Let’s hope this is the darkness before the dawn.
Just as most sources of small business financing have slowed down in the recession, angel financing has gone through some changes, too.
Conducted by the Center for Venture Research at the University of New Hampshire, The Angel Investor Market In Q1q2 2010: Where Have All The Seed Investors Gone?, surveyed angel investment during the first half of 2010. First, the good news: Angels are investing in more businesses. The number of businesses that obtained angel capital in 2010 grew three percent compared to 2009 numbers, reaching 25,200.
Now, the bad news: Although angels are investing in more companies, they’re investing less money overall. Total angel investments in the first half of 2010 dropped by 6.5 percent (to $8.5 billion) compared to the same period in 2009. At the same time, fewer angels are investing. The percentage of angels that are “latent” (meaning they haven’t made an investment) went from 36 percent in 2008 and 54 percent in 2009 to 65 percent in 2010.
More bad news: Today’s angels are focusing on later-stage companies. A mere 26 percent of angel investments in the first six months of 2010 went to startup stage investments—continuing a decline from 35 percent in 2009 and 45 percent in 2008. And that has implications for more than just startups.
In fact, even a company with a track record of success might have difficulty getting angel capital if it’s in a risky industry. Angels are focusing on industries that have proven demand even during tough times. Specifically, here’s where they’re putting their money: