State of Angel Group Market –
Things Incubation Professionals Should
Know
April 20, 2009
National Business Incubation Association Conference
Marianne Hudson
Companies Backed by American Angels
Annual Sources of Start-up Funding
Venture Capital ~$ .3 billion
State Funds
~$ .5 billion
Angel Investors ~$20 billion
Angels: 90% of outside
equity for start-ups?
Friends & Family ~$60 billion
$22
$20
$18
$16
$14
$12
$10
$8
$6
$4
$2
$0
Sources: MoneyTree, NASVF, multiple studies on informal capital
1
Potential Angels in the USA
U.S.
Millionaires
4,200,000
3 study
Estimates of
Informal
Investors
1,000,000
Center for
Venture
Research Active Angels
(est.)
225,000
Investors
in angel
groups
12,000
2009 Report from Spectrem: $1 millionaires down in 2008 by 27%, those
with $5 million down by 28%
Growth in Number of American Angel Groups
300
250
200
150
100
50
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Sources: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-09 data)
Number of European Business Angel Networks
300
250
200
150
100
50
0
2000 2001 2002 2003
Mid- Mid- Mid- Mid- Mid2004 2005 2006 2007 2008
>Consolidation of mature markets: England, Germany
>Exponential development in younger and new markets: France, Spain,
Sweden, Portugal, and Eastern European countries
$26.0B
57,000 deals
Mostly early stage
Mostly later stage
3,813 deals
$29.4B
995 Early Stage
Early
Stage
Late
Equity Capital Markets Large, Complementary
415 Seed
2007 Angel
Investment
2007 VC
Investment
source: UNH CVR
source: NVCA/PWC/VE
Benchmarking Angel Activity
US
Center for Venture Research:
2007: 258,200 angels, invest $26 billion in
57,120 ventures
No fiscal incentives YET at federal level
(25 states have tax credits for angels) –
but more discussions as to how to attract
new angels into the market as VCs and
angel syndicates are moving further along
the financial value chain
Europe
European estimate 2007:
50.000/75.000 angels investors
2-3 billion € invested
EBAN Statistics for 2006
- 9000 active angels in 97 networks
- 653 deals done
Only record activity in responding
networks: only a very small portion of the
activity
Fiscal incentives a growing phenomenon,
UK as benchmark
Compensation for the lack of
entrepreneurial spirit?
Summary of ACA Membership – April, 2009
•
•
•
•
•
Full Members
Provisional Members
Accredited Investors in Groups
States & Provinces
Affiliate Organizations
146
16
7,062
49
19
Members and Affiliates – April, 2009
Full Members
Provisional Members
Affiliates
Comparing Average ACA Group Investment Data
Number of investments
Total dollars invested
Dollars invested per round
Number of new companies
2008
2007
2006
6.3
$1.77 mil
$276,918
3.7
7.3
$1.94 mil
$265,926
4.5
7.4
$1.78 mil
$241,528
4
In 2008:
• 62.7% had follow-on or co-investments with VC firms
• 23.4% had 1 or more positive exits
Source: ACA Angel Group Confidence Surveys – 2007, 2008, and 2009 (self-reported, not verified)
Average Preferred Investment Per Round - 2008
< $150,000
$150,000 - $250,000
$250,000 - $500,000
$500,000 - $750,000
> $750,000
0
10
20
30
40
Source: 2009 ACA Angel Group Confidence Survey and 2008 Member Directory
50
Percent of
Groups
Predictions for 2009 Overall Investment Changed in 4 Months
Deals and dollars up
Everything is same
Deals up, dollars down
Deals down, dollars up
Deals and dollars down
Other
0
5
10
November, 2008
15
20
March, 2009
Source: 2008 and 2009 ACA Angel Group Confidence Surveys
25
30
35
40
Percent of
Groups
2009 Prediction:
How Long Will Credit Crunch/ Current Economy Last?
Q2 2009
November, 2008
March, 2009
Q4 2009
2010
2011
Later
0
10
20
30
40
Source: ACA Angel Group Confidence Survey – 2008 and 2009
50
60
Percent of
Groups
2009 Prediction:
Plan Major Changes to Group Structure or
Investment Process?
Increase member angels
Decrease member angels
Establish sidecar fund
Raise new fund
More investment in portfolio cos
More co-investment with other groups
Increase co-investment (general)
Update industry preferences
No changes planned
Other changes
Source: 2009 ACA Angel Group Confidence Survey
29.2%
0.0%
19.4%
12.3%
32.3%
53.8%
35.4%
15.4%
21.5%
23.1%
Co-Investment/ Follow-On Preferences
Individual angels
Other angel groups
Early-stage VC
Later-stage VC
Family offices
Other private equity
No co-investment
0
20
40
Source: 2008 ACA Angel Group Confidence Survey
60
80
100
Percent of
Groups
Impact of Recession:
Appetite for Adding New Ventures to Your Portfolio?
Recently
decreased
November, 2008
March, 2009
No change
Aggressively
seek new
opportunities?
0
5
10
15
20
25
Source: 2009 ACA Angel Group Confidence Survey
30
35
40
45
Investment Preference – 2008-2009
Biotechnology
Business Products/ Services
Com puters & Peripherals
Consum er Products/ Services
Electronics/ Instrum entation
Financial Services
Healthcare Services
Industrial/ Energy
IT Services
Media & Entertainm ent
Medical Devices & Equipm ent
Netw orking & Equipm ent
Other
Retail/ Distribution
Sem iconductors
Softw are
Telecom m unications
0
10
20
30
40
50
60
70
Percent of Groups
Source: 2009 ACA Angel Group Confidence Survey and 2008 Member Directory
80
Preferred Investment/Company Stage – 2008-2009
Percent
of
Groups
80
70
60
50
40
30
20
10
0
Seed/Startup
Early Stage
Expansion
Later Stage
Source: 2009 ACA Angel Group Confidence Survey and 2008 Member Directory
Average = 43.6
Median = 32.5
Investors Per Group
30
25
20
15
10
5
0
2 to 10
11 to 25
26 to 50
51 to 75
76 to 100
101+
Percent of Groups
Source: 2009 ACA Confidence Survey and 2008 Member Directory
Investment Structure
Network/Sidecar
(7.8%)
Fund (22.2%)
Network (69.8%)
Source: 2008 ACA Member Directory/ 2009 membership applications – 166 groups reporting (2006-2009)
Group Led by Members or Hired Manager?
Both (3.4%)
Manager (41.1%)
Members (54.8%)
Source: 2008 ACA Member Directory/ 2009 membership applications – 146 groups reporting (2006-2009)
Angel Returns: 20-25% Per Year?
25
Historical 20 Year Returns for Alternative Assets
22.4
18.7
18.7
Returns
20
16.5
14.9
13.2
15
10
5
0
Seed
Funds
All
Venture
Hedge
Funds
Source: Venture Economics, HFRI Equity Hedge Index
Buyouts
S & P 500 NASDAQ
November study: IRR = 27%
or 2.6X in 3.5 years
Rob Wiltbank, Willamette University
Need More Information?
Marianne Hudson
Angel Capital Association
8527 Bluejacket St
Lenexa, KS 66214
913-894-4703
mhudson@angelcapitalassociation.org
www.angelcapitalassociation.org