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By Rob Day, Greentechmedia:blogs
I’m referring, of course, to angel investors — individual investors who put money into startups, typically at a pretty early stage. Here on this site, and even more so in the media, the heavy focus is on venture capital inventments from institutional investors. But that ignores the critical role angels often play in getting the VC-backed startups off the ground in the first place.
As the attached Center for Venture Research survey results show (note: link opens pdf), angels are a major player in the financing of entrepreneurs in the U.S. In the first half of this year, CVR estimates that 23,100 startups received funding totaling over $12B. Compare this to the $14.9B and nearly 2,000 venture deals tracked by Moneytree in 1H08. Roughly comparable amounts, but more than 10x the investments — as reflecting the CVR survey’s conclusion that 46% of angel investments were in seed and start-up stage.
Let’s make this more specific to cleantech — the CVR study indicated that 10% of the angel investments in 1H08 were made into “Industrial/Energy”. So we can roughly estimate that about 2,000 cleantech startups received angel funding during the first half of the year, of which about half were seed or startup stage. Meanwhile, E&Y tracked 29 seed and first round VC investments into U.S. cleantech companies during 1H08. I would argue that most VC-backed seed rounds are left stealth and unreported, so the E&Y figures are undoubtedly low. But even still, the difference in number of investments by each type of investor is significant.