Angel Insights Blog

Wednesday, February 20, 2013 

Pre-Money Valuations for Angel Group Deals in 2012

One of the questions I get asked about the most is the valuation of angel deals, so I want to connect everyone to two resources with some data behind them:

• 2012 Valuation Survey of Angel Groups – Bill Payne‘s blog post, via Gust, late last year
• The Halo Report, by Silicon Valley Bank, Angel Resource Institute, and CB Insights – quarterly data and analysis of angel group investments

Bill also noted that his information is from a small survey and may not be statistically significant – we’ll keep that in mind, but make some observations anyway. We need to keep the data coming to solidify our knowledge.

• Bill found that the median pre-money valuation of angel group deals increased in 2012, with increases each year from 2010. The overall median was $2.75 million in 2012. The median valuation varied significantly from group to group, but the median of all business sectors were between $1.69 million and $3.2 million.
• The Halo Report for the third quarter of 2012 found that median pre-money valuation was $2.6 million, down slightly from $2.7 the previous quarter – but higher than the $2.5 million reported in the first quarter 2012 Halo Report.
• Looking behind the data, we can see higher valuations for life science and energy/cleantech deals, particularly over software and Internet investments, but the range is not that wide. For instance, Bill’s survey found the range across all business sections was $1.69 to $3.2 million.
• There are significant differences between groups, particularly related to geography, industry focus, and preferred business stage. For the most part, the larger valuations are in the traditional venture areas in the coasts, but some groups in the middle of the country also have higher valuations either because they focus on life science or cleantech or because they prefer not to invest in pre-revenue companies.
• Per Bill, half of the reporting groups reported pre-money valuations of pre-revenue companies between $1.8 and $3.0 million.

What does all of this mean? For my money, a few things: angel groups are still investing in startups (often pre-revenue), the valuations are smaller than the media often report, and groups and deals are so different that it is hard to generalize. OK, so even if I did generalize here somewhat, we should continue to dig into the differences and common patterns to learn more about what is really going on in the angel community. The result should be better investment experiences – and smart valuations – for angels and entrepreneurs alike.

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