U.S. Angel Investor Market Shows Solid Recovery

Connecticut angel investments up sharply since passage of Oct. jobs bill

Following a considerable contraction in investment dollars in 2008 and 2009, the U.S. angel investor market continued to recover in 2011, a trend that began in 2010 in investment dollars and in the number of investments, according to the 2011 Angel Market Analysis released by the Center for Venture Research at the University of New Hampshire.

Total investments in 2011 were $22.5 billion, an increase of 12.1% over 2010 when investments totaled $20.1 billion. A total of 66,230 entrepreneurial ventures received angel funding in 2011, an increase of 7.3% over 2010 investments. The number of active investors in 2011 reached 318,480, a substantial growth of 20% from 2010.

Angel investments continue to be a significant contributor to job growth, with the creation of 165,600 new jobs in the U.S. in 2011, or 2.5 jobs per angel investment.

Last fall’s bipartisan jobs package expanded Connecticut’s angel investor program by reducing from $100,000 to $25,000 the minimum cash investment a taxpayer must make to qualify for the angel investor income tax credit.

Since then, the number of angel investors participating in the state’s Angel Investor Tax Credit Program has increased sixfold, and investments pledged by angels have tripled, according to Connecticut Innovations, the state’s quasi-public authority responsible for technology-based economic development.

Under the tax credit program, qualified investors may take a credit against their state income tax for certain investments made in qualifying businesses. The credit equals 25% of the cash investment, up to $250,000. Since November 2011, 84 angels applied to the program and pledged investments totaling $8.6 million in 23 companies. In the six months prior to the revision in investor eligibility criteria, those totals were 13, $2.4 million, and 9 respectively.