Angel investments declined 26.2 percent in 2008, according to a report (PDF) from the University of New Hampshire’s Center for Venture Research, part of the university’s Whittemore School of Business and Economics. While total angel investments fell more than a quarter, there was little change in the number of ventures receiving angel funding. 55,480 ventures received angel funding last year, down only 2.9 percent from 2007. Deal size decreased 24 percent. “These data indicate that while angels have not significantly decreased their investment activity, they are committing less dollars resulting from lower valuations and a cautious approach to investing,” according to Jeffrey Sohl, author of the center’s report.
Healthcare Services and Medical Devices received the most angel funding in 2008, accounting for 16 percent of total investments. The other sectors receiving the most funding were Software (13 percent), Retail (12 percent), Biotech (11 percent), Industrial/Energy (8 percent), and Media (7 percent).
The report attributes the success of Retail and Media to social networking ventures.
Angels remained the largest source of seed and start-up capital in 2008, accounting for 45 percent, an increase of six percent from 2007. The largest decline was in expansion stage investing, which fell 14 percent. 63 percent of angel funding went into first sequence investments.
The yield rate, “the percentage of investment opportunities that are brought to the attention of investors that result in an investment,” have fallen 13 percent since 2005. This resulted in 2008’s low yield rate of 10 percent, further proof of angels are becoming much more selective in choosing the ventures in which to invest.
Minorities made up only 3.6 percent of the angel population, in 2008 and only 16.5 percent of the investors were women.