Why Angel Backed Companies are Raising Less Money

The average angel-backed company receives much less capital today than it did in the early 2000s, data from the University of New Hampshire’s Center for Venture Research (CVR) reveals. The CVR’s numbers — which come from surveys of individual angels and angel groups — show that the dollars that the average angel-backed company received dropped a whopping 42.3 percent between 2002 and 2014, when measured in inflation-adjusted terms.

As the chart below shows, two factors contributed to this decline. First, the amount that the average angel put into start-ups fell dramatically between 2006 and 2008, and has not recovered. Measured in inflation-adjusted terms, the amount of angel investment per active investor declined from $128,000 in 2006 to $74,611 in 2008 (in 2014 dollars). From 2008 to 2014, this amount has remained largely unchanged, increasing only to $76,121 in 2014 (in 2014 dollars).

Second, the number of active angels per angel-backed company declined from 5.6 to 4.3 between 2002 and 2014.

However, the time pattern of this decline is very different from that of the reduction in the amount invested. Almost all of the decline in the number of angels occurred between 2002 and 2005, during which time the number of active angels per financed company fell from 5.6 to 4.6. Since 2005, the number has fluctuated up and down and was at 4.3 in 2014.

While the timing of these two changes is different — suggesting that they stem from different causes — they have combined to reduce dramatically the amount of money raised by the average angel-backed company. In 2002, the average angel-backed venture received nearly $576,000 in angel money (when measured in 2014 dollars). But in 2014, the average angel-financed business received only $328,000.

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