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U.S. Angel Investment Deals, Dollars Jump in 2011

Angel (Jody McNary/Flickr)The number and dollar amounts of angel investment deals in the U.S. rose sharply in 2011, with financing for science-related companies comprising nearly half of those transactions. The summary report of angel investing released yesterday by the University of New Hampshire’s Center for Venture Research also shows more initial-stage involvement in start-up companies than in 2010.

Angel investors offer funding for small, high-potential start-up enterprises, usually in the initial stages of the companies, and often provide their expertise in business as well as funding. Many angel investors help start-up companies bridge the gap between self-funding and the point where venture capital takes over.

The report says the dollar amount of angel deals totaled $22.5 billion in 2011, a 12 percent increase compared to 2010. Some 66,230 enterprises received angel funding last year, a 7 percent gain. And the 318,480 angel investors in 2011 also represents a 20 percent increase in 2011.

Enterprises based on science fared well among angel investors in 2011, but software companies still represented the largest single category of investments, grabbing nearly a quarter (23%) of all investments. Science-related companies captured 45 percent of all angel investments:

Health care services, medical devices and equipment – 19%
Industrial and energy – 13%
Biotechnology – 13%

Interest in software enterprises surged in the second half of 2011. In the first half of the year, investments in software companies comprised only about 11 percent of the total, while science-related enterprises captured more than half (56%) of investments.

Angel investors increased their percentage of investments in the earliest — seed and start-up — stages of companies from 31 percent in 2010 to 42 percent in 2011. Early growth and expansion stage deals represented more than half of the investments (55%) in 2011, but still a marked drop from the two-thirds (67%) reported in 2010.

Angel-backed companies were a fertile source of job creation in 2011, according to the report. Companies receiving angel funds last year generated some 165,600 new jobs in the U.S., or about 2.5 jobs per investment. Women and minorities still remained under-represented in the angel investment world. Women comprise about 12 percent of the angel investors and 12 percent of the entrepreneurs receiving funds from angels in 2011. Minority angels accounted for only 4 percent of the angel population and minority-owned firms represented 7 percent of the entrepreneurs that pitched for angel funding.

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Image: Jody McNary/Flickr

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