The Size of Angel Investments

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About a week ago, I put out the statistic that the typical, or median, size of an angel investment is $10,000. Many people have responded that they don’t believe the number because they see companies receiving $250,000 to $500,000 from angels. But these numbers aren’t inconsistent.

Data from a survey of a representative sample of the adult age population in 2004 put the median (typical) angel investment made by an American between 2001 and 2003 at $10,000.

The median, or typical investment, is very different from the mean, or average investment because a few people make very large angel investments. The mean angel investment calculated from the responses to the survey from which I drew the $10,000 median figure was $77,000.

The $10,000 and $77,000 numbers refer to amounts invested by individual investors in a company, not the amount received by the company in which the investment was made. The respondents to the survey report that the average number of other private investors in the companies they invested was 3.85, making the average total number of private investors per company 4.85. If the other investors were also angel investors who made similarly sized investments, then the average investment received per company was $372,000.

How do these figures compare to the numbers from investments made by members of angel groups? Angel groups are composed of only accredited angel investors and are thought to be more sophisticated than the average angel. So one would expect them to invest more per company than the average angel investor. In 2006, the average, or mean, size of an angel investment made by angel groups was $242,000.

But angel groups are made up of several angels who each put in money. So the amount per angel is much smaller than the amount put in by the group. The data from the Angel Capital Association indicates that the average dollar value per round per individual angel group member was $31,500 in 2006.

Finally, the average company that received money from an angel group in 2006 received more than one investment. Therefore, the average amount of money that a company received from an angel group was $447,000.

The message from all of this data is simple. The typical angel investment is about $10,000, but the average is $77,000. Because, on average, several angels invest together, the average amount of money received by each company receiving an angel investment is close to $372,000. The amount of money received by companies from angel groups tends to be a bit higher, but not that much larger, and isn’t that larger on a per investor basis.

You can find out more about angels in Fool’s Gold: The Truth Behind Angel Investing in America

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About the Author: Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool’s Gold: The Truth Behind Angel Investing in America; Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By; Finding Fertile Ground: Identifying Extraordinary Opportunities for New Ventures; Technology Strategy for Managers and Entrepreneurs; and From Ice Cream to the Internet: Using Franchising to Drive the Growth and Profits of Your Company.

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Scott Shane


Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

9 Reactions

  1. I’m shocked that a typical investment is only around $10,000. I was under the impression that angel investors put up larger sums of money than that. Scott, with your latest posts you have really opened my eyes to what it is to be an angel investor. You’re making me very curious to read more in your book.

  2. These posts have enlightened me as well. Seems the typical angel investor surely can be the guy next door and the sums of money aren’t fantastic amounts that get these businesses off the ground either.

    It’s actually nice to know that it’s not out of reach for small businesses. Makes the subject of attracting an angel investor to them seem attainable for them. Interesting, too, that groups of angel investors can be a possibility as well.

  3. I think another lesson here is that purely relying on statistics to tell a story is shaky foundation. Then there is the issue of finding what you look for. Everyday people have a tendency to generalize, while researchers have a tendency to look at nuances and specifics.

    If you asked a group of entrepreneurs and entrepreneurial support people what was meant by the phrase “angel investment”, my bet is the majority would respond in a way that meant what you have called “the average amount of money received by each company receiving an angel investment”.

    Then there is the difference between median and mean versus total investments. To speak in terms of means and medians and single, individual investments sends a much different message than talking about the size of total investments in companies receiving an angel round.

    So I am glad to see this post “clarifying” the previous post, as what I think the important point here is not how many places the money comes from, but that angel investing plays an important role in the funding continuum for startup companies in the low 6 figure space.

  4. Martin Lindeskog

    I wouldn’t say no to 10 grand if the angel investor is adding value to and increasing the opportunity for my business. By the way: How is book sales going?

  5. “important point here is not how many places the money comes from, but that angel investing plays an important role in the funding continuum for startup companies in the low 6 figure space.”

    Well said Dave and I agree with you. It is really what matters most but of course, the previous post must have stirred enough and I’m pretty sure a lot are awaken.

  6. I want to take a moment to note a few words about Glenn Llopis, the business strategy consultant who assisted me with my new business venture. As a successful executive in Corporate America for over 20 years, I wanted to venture out and start my own business. However, I felt I needed some guidance and that is why I approached Glenn Llopis who was referred to me. He gave me the advice that could only come from someone with extensive experience with new ventures. Glenn saved me hundreds of thousands of dollars in trial and error and provided me with the tools to accomplish my dreams. His management philosophies are timeless and highly impactful.

  7. I think the statistics are useful to illustrate the point that many more angel investors make small investments than large investments.

    Most small businesses looking to raise $200,000 would prefer to have two investors write $100,000 checks rather than get one $50,000, two $25,000 and ten $10,000 checks, but the latter situation is much more common.

    I have helped small businesses prepare private placement documents for more than 25 years and more often than not they come in expecting to get funding from one, two or three “big hitters.” I have to explain to them that the documentation should be prepared on the assumption that they will get more and smaller investments than what they expect.

  8. Thanks for shedding light on what can often be a confusing or misleading topic. I used to be daunted by the large numbers that were thrown around in discussions of investors, but have come to learn that angels come in all shapes and sizes, and that the statistics proferred sometimes don’t come close to telling the whole story. Time to move out of my comfort zone and educate myself as to the potential opportunities that are out there. Thanks!

    Kim Washetas
    http://scoutforsuccess.com

  9. “Most small businesses looking to raise $200,000 would prefer to have two investors write $100,000 checks rather than get one $50,000, two $25,000 and ten $10,000 checks, but the latter situation is much more common.”

    but the latter situation is much more common–> Is it true David?

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