KANSAS CITY – Angel group leaders report in a recent survey by the Angel Capital Association that investments have decreased this year and will decline as well in 2009 compared to 2007 due to the current recession. However, some angel groups have increased their investment activity this year and believe they will make additional investments in 2009 as new opportunities arise from difficult economic conditions.

While full data for 2008 investments are not yet in �?? as many angel groups expect to finalize investment deals in December �?? the picture from the survey is that total angel group investments in North America will decrease by at least ten percent from 2007. Survey data for the ACA Angel Group Confidence Report was collected from leaders of ACA member angel organizations November 6 to 18th. About two-thirds of all ACA member organizations participated in the survey. (Angel group) is a member of ACA and participated in the survey.

Based on survey responses, the average size of group investment per deal in 2008 ($280,936) is about six percent larger than the 2007 average, but the average number of investments per group (6.1) will be about 16 percent less than 2007. The average total funding by each group is therefore estimated to be about $1.72 million, more than ten percent less than the 2007 figure of $1.94 million.

Group leaders had been optimistic about increasing their investments at the beginning of this year, in a survey conducted in January and February, 2008. But in this November survey, nearly half of the respondents (47.9 percent) found their activity was less than they had predicted for 2008. Activity was higher for 16 percent of the angel groups and another 36.2 percent found that their investment activity was about the same as they had forecast.

Not surprisingly, general economic issues were cited as the greatest reasons for reduced investment activity. More than half of the groups that had lower investments said that uncertainty in the market lowered inves tment activity. Other significant reasons included a loss in member wealth and the need to reserve additional capital for portfolio companies.

�??Clearly the economy is having an impact on what angel groups will do to fund startups,�?� said John O. Huston, Chairman of ACA and Managing Director of the Ohio Tech Angel Funds in Columbus, Ohio. �??However, a majority of groups expect to see the same or more investment opportunities in 2009. Some of these groups might aggressively seek new deals as they see new advantages in lower company valuations but also in fields such as green technologies, healthcare, mobile media, and renewable energy.�?�

While most groups (76.4 percent) believe they will receive more investment requests in 2009, forecasts for completed investments are mixed. More than a third believe both the number of investments and the dollar amount of investments will decrease next year, while nearly half say that investment will increase or stay the same.

Groups�?? plans for 2009 for raising funds and investment process also reflect a variety of expectations regarding economic downturns and opportunities. Many note that co-investing with other investors will be important to ensure promising companies receive enough capital and angels�?? portfolios build diversity to minimize risk. Forty seven percent plan to increase their co-investment activities with other angel groups and 33 percent will increase co-investment activities with other equity investors such as early-stage venture capital firms or individual angels. These plans to increase co-investment are significant, given that more than 90 percent co-invested with another angel group in 2008. Some angel organizations are also increasing their membership or investment capability: Twenty eight percent plan to significantly grow the number of member investors and almost a quarter (23.7 percent) plan to raise a new fund.

Based on the survey, angel groups have many concerns about the multiple challenges facing their portfolio companies, from managing current cash and expenditures, obtaining next round of financing as VC funding dries up, loss of customers and product demand, and access to credit as they grow. Many are working to support the companies they have invested in by providing more hands-on advice and oversight, assisting in locating additional capital, thinking through ways to reduce company expenditures so that current cash lasts longer, and increasing communication about market and timeline expectations.

The survey report, which is available at AngelCapitalAssociation.Org

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