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Angel Investing Stabilizes, with Health Care Leading the Way



Angel investors are slowly beginning to spread their wings again. According to new research, angel investing showed signs of stabilizing in the first two quarters of 2011 after experiencing a 30 percent market correction in the second half of 2008 and the first half of 2009, according to the Center for Venture Research at the University of New Hampshire.

A total of 26,300 entrepreneurial ventures received angel funding during the first half of 2011, a 4.4 percent increase from the same period in 2010. The average deal  size was $338,400 in the first half of 2011, comparable to the deal size of $337,300 in the same period of 2010.

"These data indicate that angels remain committed to this investment class and at slightly higher valuations than in 2010," said Jeffrey Sohl, director of the UNH Center for Venture Research at the Whittemore School of Business and Economics.
"While the market exhibited a stabilization from Q1 and Q2 2010, 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 and has since demonstrated a slow recovery."

Angels have significantly increased their penchant for seed and startup stage investing, with 39 percent of Q1 and Q2 2011 angel investments in the seed and startup stage , marking a 13 percent increase from the same period in 2010. This increase was reflected in a decrease in post-seed/startup investing, with 60 percent of investments in early and expansion stage, compared with 70 percent in the first half of 2010.

"Historically, angels have been the major source of seed and startup capital for entrepreneurs, and this return to seed and startup investing is an encouraging sign. While there remains a need for seed and startup capital and a capital gap in this stage, if the return to seed and startup investing continues, this will signify an improvement in both new venture formation and job creation," Sohl said.

Health care services, medical devices and equipment accounted for the largest share of investments, with 25 percent of total angel investments in Q1 and Q2 2011, followed by industrial and energy (17 percent), biotech (14 percent), software (11 percent), media (8 percent) and retail (8 percent).

Angel investments continue to be a significant contributor to job growth, with the creation of 134,130 new jobs in the United States in 2011, or roughly five jobs per angel investment.


Jeanette Mulvey

Jeanette has been writing about business for more than 20 years. She has written about every kind of entrepreneur from hardware store owners to fashion designers. Previously she was a manager of internal communications for Home Depot. Her journalism career began in local newspapers. She has a degree in American Studies from Rutgers University. Follow her on Twitter @jeanettebnd.