ANN ARBOR ? Life sciences, drug development and information technology remain the hottest investments for Angel Investors in the Great Lakes region, a survey of major Angel groups shows.
Nationally, Angel investing enjoyed a big up tick nationally in 2004, a 24 percent gain from the year before. The hottest sectors nationally were Software (22 percent), Health (16 percent), Biotech (10 percent) and IT Services (8 percent). In the Great Lakes region, angel investing groups report similar investment patterns.
In Michigan and Southern Ontario, software was the top investment category in 2003, followed by biotech, medical devices, financial services IT, transportation and networking, said David Weaver, president of the Great Lakes Angels. The report for 2004 is not yet finalized.
?But my guess is software would still be in the lead,?? Weaver said. ?We had two big life sciences deals done in 2004 as well.?
The Grand Angels of Grand Rapids, Michigan, focus their investments on deals in West Michigan. The group made four investments in 2004: SimpleDine, a seed stage eCommerce group, Salamander, a homeland security technology company, ProNAi, a pharmaceutical group, and RF Identics, a radio tag group, said Jody De Pree Vanderwel, President of Grand Angels.
?One of the trends that could well emerge is using some of our excess manufacturing capacity to manufacture some medical devices,?? De Pree Vanderwel said. ?That?s certainly a cutting edge area of technology. One trend that may emerge is investing in businesses that can produce medical devices here, which can use the skilled labor and manufacturing capacity in West Michigan.?
Software development, since it can be applied to any segment of the market, is getting a second look from the Grand Angels as well, she said. Since the Grand Angels reaches into Southwest Michigan and the Kalamazoo area, where pharmaceuticals and drug discovery is well developed, those sectors will see a lot of attention in 2005, De Pree Vanderwel predicted.
Michigan?s other major angel investing group, the Ann Arbor Angels, have focused on five sectors over the past twelve months:
Life Sciences, IT, Industrial Technology, Nanotech and Homeland Security. The group has not invested in all of the sub-categories, but its members have invested within each category. Here?s the breakdown:
Information Technology: Internet services, network solutions, database management, software development, communications and electronics.
Life Sciences: diagnostic, drug discovery, healthcare management, devices, therapeutics, and bioinformatics.
Small Tech: MEMS & nanotechnology
Industrial Technology: advanced manufacturing and industrial engineering
?We consider the Homeland Security space to be a cross-industry sector,? said Ann Arbor Angels Founder Michael Cole. ?It can fall in IT, Life Sciences, Small Tech and Industrial technology.?
Meanwhile, in Ohio investments are gravitating towards IT and medical devices, said Ohio TechAngel President Bharat Chabria. The Ohio TechAngel Fund is a $1.3 million contributed capital and ?sidecar? angel fund with fifty members from throughout Ohio.
?We started operations on April 1, 2004, so our first annual report covers just nine months,? Chabria said. ?In the first nine months saw 400 deals, of which we selected 40 to make presentations, 16 allowed to come back for full membership presentation, we approved 3 investments and closed on two.?
Potential areas of investment include Healthcare devices, biotech, pharmaceuticals, Software ? in healthcare services, manufacturing productivity and consumer recreation.
The other big change for Ohio TechAngels is its membership has nearly doubled in 2005 to 99 members. The group?s reach extends in a two-three hour drive from Columbus, where the Fund is based. So far it has not invested outside Ohio.
?We presented 30 deals to our members since March 2004,?? said Steve Beck, president of the Indiana Venture Center. ?Some 25 percent were Life Sciences, 20 percent IT, 20 percent Advanced Manufacturing and 15 percent transportation technology.?
Beck said the deals mirrored Indiana?s strengths. Indiana ranks No. 4 in the world in the amount of life sciences investment. A lot of angel investors made money in life sciences and know the segment well. Purdue University produces a lot of IT graduates, the most in the nation. And a lot of them end up in the auto industry.
?We?re looking at everything from new energy sources to some of the most wild and crazy things you?ve ever seen,?? Beck said.
Prairie Angels of Chicago, one of the Midwest?s oldest angel networks, the focus is on the skill sets of its 25 members, said co founder Barry Moltz. The sectors where Prairie Angels feel they can get the best Return On Investment is Manufacturing Distribution, Software and Retail. Moltz said he expects the focus in 2005 to not change.
Moltz serves on its screening committee and reviews for this organization more than 500 business plans a year. Most recently, he is co founded with other angels and members of the venture community, Prairie Angel Capital Fund (www.pafund.com) a committed capital fund that will lead due diligence on local seed stage companies and then lead investments rounds. Prairie Angels? geographic reach includes Illinois, Wisconsin, Michigan and Indiana.
The Wisconsin Angel Network, which just started in January, is too new to have an investment track record. Director Joe Kremer works closely with a network that?s starting up in Fox Valley, which will is known for its manufacturing. If you go to Madison, the Wisconsin Investment Partners have invested heavily in bio sciences. The focus in Milwaukee for the Golden Angel Network is start-up companies with innovative products and services that can occupy a dominant position in a growing market.
Mike Brennan is Editor & Publisher of Mitechnews.Com, a technology and entrepreneurial web portal for Michigan and the Midwest. To view this site, click on Mitechnews.Com
