Number Of Angel Investor Groups Is Surging Across U.S.

Angel Capital Education Foundation

and the Ewing Marion Kauffman Foundation.

The number of groups climbed to 250 in 2005, a 67 percent increase from the estimated 150 in 2002, the study said.

Across the Southeast, there are at least 20 angel capital groups, according to the Angel Capital Association.

The increase could be good news for entrepreneurs who rely more heavily than ever on funding from wealthy individuals to get new ventures started as opposed to venture capital friends.

"Angels have gone from investing as individuals and sometimes forming ad hoc groups for certain investments, to creating formal groups with robust investment processes," said Marianne Hudson, executive director of ACEF and entrepreneurship director of the Kauffman Foundation.

"As the percent of venture capital dollars invested in early-stage companies continues to drop relative to the total dollars venture capitalists invest, angel groups are playing an increasingly important role in the funding of these ventures," she added. "Many of today's angel investors are far more educated about investment in great part thanks to such sophisticated angel groups who have shared best practices."

The increase in organized groups reflects an increasing amount of angel investments, based on statistics compiled by the Center for Venture Research at the University of New Hampshire.

However, that study, which was released in March, showed that more angels are choosing to make investments in later stage rounds rather than seed or early stage.

Angel investments increased 2.7 percent in 2005 from 2004, the Center for Venture Research said. Of that amount, 55 percent went to seed and start-ups while 43 percent went to post-seed and later deals, an increase of 10 percent over historical levels that began in 2004, according to Center for Venture Research data.

Angels are the largest source for seed and start-up capital.

Funding for start-up and seed rounds from all sources totaled $735.9 million in 2005, according to the MoneyTree Survey from PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association.

That total represented an 81 percent jump from $346 million in 2004, but given the total of venture capital dollars available (more than $21.6 billion), it is "still insignificant", said Jeff Barber, a partner at PwC in Raleigh at a recent venture event.

Early-stage deals drew $3.396 billion, a 14.8 percent drop from the previous year.

The Angel Capital Education Foundation's study reported that the average angel group has invested $1.45 million with average investments of $266,000 per round and an average investment per company of $387,000 in 2005.

The angel groups are also becoming more "formalized", the study said, with more investments being made jointly as they form angel syndications.

Also, 45 percent of angel groups said they had made co-investments with venture capital firms during 2005.

The angel groups, on average, include 41 members, made 5.46 investments in 4.49 companies, and showed a preference for investments in medical device and software firms. Individuals invested an average of $33,236 per deal.

For a list of angel groups operating in the Southeast, see:

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