2 2010 angel investments in the seed and start-up stage, marking a steady decrease in the seed and start-up stage that began in 2008 (45%) and 2009 (35%), and it is the smallest percentage in seed and start-up investing for several years. This decline was reflected in an increase in post- seed/start-up investing with 56% of investments in this stage. Historically angels have been the major source of seed and start-up capital for entrepreneurs and this declining interest in seed and start-up capital represents a significant change in the angel market. Without a reversal of this trend in the near future, the dearth of seed and start-up capital may approach a critical stage, deepening the capital gap and impeding both new venture formation and job creation. This change in investment behavior is likely an indication of both a need to increase investments in existing portfolio companies in order for these portfolio companies to survive the recession and an extended exit horizon. Expansion stage investing (14%) remained unchanged. New, first sequence, investments represent 46% of Q1,2 2010 angel activity, a decline of 12% in the last year.
Download the Full Report: Q1Q2 2010 Angel Market Analysis Report
