[Posted on October 3, 2007 - 5:17 PM]
It shouldn't come as any surprise, given the overhang of professional venture money and the paucity of strong venture-backed IPOs, but researchers at the Center for Venture Research at the University of New Hampshire have come up with figures showing that angel investment in the first half of 2007 has fallen compared to last year.
Investment of $11.9 billion by amateur venture capitalists represents a decrease of 6% from the same period in 2006, while the 24,000 startups that landed funding amounts to a slight decrease from last year. But investor interest remained strong, with 140,000 individual angels closing deals, up 8% from the first half of 2006.
Support for angel-backed startups also has been strong recently, with Intel Capital announcing it would lead the first professional investment round in Punchbowl Software Inc., joining angel group eCoast Angels, and with Microsoft Corp. announcing a new formal program to work with angels.
Jeffrey Sohl, director of the Center for Venture Research and professor of entrepreneurship and decision sciences, attributed the imbalance to a 4% decrease in average deal size and an increase in the number of angels in each deal. Healthcare and software remained the most popular areas of investment, drawing 22% and 14%, respectively, with biotech, computer hardware, IT services, retail and cleantech each attracting about 10%.
"This market-level sector diversification indicates a robust investment pattern," Sohl said in a statement announcing the report. "Since the angel market is essentially the spawning grounds for the next wave of high-growth investments, this sector diversification provides an indication of investment opportunities that will be available for later-stage institutional investors."
The report cheers the industry on with claims that angel investors are the largest source of seed capital, but also notes that since the sector began rebounding in 2004 from the venture crash, angels have participated more readily in later-stage rounds. - Clifford Carlsen
See Jeff Noonan's post on backing stupid ideas
See this story from Research Recap on a shift in angel focus