Statistics show a tremendous impact on the regional and national economy.
Lookng for positive signs when it comes to the startup and growth of innovative ideas and businesses? Look no further than the sustained growth seen in angel investing in the last several years.
According to the Center for Venture Research at the University of New Hampshire, 2012 continued the upward trend, as total angel investments climbed to $22.9 billion, with a total of just over 67,000 entrepreneurial ventures receiving funding. And while full-year 2013 data is still being finalized, the Center noted that the first two quarters of 2013 showed about a five-percent increase over the first two quarters of 2012 in both angel investments and ventures receiving funding. Additionally, angel investments created 274,800 new jobs in 2012 and an additional 111,500 jobs in the first two quarters of 2013, for an average of about four jobs per angel investment. Collectively, these statistics show the tremendous impact angel investing has on our economy.
So where do we stand at the local level? Central Illinois Angels (CIA) has continued to grow its investment portfolio. Since its inception in late 2009, CIA has now made 24 investments totaling nearly $5.8 million in its 15 portfolio companies. In 2013 alone, CIA invested $2.3 million in eight investments ranging from a seed-stage startup out of the University of Illinois to a later-stage, expanding wind turbine gearbox remanufacturer in southern Wisconsin. In 2013, CIA also had follow-on investments in three Peoria NEXT Innovation Center graduates: Intellihot Green Technologies, Lumec Control Products and Endotronix. All three companies continue to make progress and are poised to move forward with aggressive plans for 2014.
What industries are seeing the strongest investment? The 2013 third-quarter Halo Report published by the Angel Resource Institute indicates that 81 percent of all investments were in three broad categories: the Internet, healthcare and mobile. These three categories have continued to dominate the national angel-investing landscape, although the Center for Venture Research has shown that industrial/energy investing has been a consistent performer since 2009. CIA is fairly consistent with a number of these investment trends, as the majority of our companies are in either the industrial or healthcare segments. These two industries, of course, are both strong suits for the Peoria area, so investments in them should be no surprise.
Looking ahead, CIA is excited about the prospects of 2014 and beyond. We believe our group will continue to grow and that our track record will continue to pay dividends as we look not only at local investment opportunities, but expand our investment syndication network to more of the Midwest.
CIA has steadily added new members the last few years, and while members join for a number of reasons, one is that angel returns average more than 20 percent, whereas the historic return for the stock market has been about 10 percent. Members also enjoy the opportunity to review game-changing technology and the chance to network with more than four dozen of their peers. Members also enjoy seeing the progress of our portfolio companies. And while it’s exciting to share the successes, it’s also important that we learn from the trials our portfolio companies go through as well. These shared learning experiences are critical in being able to navigate future investment opportunities.
It is also important to note the positive impacts angel investing has on the startups that investors work with and fund. A 2010 study conducted by researchers from Harvard and MIT found that angel funding is positively correlated with higher survival, additional fundraising outside the angel group, and faster growth as measured through growth in website traffic, with improvements typically ranging between 30 and 50 percent. Overall, “the results of this particular study suggest that the bundle of inputs that angel investors provide have a large and significant impact on the success and survival of startup ventures.”
Further, when it comes to this “bundle of inputs,” an article by Drs. Edward Bond, Richard Gretz and Kevin O’Brien of Bradley University found that clients of a publicly-funded technology commercialization center focused on entrepreneurship increased their likelihood of success by more than 145 percent when the clients had nonfinancial interaction with business angels. The article also noted that nonfinancial interaction with business angels versus other funding sources led to higher success rates.
What does this mean? As Drs. Bond, Gretz and O’Brien stated in their research implications, “We find that entrepreneurs can greatly increase their odds of success by interacting with business angels—even if they do not receive funding.” This research, combined with the 2010 study noted above, is exciting news for our community. Peoria has an established, growing angel group in place that can provide not only funding, but also the “bundle of inputs,” such as industry knowledge, specific expertise and contacts, that can help make our local startups even more successful.
CIA is truly excited about what lies ahead. We look forward to growing our group and continuing to fund innovative, game-changing companies from startup to exit. We look forward to the local investment opportunities we know are in front of us, and the positive impacts angel investing continues to have on our regional and national economies. iBi
Dave Parkinson is president of Central Illinois Angels.