The angel investor market in 2015 had a slight increase in investment dollars and in deal size according to a new report from the Center for Venture Research (CVR) at the University of New Hampshire.
The State Science & Technology Institute provides the following analysis:
In The Angel Investor Market in 2015: A Buyers Market, CVR reports that total angel investments in 2015 were $24.6 billion – an increase of 1.9% over 2014. CVR also reported that the total number of entrepreneurial ventures that received angel funding in 2015 declined by 3.1% from 2014 – in total 71,110 start-ups received funding. The result of these two trends was larger deal sizes for 2015 – an increase of 5.1% from 2014. CVR concluded that these findings, combined with yield rates and valuations data, indicate that angels were selective in their investment behavior in 2015.
While CVR contends that the angel market was robust in 2015 – approximately $24.6 billion in investments – they also believe that the selectivity of angels and decrease in valuations over the last three years indicates a continuing market correction in valuations. Other findings include:
Software maintained its top sector position with 18% of total angel investments in 2015
Other key industries include Healthcare Services/Medical Devices and Equipment (16%), Biotech (13%), Industrial/Energy (11%), Retail (10.6%), and Media (9%)
Angel investments contributed to the creation of 270,2000 new jobs in the U.S. – 3.8 jobs per angel investment
The average angel deal size was $345,390
The average equity received was 14.89% with a deal valuation of $2.3 million
Angel investment in the seed and start-up stage (28% of deals) was largely unchanged from 2014 (25% of deals)
Fort-five percent of all angel deals were early stage investments (46% in 2014)
Expansion and late stage investments also remained consistent with regard to percentage of total deals
Interested in the health of Indiana’s tech community? Get involved in the new Indiana Technology and Innovation Council. First open discussion is August 9! Contact Mark Lawrance at mlawrance(at)indianachamber.com to learn more.
I’m quite a poker enthusiast and play tournaments in Southern Indiana and Cincinnati quite a bit, as well as an occasional home game with friends.
One of my favorite players to watch on television is Vanessa Selbst — mainly because she’s managed to parlay an unpredictable, super aggressive style largely based on reading opponents into remarkable results (with well over $10 million in career tournament earnings). She also boasts a law degree from Yale University.
Site Selection magazine is well known for its tracking of business projects and rankings of economic activity. One of its newest projects (in its fourth year) is Best to Invest ratings. Half of the evaluation is based on its comprehensive database of new and expanded facilities, with the other 50% an analysis of business environment, business risks, foreign direct investment and infrastructure.
Here are top countries in five global regions. The metro rankings in these regions are based on similar factors as above, but with a slightly different weighting formula.
Top five countries: Ireland, United Kingdom, Germany, Austria and (tie) Switzerland and Italy. Top five metros: Dublin, Ireland; Frankfurt, Germany; Edinburgh, Scotland; Birmingham, England; and (tie) Belfast, Northern Ireland and Paris, France.
Countries: Hungary, Poland, Slovak Republic and (tie) Estonia and Czech Republic. Metros: Budapest, Hungary; Moscow, Russia; Bucharest, Romania; Prague, Czech Republic; and Warsaw, Poland.
Countries: Singapore, Australia, (tie) Malaysia and South Korea, Vietnam. Metros (first three in China and last two in India): (tie) Beijing and Shanghai; (tie) Chongqing and Chennai; and Bangalore.
Africa and the Middle East
Countries: South Africa, Bahrain, United Arab Emirates, Saudi Arabia and Qatar. Metros: Port Elizabeth, South Africa; (tie) Nairobi, Kenya; Cairo, Egypt; and Kinsasha, Congo; and Casablanca, Morocco.
Countries: Mexico, Brazil, Costa Rica, Chile and Argentina. Metros: Sao Paulo, Brazil; Rio de Janeiro, Brazil; Mexico City, Mexico; (tie) Guadalajara, Mexico and Monterrey, Mexico.
Our friend Gerry Dick at Inside INdiana Business had an interesting conversation with Kristian Andersen and Ice Miller’s Kristine Danz about Gravity Ventures, a seed stage investing fund for technology companies. Watch the video, and here’s a summary:
A seed stage venture fund is investing in Hoosier technology companies with capital from young investors and entrepreneurs. Gravity Ventures has helped Indiana-based startups including Formspring and Compendium Blogware. Co-founder Kristian Andersen and Ice Miller LLP Private Equity and Venture Services Group Partner Kristine Danz talk withGerry Dick about the fund and the changing landscape of startups.
The fund’s typical investments range from $75,000 to $100,000.
Andersen says it is becoming less expensive to launch a technology company.
He points out what used to require $5 million just a few years ago now costs up to $500,000.
Andersen says one example of the lower costs is equipment. People used to spend up to $1 million to buy hardware to help run the business. Today, they can write a check for around $500 to a company like Amazon.com (Nasdaq: AMZN) to take care of those services.
Legislation is going through the United States Congress to make it easier for small businesses in America to benefit from crowd-funding. The Wall Street Journal blog relays:
The U.S. House advanced legislation this week that would make it easier for smaller companies to raise money from investors.
House lawmakers, in overwhelming bipartisan votes, completed work Thursday on four bills as the measures drew interest in the Senate. President Barack Obama also signaled support for at least one of the bills.
Among other things, the House by a vote of 413-11 approved a bill to make it easier for companies to advertise private offerings with wealthy investors and voted 407-17 to allow startup companies to raise up to $10,000 from individuals over the Internet.
Supporters hope the bills, if signed into law, will help small firms grow in size and hire new workers.
Sen. Kirsten Gillibrand (D., N.Y.), who is weighing introducing capital formation legislation in the Senate, said there is widespread need for Congress to act. “Everywhere I spend time across the state I talk to small business owners and entrepreneurs that need access to capital to grow and create jobs,” Ms. Gillibrand said.
The advertising provision would end a Securities and Exchange Commission ban on “general solicitation” that effectively limits the ability of companies to reach out to potential new investors. “Under the current ban, if you have a good idea but you don’t have a prior relationship, it cuts off a whole section of investors,” said Rep. Kevin McCarthy (R., Calif.) said in an interview.
The Internet bill would allow startups to use “crowd-funding” methods to tap thousands of investors for very small amounts of shares without the firm having to register first with the SEC. Introduced by Rep. Patrick McHenry (R., N.C.), the bill would allow startups to raise up to $2 million through Internet solicitations and social networking and online sites designed for capital raising.
While we can’t make a prediction with 100% certainty, we can assign probabilities to the next trend for the U.S. stock markets. The major U.S. market indexes (Dow Jones 30, S&P 500 and NASDAQ Composite) all reached new highs for the rally on or about April 28. Additionally, technical indicators of the market’s underlying health were all strongly positive as well. The correction that has ensued since April 28 has erased between 9% and 11% of the averages’ value. In a less tumultuous time, this kind of performance would be seen as a normal correction and not the start of a new bear market.
There are two root causes for the stock markets’ performance since the end of April:
The U.S. market had not experienced a 10% correction since the start of the new uptrend in March of 2009. We saw two corrections (in June 2009 and January 2010) that declined less than 9% on both occasions. The selling was less intense than of late and the markets quickly rebounded from their lows. This correction probably marks the end of the first stage of the new bull market, where nearly all stocks — regardless of size or quality — go up. The second stage will see more selectivity among investors and moderating returns compared to the past 14 months.
The Greek debt crisis and fallout among other members of the Euro currency zone has reminded investors that risk still exists in the debt markets. The U.S. experienced a private debt crisis in 2007-2008 when the mortgage market imploded and caused several large financial institutions to fail or need significant government help to stay afloat. The Euro crisis is a government debt issue with Greece being unable to sell new debt without the explicit guarantee of the European Central Bank (akin to the Federal Reserve). This rescue package was announced two weeks ago but has yet to allay fears that more trouble may be brewing for Greece, Portugal, Spain and Italy. We think the rescue package has been effective by bringing down interest rates for all four countries though significant work remains to be done to reduce their budget deficits without causing major recessions in those countries. (This is something all governments need to do!)
A silver lining to the decline of the past few weeks is oil prices have declined from almost $90 to $70 per barrel. Look for lower gas prices as a result. Interest rates have also declined as investors have fled to Treasuries as a safe haven. Mortgage rates will likely decline as well. Finally, the U.S. economy may have finally entered a durable recovery and this momentum is hard to reverse in a short period of time.
Investors can expect that volatility could remain elevated over the next few weeks or months as more news coming out of Europe could influence opinions about the impact on U.S. economic growth.
Elaine Bedel, president of Chamber member Bedel Financial Consulting in Indianapolis, authored an interesting column today for Inside INdiana Business explaining how you can apply Butler’s winning hoops formula to your finances:
Just as the Butler Bulldogs have a "game plan" for defeating each opponent, you need your own personal "game plan" to be financially successful. By developing your financial skills and being disciplined in implementing your plan, you can achieve your own financial victories.
Take time now to create your game plan and to develop an action list to accomplish your personal goals. Just like a good basketball player, you need to gain the skills that will allow you to take control of your financial life. If your understanding of financial concepts is lacking, take a course or read a book. Likewise, take the initiative to use the financial tools and calculators available on the Web to outline the steps necessary to achieve each goal. Then be disciplined in your approach. If you do, you will have a good chance of getting the result that you want.
Here are a few financial "tips" that can help you along the way.
1.Set Goals. It is important to write down your goals and keep them in a place where you are likely to read them at least once a week. Your electronic or paper calendar may be a good place. Reading your goals periodically will keep you focused throughout the year.
2.Control Spending. Maintain the lifestyle you can afford. Buy only what you need, not what you want. Do not create “lifestyle debt”. If you purchase “stuff” to keep up with the neighbors you will be threatening your future financial security.
3.Manage Credit Cards. Never carry a balance. Be smart and use your credit card wisely. Credit cards can be an effective and efficient financial tool. Smart people charge only the amount they can pay off each month.
4.Save Intentionally. Make your saving automatic. Direct a portion of your earned income from your paycheck to savings before the money gets to the checking account. For college education, have it automatically deposited to a 529 Plan. For retirement, have it deposited directly into your 401(k), 403(b), or other retirement plan. For other investments, have the funds directed from your paycheck to a brokerage account.
5.Check Your Progress. Establish a system of tracking that will allow you to easily review your saving and spending budget throughout the year. Consider software and/or on-line banking.
Use that Bulldog discipline to keep your financial life in check and on track.
The good news is that angels are still investing. No, the dollars are not quite the same as during the glory days. But the numbers of deals in the first six months of this year increased by 6% over the same period in 2008.
Angels are also sprouting their wings differently in other ways. The Center for Venture Research (as reported by the State Science & Technology Institute) has the details:
The average deal size has fallen by 31 percent since early 2008.
The report attributes the change to lower company valuations and to angel investors taking a more cautious approach to investing without decreasing their level of activity. Investors have also begun shifting their focus away from seed- and startup-stage firms in order to support their portfolio companies and reduce their risk.
Seed- and early-stage deals have made up only 27 percent of angel investment in the first half of the year, its lowest point in several years. While expansion-stage investment remained unchanged, post-seed- and startup-stage investment rose to 58 percent of angel activity. Though angel capital still has a reputation for a focus on early-stage investments, later-stage deals have represented a majority of angel activity since 2008.
Health care has expanded its lead as the most popular sector for angel investment with 28 percent of all angel deals, according to the report. Software, once the leading angel recipient, represented only 14 percent of investment. The industrial/energy sector grew to 13 percent of deals, up from 10 in the first half of 2008, which the report attributes to a continued interest in green technologies.
Read the full report from the University of New Hampshire Center for Venture Research.