Angels Favored Healthcare & Internet, With Bigger Rounds in 2011

3/8/12Follow @xconomy

Each time new private investing data comes out, it seems like it’s another chance for California to show its dominance. That’s the case with the Halo Report, but this particular report also reveals some interesting trends in angel investing.

Put together by the Angel Resource Institute, Silicon Valley Bank, and the data services firm CB Insights, this report’s data comes from 2011 deals with at least one angel group participating. Last year, that amounted to 573 investments and $873.3 million.

While California was the top region for angel dollars and deals, the rest of the country is getting its fair share of play. The report says 79 percent of the deals were done outside the Golden State, and 70 percent of the angel dollars went into other regions.

It seems angels are sticking together more. The median size of rounds in which angels invested with other individuals or angel groups grew by 40 percent in 2011, from $500,000 to $700,000. Meanwhile, the median size of rounds in which angels invested with other types of investors fell from $2 million 2010 to $1.5 million in 2011.

Nationally, 58 percent of angel investment deals went to the healthcare and Internet spaces, with medical device and equipment companies accounting for 60 percent of those healthcare deals. (The costs of drug development are so high, there’s not much reason for angels to invest in drugmakers, if you think about it.)

Even though Boston is known as a life sciences hub, Internet companies in New England accounted for the largest percentage of angel investment deals, at 28.8 percent. Healthcare was second for deals at 16.3 percent. The “other” category (lumping together sectors like industrial, automotive, retail, and consumer products) also took 16.3 percent of the deals, and mobile and telecomm was fourth for angel deals at 12.5 percent. California showed a similar ranking among sectors for angel deals.

Angels investing data wasn’t available by sector for New York and the Northwest, but the breakdown for the Great Lakes Region (including Xconomy city Detroit) showed healthcare was king, with 31.1 percent of the angel deals, while Internet companies followed at 28.4 percent. Interestingly, angel deals in the mobile sector and the automotive sector in the region were tied, at 5.4 percent.

So who’s supplying the cash? California had a strong showing among the five most active angel groups by deals last year, with the Menlo Park-based Band of Angels and Southern California’s Tech Coast Angels as part of the pack. Golden Seeds, which has a presence in Massachusetts, New York, and California, also made the top five angel investing groups, as did Boston’s LaunchPad Venture Group and Austin’s Central Texas Angel Network.

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  • observer

    “….there’s not much reason for angels to invest in drugmakers, if you think about it”

    Erin has oversimplified in a couple of ways here, I think. A reason to invest is for the very large upside (typical deals total in the hundreds of millions) as well as for the satisfaction of large potential quality of life impact. In the survey, the Healthcare sector did have 60%ish in the med device/equipment area, but drugs/biotech together was above 20% in total.

    So there is plenty of excitement and opportunity in drugs/biotech, but it is an area with high barriers and needs careful selection.