Investing angels slow a bit in ’07

Angel investment dipped a bit in the first half of the year, as average deal sizes declined and individual investors took on smaller stakes, according to a new report.

Overall, angels invested $11.9 billion in the first six months of 2007, a decrease of 6% over the same period last year, according to data released last week by the Center for Venture Research at the University of New Hampshire.

Deal count held steady. A total of 24,000 entrepreneurial ventures received angel funding in the first half of 2007, a 2% decline from a year ago. And the number of individual angels actually rose. There were 140,000 active investors in the first half of 2007, up 8% above the first half of 2006.

Financings were heavily diversified across sectors. Health care services / medical devices and software companies raised 22% and 14%, respectively, of total angel investments in the first half of 2007. This was followed closely by biotech at 10 percent. Electronics and computer hardware, IT services, retail and industrial/energy (which includes environmental products and services) garnered close to 10% each.

While angels are best known for seed and startup capital, researchers say they’re increasingly moving into later-stage investments. In the first half of the year, post-seed and post-startup investments accounted for 48% of angel expenditures.

“While angels are not abandoning seed and startup investing, it appears that market conditions, the preferences of large formal angel alliances, and a possible slight restructuring of the angel market are resulting in angels engaging in more later stage investments,” says Jeffrey Sohl, director of the Center for Venture Research. —Joanna Glasner