What does an Angel look like?

Angel investors are affluent individuals who offer money to start-up companies in exchange for equity, repayment with interest or the option to buy stock later at a reduced rate. Unlike venture capitalists who manage the pooled money of others, angels generally invest their own funds. Angel groups, which typically have about 50 members offer a social network for individual investors, holding regular events at which carefully screened companies give presentations and request money.

From the Angel Capital Association’s 2008 Angel Group Confidence Report, here are some enlightening statistics on the nature of nationwide angel investment:

• Angel groups invest early with 82 percent saying they invest in seed and start-up companies and 85 percent investing in early stage companies. Only 45 percent invest in expanding or later stage companies.
• The average angel group invested a total of $1.9 million in 4.5 new companies and 3 existing portfolio companies in 2007. They invested an average of $150,000 per funding round.
• Angels invest alone, as 77 percent of groups allow individuals to choose whether they will invest.
• Angels put money in hot industries. Software, medical devices and equipment, business products and services, industrial and energy, IT services, and biotechnology were among the most invested in industries with more than 50 percent of groups saying they have an interest in each category.
• Community counts for angels with nearly 30 percent saying they prefer to invest within two hours of their metro area.
• Angel groups are picky. The average angel group screened fewer than 180 companies and presented fewer than 20 for investment in 2007.
• Angel investing is a tough bet. Only ¼ of angel groups had at least one investment that exited through a merger, acquisition, initial public offering (IPO) or positive exit in 2007.
• Angel groups are growing. Sixty-eight percent of responding angel groups were formed since 2002 and almost 50 percent said they grew slightly or significantly in number of participating accredited investors. Only 13 percent said their membership decreased.
• Things are looking up for angel investors. About 45 percent of angel groups said that both quantity and quality of applying companies increased. Responding angel groups also said that they expect to see continued increases in number of investments and total dollars invested (55 percent), quantity and quality of presenting companies (48 percent), and number of individual member investors (36 percent).
• Big money-makers are unlikely. More than 60 percent of angel groups think that fewer than 5 percent of their investments will exit in 2008.
• Angels are all around. The Midwest leads North American regions in number of angel groups with 24 percent of respondents located there. Other high concentration areas include California (18 percent), the Northeast (17 percent) and the Southeast (15 percent).

See the full report on the Angel Capital Association’s website.