Companies In Life Sciences,
Biotechnology Reap Rewards Of National Angel Investors Market In
First Half Of 2005
Contact: Lori Wright
UNH Media Relations
Oct. 7, 2005
Editors: Jeffrey Sohl, director of the Center for Venture Research,
is available to discuss the Angel Investor Market Analysis for Q1
and Q2 2005 at 603-862-3373 or 603-862-3341 (CVR Main Number) and
email@example.com. The entire
report is available for download at http://unhinfo.unh.edu/news/docs/Q122005AngelInvestorMarket.pdf.
DURHAM, N.H. – Angel investors put their money behind companies
involved in the life sciences and biotechnology in the first half
of 2005, with nearly 40 percent of total angel investments nationwide
backing the two sectors, according to the Angel Investor Market
Analysis for Q1 and Q2 2005 released by Center for Venture Research
at the University of New Hampshire Whittemore School of Business
“Life sciences has been attracting a lot of attention because
it’s a growing market and is predicted to get much larger.
The difficulties of the high risk of investment and long exit horizons
now are being offset by the potential returns. Investors shied away
from the life sciences and biotech sectors for a while because of
the long exit horizons, but the possibility of high potential returns
have helped angels realize that there are more possibilities in
making deals work now,” said Jeffrey Sohl, director of the
Center for Venture Research.
Life sciences, which includes health care services, medical devices
and equipment, attracted 20 percent of the angel investment in the
first half of 2005. Biotechnology attracted 17.5 percent of angel
investments, with software investments close behind at 17 percent
and IT services at 13 percent. The remaining investments were approximately
equally weighted across high tech sectors, with each having between
3 percent and 6 percent of the total deals.
“This market level sector diversification indicates a robust
investment pattern and provides a foundation for reasonable growth
in the market. Since the angel market is essentially the spawning
ground for the next wave of high growth investments, this sector
diversification provides an indication of investment opportunities
that will be available for later stage institutional investors,”
according to the report authored by Sohl.
Overall, the angel investor market has shown signs of maintaining
investment levels in the first half of 2005, with total investments
of $11 billion. Angel investments for the first half of 2005 are
slightly less than the first half of 2004 ($12.4 billion) but on
track to match 2004 investments of $22.5 billion, according to the
report. A total of 26,000 entrepreneurial ventures received angel
funding in the first half of 2005, a level comparable to the first
half of 2004. The number of active investors in the first two quarters
of 2005 was 126,000 individuals, a slight decline from the same
period in 2004. An average of four to five investors joined forces
to fund these entrepreneurial ventures.
“Angels continue to be the largest source of seed and start-up
capital, with 48 percent of the first half of 2005 angel investments
in the seed and start-up stage. While this preference for seed and
start-up investing is the largest stage for angel deals, this also
represents an 11 percent decline in this stage from Q1-2, 2004.
While angels are not abandoning seed and start-up investing, it
appears that market conditions and the preferences of large formal
groups of angels, are resulting in angels engaging in more later
stage and follow-on funding for their investments,” according
to the report.
“New, first sequence, investments represent 69 percent of
Q1-2, 2005 angel activity. This shift in investment strategies toward
post seed investments reduces the proportional amount of seed and
start-up capital. This restructuring of the angel market has in
turn resulted in fewer dollars available for seed investments, thus
exacerbating the capital gap for seed and start-up capital in the
United States,” according to the report.
Looking forward, if the angel market is to achieve sustainable growth
there needs to be a reasonable augmentation in active investors,
and thus, level of participation is an important consideration.
While the number of individuals who are members of organized angel
groups is increasing, there is a larger percentage of latent angels
(individuals who have the necessary net worth, but have not made
an investment), according to the analysis.
In the first half of 2005, 66 percent of the membership in angel
groups was latent angels, compared to 56 percent in 2004 and 48
percent in 2003. “This increase in latent investors over time
indicates that while many high-net worth individuals may be attracted
to the early stage equity market, they have not converted this interest
into direct participation. This lack of active involvement may be
the result of the current trend to rush to form angel groups, rather
than meeting the more basic systemic need for educational programs
and research to move the latent angel to the active investor,”
the report said.
The Center for Venture Research (CVR) at the UNH Whittemore School
of Business and Economics has been conducting research on the angel
market since 1980. The CVR’s mission is to provide an understanding
of the angel market and the critical role of angels in the early
stage equity financing of high growth entrepreneurial ventures.
Through the tenet of academic research in an applied area of study,
the CVR is dedicated to providing reliable and timely information
on the angel market to entrepreneurs, private investors and public
The Center for Venture Research also provides consulting services
to angels, angel groups and state and foreign governments. For more
information visit http://www.unh.edu/cvr
or contact the CVR at 603-862-3341.