Angels Spend Less, Back Older Startups

Angel investment dipped a bit in the first half of the year, as average deal sizes declined and individual investors took on smaller stakes, according to a new report from the Center for Venture Research at UNH.

In all, angels invested $11.9 billion in the first six months of 2007, a decrease of 6% over the same period last year. Deal count was held steadier. A total of 24,000 entrepreneurial ventures received angel funding in the first half of 2007, a 2% decline from a year ago. And the number of individual angels actually rose. There were 140,000 active investors in the first half of 2007, up 8% above the first half of 2006.

While angels are best known for seed and startup-capital, researchers say they’re increasingly moving into later-stage investments. In the first half of the year, post-seed and post-start-up investments accounted for 48% of angel expenditures. Says Jeffrey Sohl, director of the Center for Venture Research: “While angels are not abandoning seed and start-up investing, it appears that market conditions, the preferences of large formal angel alliances, and a possible slight restructuring of the angel market are resulting in angels engaging in more later-stage investments. ”

Financings were pretty heavily diversified across sectors. Healthcare services and medical devices and software companies raised 22% and 14%, respectively, of total angel investments in the first half of 2007. This was followed closely by biotech, electronics and computer hardware, IT services, retail and industrial/energy (which include environmental products and services) got close to 10% each.