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The Biggest Trends in Angel Investing

Every year, the Angel Resource Institute works together with Pitchbook and Wilamette University to put together the Halo Report, an in-depth analysis of individual angel and angel group investment activity across the country. As members of the Angel Capital Association and the larger angel community, we are proud to be featured in this year’s report as one of the top seven most active angel groups in the country and interested in the insights about the landscape shared. Below are the key findings from the report.

1) Angels Keep Their Investments Close to Home

One of the key findings the Halo Report uncovered was that angels invest in their own geographic regions 75% to 80% of the time.

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From a practical standpoint, this data makes sense. Angels source their own deals and are more likely to have established networks and connections in the startup ecosystem closest to them. They also have a vested interest in stimulating their local economies and developing relationships with their companies they can maintain over time.

At Hyde Park Angels, we only invest in the Midwest because we care about growing the Midwest entrepreneurial landscape, but also because we rank our human capital as our most valuable asset. Our members are individuals who have started, scaled, and sold their own businesses, and they use that experience that help our portfolio companies onto the same path to success. To do that, proximity becomes very important.

2) The Coasts Continue to Dominate Dollars Invested and Deals Done

In just one year, New England has doubled its share of deals and dollars invested nationwide. This brings the East Coast to the most dominant player in the country, representing 21.5% of all deals done and 26.7% of dollars invested. The West Coast follows close behind, investing in 20.9% of all deals done and putting in 17.9% of dollars invested.

Other regions like the Midwest and Southeast are growing their market share and represent a strong portion of overall investments, indicating a trend towards more investment within non-coastal regions. Pared with the data suggesting angels invest in their own regions, this also demonstrates more investments in non-coastal startups.

3) Median Valuations Reached Peak Levels Last Year
In 2014, the median angel investment nationwide was $3M. Last year, that number jumped up 53% to $4.6M.

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With the recent changes in the public markets, questions around unicorn valuations, and a general movement towards correction in the private markets, this trend is likely to shift in 2016. It also provides more background into the present day shift; historically, valuations in the angel market have increased incrementally. The explosive growth in 2015 was uncharacteristic, so in 2016 we may be looking more about restoring equilibrium than simply tightening up valuations.

4) Healthcare Investments Are on the Rise
In 2012, healthcare investments made up approximately 16.9% of all angel investments. Last year, that percentage jumped up to 22.9%, making it the fastest growing industry sector for investment when compared against software, commercial services, media, consumer goods, pharmaceuticals and biotechnology, hardware, and energy.

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