The Small Business Administration (SBA) is as focused as anyone on the hard data and information around entrepreneurship and investing as anyone. Their recently released study identifies a much bigger universe of investors that most people had thought, and confirms many important details that we "knew" intuitively, but could not support scientifically. Note that, as much as we love the SBA, in typical governmental style, much of this data spans the years from 2001 to 2003, so direct correlations to today are suspect. For those of us who remember that far back, these were lean years for the economy, being the wake of the 9/11 attacks and the dot-com bust. So, take it for what it's worth, and read the full report to determine your own conclusions.
The first interesting analysis looks at the number of angel investors and investments: - Surveys
from the Federal Reserve and other research organizations estimated
number of people who made an angel investment between 2001 and 2003 is
between 331,100 and 629,000 people, and made investments in between 50,700 and 57,300 companies. This is based on extrapolated data, and likely represents the largest possible population of angels.
- The
Angel Capital Association reports that in 2006, the 5,632 accredited
angel investors comprise its membership made 947 investments in 512
companies. These are the numbers of self-identified angel investors who joined the known professional organization, and likely represents 'serial' and 'professional' investors.
The difference between these two sets of numbers begins to identify the confusion and paradox in researching angel investing. Next, we are interested in how much money gets invested:
- The broader estimates for the years between 2001 and 2003, suggest that angels invested an estimated $23 billion per year.
- ACA members provided start-ups with a total of $228.8 million in 2006.
Obviously, that's a big range, and it's easy to presume that the truth lies somewhere in between. It's clear that the ACA membership is the most sophisticated sub-set of angels. Additional information cited in the report indicates that the average ACA investment is just under $35,000, which is more than three times the size of the average investment among the larger set. This report suggest that most angels are unaccredited investors,
If we relate these numbers to the Colorado population (and assume a direct correlation, which is a questionable proposition), it suggest that there are as many as 10,000 potential angel investors in Colorado, but fewer than 100 who are active, professional angels. (Please chime in here -- how do these numbers reflect your knowledge of the state's investing climate?).
In summary, quantifying and measuring angel investing a difficult science, and even those who are doing this as a profession have questionable data and challenging correlations. However, we do know that angel investing is one of the most important drivers of the US economy, and continues to be a major impetus to getting early stage companies up and running. We'll see a big turnout of most of Colorado's professional angels, and probably more of the hidden angels than even we can identify, at the upcoming Angel Capital Summit on November 21st.
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