2011 Angel Market Analysis, recently released by the Center for Venture Research at the University of New Hampshire, shows not only that there are more angels around, but that they are investing more money in more companies.If you’re looking for angel investors, there’s good news afoot. The latest
Here’s a closer look at what angels are thinking and doing - and some ideas on how you can leverage their growing confidence to fund your business.
Overall, angel investments in 2011 reached $22.5 billion, 12.1% more than in 2010. About 66,230 entrepreneurial businesses got angel funding in 2011, up 7.3% from 2010. Finally, 2011 saw 20% more active investors (318,480 in all) compared to 2010.
“Angels have significantly increased their investment activity, and are committing more dollars resulting from higher valuations," says Jeffrey Sohl, director of the UNH Center for Venture Research at the Whittemore School of Business and Economics. “It appears that an optimism in angel investing is taking hold.”
How can you benefit from this optimism?
Act quickly. If you’re looking for seed or startup capital, the time to make your move is now. The study found angel interest in early-stage investing is growing. Last year, 42% of angel investment was seed and startup capital, reversing a two-year decline in the percentage of angel capital going to early-stage companies.
Target your approach. Obviously, looking for angels who specialize in your industry increases your chances of success. Last year, software was the most popular sector, attracting 23% of total angel investments, followed by health care services/medical devices and equipment (19%), industrial/energy (13%), biotech (13%), IT services (7%), and media (5%). Industrial/energy investing has remained a significant sector for angels for the past few years, reflecting a continued appetite for clean tech.
Be optimistic, but not unrealistic. Share your angels’ optimism by showing how your business will succeed, grow and give them the rate of return they’re looking for. But don’t promise the moon or try to fly by with unrealistic financial projections or fantasies of dominating the marketplace. Yes, angels may be feeling more confident, but they’re not wearing rose-colored glasses.
If your business is beyond the seed capital stage, there’s still good news for you. Businesses in the early and expansion stages received 55% of angel investments, which, although down from 67% in 2010, is still substantial. New, first-sequence investments represented 52% of 2011 angel activity, an increase of 11% from last year.
Sohl sees this as a good sign for young businesses. “This increase in seed/startup stage and first sequence investing is promising, and this renewed interest in seed and startup financing is an encouraging development for our nation’s entrepreneurs,” he says.
It’s also a good thing for America. Angel investments last year were a significant contributor to job growth, leading to the creation of 165,600 new jobs, or 2.5 jobs per angel investment.
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