Chart: What’s Happening with Angel Investing

Last year, the dollar value of angel investments increased 11.7 percent from a recent low of $18 billion (measured in 2010 dollars) the year before, according to analysis by University of New Hampshire’s Center for Venture Research (CVR). While this increase marks the first rise in angel dollars invested in real dollar terms since 2006, the amount put into companies in 2010 remains below that in every year from 2003 through 2007. In 2010, the amount invested by angels was only 5.6 percent higher in real dollar terms than that supplied in 2002.

The trends are very different for the number of companies financed by business angels. Despite a slight dip between 2007 and 2008, the CVR reports a consistent increase in the number of angel-backed companies. Between 2002 and 2010, the number of companies financed by business angels rose 71.9 percent, according to the University of New Hampshire research group.

The result of these divergent trends is a steep drop in the size of the average angel investment from $528,000 in 2002 to $325,000 in 2010 (in real dollars).

Why angels dropped the average size of their investments 38 percent in real dollar terms between 2002 and 2010 remains an important unanswered question. Any thoughts?

Source: Created from data from the Center for Venture Research.

From Small Business Trends

Angel Investment Network’s Weekly Twitter Roundup

Angel Investment News 

  • Benjamin Kuo, the founder of SoCalTech, talks about the 4 kinds of Angel Investors https://ow.ly/5S1x0
  • When an angel investor group has more than 10% women, the number or size of investments increases, says new research: https://ow.ly/5SQ89
  • European Venture Capital Activity Down 28% In The First Half Of 2011: https://ow.ly/5TSaf
  • Why Now Is the Time to Seek Investors for US Businesses: https://ow.ly/5TTbA
  • 7 Common Mistakes Made by Angel Investors: https://ow.ly/5TWJ0

Business Plans & Pitching

  • Dragons’ Den: Top 5 most disastrous pitches: https://ow.ly/5S1ti
  • Steps To Create A Business Plan: https://ow.ly/5S36Z
  • How to Create the Perfect Elevator Pitch: https://ow.ly/5UYJD

Fund Raising

  • The 5 Questions Entrepreneurs Need To Ask In Order To Get Funded: https://ow.ly/5S2fm
  • 5 Things Entrepreneurs Need to Know About Valuation: https://ow.ly/5SQYq
  • Top Tips for Raising Angel Investment Funding: https://ow.ly/5TT4f
  • 4 Ways to Attract an Angel Investor: https://ow.ly/5V0ZP

Marketing & Social Media

  • 10 Tips for Better Startup Marketing: https://ow.ly/5S2s0
  • Why Google+ Will Replace Facebook & Twitter: https://ow.ly/5S7Ul
  • Social Media Best Practices: 12 Tips for Making the Best of Facebook, Twitter, Google + or Any Other Social Site: https://ow.ly/5SQDH
  • 9 Startups With Killer Blogs: https://ow.ly/5SQS4
  • 10 Social Media Mistakes Small Businesses Can Avoid: https://ow.ly/5VY7e

Start-Up & Entrepreneurship

  • Theo Paphitis’ Tips for Small Businesses: https://ow.ly/5SQ3l
  • 6 Reasons Why People Are Afraid to Start a Business: https://ow.ly/5SSmY
  • Rules for Startup Entrepreneurs: https://ow.ly/5TSt2
  • 19 Secrets To Immediate & Exponential Business Growth: https://ow.ly/5U1hp
  • Five Startup Tips from Hotels.com and Getaroom.com Co-Founder Bob Diener: https://ow.ly/5UYik

To stay updated, come follow us on Twitter: https://twitter.com/angel__network.

Read anything interesting? Feel free to add links to any articles or resources you’d like to share with the angel community.

Angel Investment Network’s Weekly Funding Roundup

Here’s a roundup of some of the recent seed-stage and angel deals from around the world: 

  • GoPollGo, a Palo Alto, California-based online polling service, has received an undisclosed amount of seed funding from Idealab
  • Phizzle, who provide solutions to grow fan loyalty, drive monetization and harness brand equity, has closed $3 million A round financing
  • Azumio, a developer of biofeedback apps for smartphones, lands $2.5m Series A funding from Founders Fund, Accel Partners & Felicis Ventures
  • Visual Revenue, the market leader in predictive analytics for online media, has secured $512K from venture capital firms and angel investors
  • Read It Later, which lets you bookmark a webpage and access it later from any smartphone, computer or tablet, has raised $2.5m funding
  • Segmint Inc., who gather and analyze customer purchasing behavior while keeping their identities anonymous, has raised seed funding
  • CloudOne, the leader in lifting software and systems development on to the Cloud, has raised $1.9 million in venture capital funding
  • just.me, a startup playing in the social & mobile spaces, lands $600,000 seed funding from a list of investors including Google Ventures
  • Boston mobile device application startup Crashlytics Inc. has taken in $800,000 of a planned $1 million initial funding round
  • BabbaCo, a maker of educational products for children, has raised $1.2 million from technology investment fund Lightbank and SV Angel
  • Simply Measured, a social media analytics company founded in 2010, has raised $750,000 in seed funding
  • File-sharing startup, Minus, has raised $1 million in seed funding from IDG Capital Partners
  • ChoozOn, the world’s first personalized service for deal discovery and social shopping for deals, lands $3.2m funding from angel investors.
  • COMPANY (www.welcometocompany.com) a social network for contemporary art collectors & online art market lands seed funding of $1.6 million.

To get regular updates, come follow us on Twitter: https://twitter.com/angel__network.

Have you managed to raise capital for your company?  We always love to hear from entrepreneurs who manage to get funded.

7 Common Mistakes Made by Angel Investors

As the head of Angel Investment Network, I’ve had the chance to speak with a lot of angels over the years.  When discussing their experiences, some things kept coming up again and again…

1) Not looking at enough deals

Make sure you look at as many investment opportunities as possible.  The more business plans you read, the more likely you are to find the one that pushes all the right buttons.  It also lets you  notice industry trends and see if any competitors and emerging.  Last year I read about 50 plans about wind turbines, who all claimed to be the best.  You quickly realize that there are so many new players fighting for market share that it would be a very difficult call to make in terms of making an investment. Professional venture capitalists expect to look at 100 companies for every investment they make, so you should join several angel groups to make sure you see as many deals as possible.

2) Not making enough investments

The Rule of 12 says that you need to invest in 12 companies to have statistical diversity. Invest in fewer than 12 deals and you run the risk of them all failing.  Investing in a startup is very high risk, so it’s much more advisable to invest £20,000 in 5 companies than £100,000 in one company. Ron Conway says 1/3 of the startups in your portfolio will lose, 1/3 will get you your money back and 1/3 will be wins.  This shows how important it is to diversify your portfolio as much as possible to increase your chances of picking a hit.

3) Not knowing when to quit

I don’t want to make too close a comparison to gambling, but angels need to have the same mentality as gamblers when things don’t go well.  In the same way that a gambler needs to know when to walk out of the casino when things aren’t going their way, an angel needs to know when to throw in the towel and let an investment go out of business.

4) Expecting a quick return

Most entrepreneurs’ business plans say they expect to exit within 3-4 years, but the reality is that it usually takes much longer than that. Angel investing is a long-term commitment, so it’s important to invest money that you can afford to be without for a number of years.

5) Not doing thorough due diligence.

As with any business deal, it’s important to do through due diligence on the business and management team.  You’ll more than likely be giving your money to a complete stranger so you need to trust them completely and feel comfortable that they’ll spend your money wisely.

6) Not reserving additional capital for the inevitable follow-on round.

The initial investment won’t last forever and most companies will have to raise more capital (either from existing investors, external angels or VC’s).  If you invest in the next round of funding, it’s easier for you to set the company valuation. By participating in the follow-on round, the entrepreneur can go to the VC’s and say we’ve already raised X in this round in return for Y% equity, which values the company at Z. If not, you essentially lose control in that round and the VC’s are in a very strong position to dictate the terms of the deal.

7) Following a herd mentality

A lot of investors like to invest in groups as they get the added benefit of other investors’ expertise, contacts, etc. They feel their pooled experience should give the company (and therefore their own investment).  This is often the case, but I’d remind investors not to place too much trust in other angels’ judgement and to always do their own diligence and research.

There are many ways to avoid these common pitfalls. Joining an angel network is a good way to see more potential investment opportunities, build a portfolio, and find out about other angels’ experience with investing (you may be able to learn from their mistakes).

Investors, are there any other mistakes you’ve made over the years?  Add your thoughts below so other angels can have a much better shot at taking advantage of the great potential returns start-ups can provide.

Angel Investment Network’s Weekly Twitter Roundup

Angel Investment News 

  • A Venture Shift panel discusses the disruption of the VC industry and why angels are here to stay: https://bit.ly/ptW3IS
  • Five Ways To Get More Women In Venture Capital: https://bit.ly/rigkfB
  • Ex-MySpace Director Deep Malhotra launches an incubation facility called Gemini New Media Ventures: https://bit.ly/o0Bv6d
  • New Zealand fund managers are calling for more government intervention to save the struggling venture capital industry: http
  • The Expectations Gap – The Impact Of UK’s Enterprise Investment Schemes: https://bit.ly/o1pbcH
  • Are you an angel? Alternative ways to invest: https://bit.ly/i8waKS
  • Ex-Googlers attract more capital than ex-Microsofties (but report misses a few too): https://bit.ly/mUnNPA

Business Plans & Pitching

  • Tips For the Perfect Elevator Pitch: https://bit.ly/rhFfzH
  • What to Include in an Elevator Pitch: https://ow.ly/5PMN5

Fund Raising

  • Start-ups hungry for financing tips: https://bit.ly/nIRxDn
  • Bootstrapping. Friends & Family. Angels. VC. Which of these ways of financing your start-up is right for you? https://bit.ly/nMTaDT
  • 3 Common Mistakes Made by Angel Investors: https://bit.ly/q8ZJ1Q
  • 5 Non-Traditional Ways to Get Startup Money: https://bit.ly/oaow2Q

Marketing & Social Media

  • Are You Ready For Google+? https://bit.ly/rud2Pr
  • The Top 10 Marketing Sites For Social Media Marketing Trends: http
  • The Complete Entrepreneur Guide to Google+: https://bit.ly/rnYFiu
  • 6 Daily Habits for Facebook Marketing Success: https://bit.ly/pWxSUd
  • 4 Big Social Media Mistakes Small Business Owners Make: http
  • Social media trends 2011/2012: https://ow.ly/5PM7p

Start-Up & Entrepreneurship

  • 10 Must-Have Business Apps for 2011: https://bit.ly/pvVaXF
  • 5 Skills & Traits Every Entrepreneur Should Nurture for Success: http
  • The 10 Most Popular Startup Tools: https://bit.ly/opO7Qf
  • 8 Crucial Elements of Start-up Success: https://bit.ly/raNAaO

To stay updated, come follow us on Twitter: https://twitter.com/angel__network.

Read anything interesting? Feel free to add links to any articles or resources you’d like to share with the angel community.