Will Angel Investment Slowdown Hamper Recovery?

Just as most sources of small business financing have slowed down in the recession, angel financing has gone through some changes, too.

Like all investors, angels became more cautious about their investments. But what long-term effect will this slowdown have? A recent study holds some useful news for small businesses that are seeking this type of financing.

Conducted by the Center for Venture Research at the University of New Hampshire, The Angel Investor Market In Q1q2 2010: Where Have All The Seed Investors Gone?,surveyed angel investment during the first half of 2010. First, the good news: Angels are investing in more businesses. The number of businesses that obtained angel capital in 2010 grew three percent compared to 2009 numbers, reaching 25,200.

Recovery at Risk Due to Angel Investment Slowdown?

Now, the bad news: Although angels are investing in more companies, they’re investing less money overall. Total angel investments in the first half of 2010 dropped by 6.5 percent (to $8.5 billion) compared to the same period in 2009. At the same time, fewer angels are investing. The percentage of angels that are “latent” (meaning they haven’t made an investment) went from 36 percent in 2008 and 54 percent in 2009 to 65 percent in 2010.

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More bad news: Today’s angels are focusing on later-stage companies. A mere 26 percent of angel investments in the first six months of 2010 went to startup stage investments—continuing a decline from 35 percent in 2009 and 45 percent in 2008. And that has implications for more than just startups.

“Historically angels have been the major source of seed and startup capital for entrepreneurs and this declining interest in seed and start-up capital represents a significant change in the angel market,” notes study author Jeffrey Sohl. “Without a reversal of this trend in the near future, the dearth of seed and start-up capital may approach a critical stage, deepening the capital gap and impeding both new venture formation and job creation.”

In fact, even a company with a track record of success might have difficulty getting angel capital if it’s in a risky industry. Angels are focusing on industries that have proven demand even during tough times. Specifically, here’s where they’re putting their money:

  • Healthcare/medical devices and equipment: 24 percent
  • Biotech: 20 percent
  • Software: 12 percent
  • Industrial/energy: 11 percent
  • Retail: 9 percent
  • Media: 5 percent

Recovery could be at risk if angels’ confidence doesn’t improve. Here’s hoping that the rest of 2010 brings more positive news.

Editor’s Note: This article was previously published at OPENForum.com under the title: “Is an Angel Investment Slowdown Putting the Recovery at Risk?” It is republished here with permission.

[“source-smallbiztrends”]

Angel Investments Since the Economic Downturn

In an earlier post, I discussed how venture capital deals have changed since the financial crisis and the Great Recession. Today, I want to point out some changes in angel deals and angel investments over the same period.

Because there is a lot less information on angel investing than on venture capital, I will concentrate on just four dimensions of angel finance:

  • The number of investors.
  • The amount invested annually.
  • The number of businesses funded each year.
  • The average size of the investments.

Number of Angel Investors

The number of angel investors isn’t appreciably different now from what it was before the Great Recession. The Center for Venture Research (CVR) at the University of New Hampshire estimates that there were 258,200 angel investors in the United States (PDF) in 2007 and 268,160 in 2012.

That’s a change of less than 4 percent.

Amount Angel Investments

The amount of financing provided by business angels has changed by much more, declining 20 percent inflation-adjusted terms from before the recession to last year. According to CVR’s estimates, angels invested $27.3 billion in 2007 versus $21.8 billion in 2012 (both measured in 2010 dollars).

Number of Companies Financed

In contrast to the amount of money provided to entrepreneurs, which is now lower than before the start of the Great Recession, the number of companies receiving financing is currently substantially higher. The CVR estimates a 17.3 percent increase in the number of companies funded by angels between 2007 and 2012 (from 57,120 to 67,030).

Angel Investment Size

The decline in the amount of capital provided by angel investors combined with the increase in the number of companies that business angels have financed has led a sizable drop in the size of average angel investments.

As the figure below shows, average angel investments were roughly one third lower last year than in 2007, when measured in real terms. Moreover, the relatively constant size of the average angel investment in the early part of the 2000s and again since 2008 suggests that the financial crisis and Great Recession has led angels to fundamentally alter the size of their investments.

Source: Created from data from the Center for Venture Research at the University of New Hampshire
Source: Created from data from the Center for Venture Research at the University of New Hampshire

In short, angels have responded to the changed economic environment, not by exiting the market, but by providing less money to more startups, thereby dramatically reducing the size of the average angel investment.

Business Angel Photo via Shutterstock

[“source-smallbiztrends”]

Transcell Biologics raises funds from Indian Angel Network

Transcell Biologics was started in 2009 by Dr. Subhadra Dravida who has 16 years of experience in stem cell research.

Transcell Biologics was started in 2009 by Dr. Subhadra Dravida who has 16 years of experience in stem cell research.

New Delhi: Indian Angel Network (IAN), a network of angel investors who invest in early-stage businesses, has invested an undisclosed amount in Hyderabad-based healthcare start-up Transcell Biologics in a round led by angel investor Sanjay Jesrani, said IAN on Thursday. Jesrani will join the board of the company.

The company plans to use the investment to develop products out of stem cell based platforms in both the therapeutic and non-therapeutic areas.

The company was started in 2009 by Dr. Subhadra Dravida who has 16 years of experience in stem cell research.

The start-up develops transformative stem cell based products portfolio and is creating repository of India-specific patient derived tissues for research and development. This will be used towards advancements in modern adult stem cell technology based drug discovery in oncology and brain diseases.

Globally, stem cell therapy is integrated to treat a number of chronic and incurable diseases such as blood cancer and thalassemia.

“Transcell Biologics provides end-to-end solution offerings in stem cell bio banking and ensures quality processing and presentations for the intended applications. We are built on the rock bed of home grown technologies with intellectual property as our business asset since inception with focus on clinical translation,” said Dravida, founder and chief executive officer of Transcell Biologics.

The company had commercialized home-grown stem cell banking vertical in 2011. “With the advancement in technology, newer players are entering the Indian market with an aim to not just to preserve precious lives of the coming generation but also for the regenerative medicine space. Transcell Biologics is one such company who wants to help the needy patient population with the support of their home grown technologies translations. The company has phenomenal amount of research assets in this domain,” said Jesrani.

[“Source-Livemint”]

Home services start-up Gapoon raises angel funds

Bengaluru-based Gapoon, founded in 2015, earlier raised an undisclosed amount in angel funding in July.

Bengaluru-based Gapoon, founded in 2015, earlier raised an undisclosed amount in angel funding in July.

Bengaluru: Home services start-up Gapoon Online Consumer Services Pvt. Ltd on Tuesday said it has raisedRs.1.2 crore in angel funding.

Bengaluru-based Gapoon, founded in 2015, earlier raised an undisclosed amount in angel funding in July.

It operates an on-demand as well as subscription-based model for services such as home cleaning, electricians, appliance maintenance, plumbing, pest control and carpentry.

There are close to 80 start-ups in the home services space in India providing electricians, plumbers, fitness trainers, photographers and even wedding planners, among other services.

Gapoon said it will utilise the funds to concentrate on growing its subscription-based services, which offer the firm a steady revenue and reduce customer-acquisition costs.

“With multiple start-ups emerging in the service industry, Gapoon shows a much more promising solution by pioneering a subscription-based model and focusing on service quality. This funding round will help them consolidate their position,’’ Chandrasekhar Tallapragada, an angel investor who participated in the current funding round, said in a statement.

“This funding round gives us further strength to expand our service offerings to the entire city of Bengaluru in a stronger manner. We intend to focus on growing our subscription-based model. We are also working on service portfolio expansion. We are confident of capturing the market across the country in coming months. We also hope to expand to new cities by the end of 2016,” said Apoorva Mishra, chief executive officer, Gapoon.

[“source-Livemint”]