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Angles Continue To Be #1 Source Of Capital

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According to the University of New Hampshire's Center for Venture Research (CVR), Angel investors continue to be the number one source of seed and startup capital for entrepreneurs. A total of 55,480 entrepreneurial ventures received Angel funding in 2008, a modest 2.9% decrease from 2007, and the number of active investors in 2008 was 260,500 individuals, virtually unchanged from 2007.

This data indicates that while Angels have not significantly decreased their investment activity, they are committing less dollars (resulting from lower valuations and a cautious approach to investing). CVR concludes that although the current economic climate has not reduced Angel activity significantly, it has caused investors to scale back the size of their investments.

An Angel investor or Angel (according to Wikipedia) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of Angel investors organize themselves into Angel groups or networks to share research and pool their investment capital. My definition, as I wrote in “So You Want To Be A Millionaire” (see is more in line with the FFF concept (Friends, Family, and Fools).

My advice to find Angels, is to tell everyone you know what you are doing. You shouldn't worry about giving your idea away as much as you should worry about not getting your funding fast enough. A good place for the totally uninitiated to start, is to talk to anyone who deals with a lot of startups, such as lawyers, PR firms, accountants, and marketing consultants.

CVR released statistics on application and acceptance rates for minority and women entrepreneurs as well. CVR found that although their acceptance rates were in line with the total population of entrepreneurs, minorities and women are less likely to seek angel funding. In 2008, minority Angels accounted for 3.6% of the Angel population and women Angels represented 16.5% of the Angel market.

Minority-owned firms represented 3.7% of the entrepreneurs that presented their business concept to Angels. The yield rate for these minority-owned firms was 11.3%, which for the second straight year, is in line with market yield rates. However, the small percentage of minority-owned firms seeking Angel capital is of concern. Women-owned ventures accounted for 15.7% of the entrepreneurs that are seeking Angel capital and 9.5% of these women entrepreneurs received Angel investment in 2008.

Healthcare/Medical Devices and Equipment took the lead as the most popular sector for Angel investment, passing Software in 2008. Healthcare companies received 16 percent of all investment. Despite becoming the top sector, healthcare's total share of investment actually declined by three points from 2007. Software saw its share of total investment fall even more, from 27 percent of investment to 13 percent. The Biotech and Industrial/Energy sectors held steady while both Retail and Media increased their share.

In 2008, only ten percent of companies that were reviewed by Angel investors actually received Angel dollars. This continues the decline in acceptance rates that has occurred since the industry's peak acceptance in 2005, when 23 percent of companies were approved. Though Angel investments dropped considerably in 2008, the total number of deals held steady. Total investments fell 26.2 percent from 2007 to $19.2 billion, while deals fell only 2.9 percent.

45 percent of Angel deals invested in companies at the seed and startup phase, up from 39 percent in 2007. A majority of Angel capital recipients (63 %), are in their first sequence of fundraising, a number that has held steady for several years. Angel investors are becoming less interested in expansion-stage deals, which received only 14 percent of total Angel dollars.

You can find lists of professional Angel financing firms like or on the Net by running a standard search. The full 2008 Angel Market Analysis is available at:

The Center for Venture Research (CVR) has been conducting research on the Angel market since 1980. The CVR’s mission is to provide an understanding of the Angel market through quality research. The CVR is dedicated to providing reliable and timely information on the Angel market to entrepreneurs, private investors and public policymakers. For more information visit


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