The Importance of Angel Investments

Top Six Sectors Angel Investors Fund

Top 6 Sectors Angel Investors Fund (Photo credit: Cory M. Grenier)

Angel investments are considered by observers to be one of the key drivers behind the startup and growth of new businesses (Council on Competitiveness, 2007). Well, just how large is the angel capital market, how much demand is there for angel capital, what are the primary characteristics of angel investments?, and what do the companies that receive angel f̄inancing look like?

In his research paper, Scott Shane found that the estimated number of people who made an angel investment between 2001 and 2003 is between 331,100 and 629,000, and these angels invested an estimated $23 billion per year. Just on the EUSA and 2003 FRSSBF data, Shane observes that the number of companies that receive angel investments annually is between 50,700 and 57,300.

According to the EUSA data, the typical angel investment made between these 3 years was $10,000 and in 2006, the average dollar value invested per angel in an angel group deal was $31,457. This brings the leverage debt of 40.2% of the money provided by angels to startups in these 3 years.Shane discovered from previous research that 35% of these angels would invest without “looking at the entrepreneur’s business plan”, and that 20% of angel investors performed “no due diligence on investments that they made”.

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