With four million (more or less) potential angel investors in the US, but only ten thousand or so organized in any notable way, we can’t be talking about much money being invested, right? Yes… that was a rhetorical question. In fact, the same 2007 ACEF presentation mentioned previously includes a great slide comparing the relative investment volume by angels compared to venture capital firms:
In 2007, it’s estimated that angels invested $26B into 27,000 deals — for an average of $456K per deal. During the same period, VCs invested $29.4B in 3,813 deals – averaging $7.7M per deal, and based on the VC industry trend toward later stage investing, one can assume the median investment is much higher. So the overall scale of angel investment is very close to that of VCs, but the number of deals is vastly different. Not surprisingly, angels invest less per deal on average, and almost always less per investor.
So what does this tell us? Obviously, angel investment is a powerful component of the startup business funding ecosystem. Does it tell us much about the interactions between angels and VCs? Not really. While conventional wisdom might say that a typical funding path for a high-tech start-up is: founders/family/friends, then angels, then VCs, in reality the investment profiles of the two groups keeps them separate much of the time. I’ll explore the reasons why in a couple of posts: Profiles in Courage and Mind the Gap.