Thursday, October 11, 2012

Fostering Entrepreneurship—VI

The State of Angel Investing

Halo Report Infographic
 ~ Several interesting facts in the latest Halo Report on startup funding:

  1. The median size for startup valuation when funded is $2.7M. Fully 3/4 of all startups receive investor funding with a valuation of $1.7M or greater. For entrepreneurs (for now) these are robust numbers, and help explain the bit of a rush to raise money we're seeing in some quarters.
  2. The median size of the round shrunk to just over $500K. For a Series A round this seems a bit small, but the number is probably skewed downward because of an overweighting of those famously capital efficient Internet startups which can hit early milestones with less money, thanks to the cheap cost of electrons, energy drinks and ramen.
  3. Investors remain herd creatures with the bulk of the deals and dollars going to Internet, healthcare, and mobile/telecon. (As a country, do we want to reinvigorate our industrial base? If so, we might want to start with funding industrial innovation.)
  4. The Pacific Northwest doesn't have one of the top 5 most active angel groups in terms of number of deals...
  5. ...but Seattle does boast The Alliance of Angels as a top 5 angel group for dollars invested. Bravo!
  6. The Pacific Northwest's national share deals held steady, while dollars invested grew year-over-year.
In short, we're doing OK, not great. Deals are getting done, but there is a growing sense of froth reflected in the valuations and the narrowing sector focus. Greater diversity would be salutary to our broader economy, as well as softening the boom-bust angel cycle.

Many investors are waiting for the election to finish, hoping that the result will clarify the investment and taxation climate going forward. It won't. Still, there may be even more investing activity in the next 6 months than in the past, which will make a comparison of this to the next Halo Report interesting reading.

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