Entrepreneurs seeking angel funding should pay special attention to the recent Halo Report, a joint release by Silicon Valley Bank, CB Insights and Angel Resource Institute. The report looks at 783 deals including angel investors totaling over $1.1 billion. The data shows that internet-based and healthcare startups receiving the most funding and that New York leads the nation in angel investing. This quick chart below highlights the key sectors, ranked by dollar volume, where angel investors are putting their money:
· Internet: 31.9 percent
· Healthcare: 20.9 percent
· Mobile and telecom: 13.3 percent
· Industrial: 6 percent
· Electronics: 3.8 percent
· Consumer product and services: 5.3 percent
· Services: 4.5 percent
· All industries that don’t fit into the aforementioned categories: 14.2 percent
So how much money can an entrepreneur expect to receive from an angel?
The most common investment size featured in last year’s report was $600,000 down from the median investment amount of $625,000 in the 2011 Halo Report. While 2012’s aggregate numbers are lower than the 2011 numbers, angel investing exhibited a surge during the last three months of 2012 where the most common investment amount was $690,000.
What is the typical company size of those receiving angel funding?
While any company can seek angel funding and there have been situations where ventures have received venture funding with very little in terms of revenue, the most common valuation of companies receiving angel funding has been $2.5 million. That number has held consistent over the last two years. Additionally, 63% of all deals were done with companies that were already generating revenue. This suggests that it might be more beneficial to founders to build out their product, go to market and prove their concept before seeking angel funding.
Are deals being funded mostly with debt or equity?
One of the most common questions entrepreneurs face is whether they should raise debt or equity in their earliest stages of funding. Much has been said about the value of convertible debt for entrepreneurs but the data suggests that investors increasingly would rather receive equity for their early stage investments instead of putting off valuation to a later date. In 2012, only 11% of the reported deals included convertible debt. This number seems low when compared to the aggregate but it’s almost double the amount from 2011, where only 6% of the deals featured convertible debt.
How many individuals typically invest in an angel investment?
Many entrepreneurs have the idea that angels are individuals who invest in ventures on a solo basis and while that was the case in the past the recent data shows that most angel deals now are co-investments involving more than one investor. Almost 70% of the angel deals that were done in 2012 were co-investments, an increase from 64% in 2011 and 41% in 2010. Entrepreneurs should see this as a welcome trend as more investors in a given deal also means more money raised in any given fundraising round.
Where are most angels located?
The main hubs of activity are on the east and west coasts, with New York leading the way for angel investment in 2012. The list of top ten angel locations below highlights where angels are most active:
New York Angels, New York
Tech Coast Angels, Los Angeles
Launchpad Venture Group, Boston
Central Texas Angel Network, Austin
Golden Seeds, New York
Sand Hill Angels, Sunnyvale, Calif.
Investor's Circle, Durham, N.C.
Alliance of Angels, Seattle, Wash.
Maine Angels, Bar Harbor, Maine
A quick snapshot of the key information from the Halo Report is included in the graphic below: