HALO Report Shows Continued Rise in Valuations and Deal Sizes

By: Marianne Hudson, ACA Executive Director

Angel group valuations and deal sizes are on a huge growth trajectory according to the HALO Report through the third quarter of 2015.  The report, released today by the Angel Resource Institute at Willamette University, shows the median seed stage valuation at an all-time high of $4 million, a 33 percent increase over 2014.  Some of this is reflected in median round sizes, which more than doubled in one year - $350,000 in Q3 2014 to $725,000 in Q3 2015.

These increases are a really big deal for the angel group community, and I hope that these trends reverse themselves soon.  As ARI’s Vice Chairman of Research Rob Wiltbank said, “This report reinforces the trends that we have been reporting on for the past several quarters, particularly the rise in all round sizes and pre-money valuations. These trends have a significant impact on the way that angels and entrepreneurs plan for the future when raising capital.”

Angels need to get a handle on rising valuations, for the good of both investors and entrepreneurs.  What troubles me the most is the growth in the range of valuations that you can see when you review the full HALO Report deck.  Slide 8 shows not only that the median pre-money valuation increased from $3 million in 2104 to $4 million in 2015 so far, but the top angel group valuations increased from $12.8M to $15.0M.  I don’t know the details behind these numbers, so it could be that this means some deals were later stage for a syndicate of angel groups.

The report includes some other interesting tidbits as well:

  • The HALO dataset continues to show a distribution of deals by both number and dollars throughout the US.  One of the highlights of the report says “Angel investing activity is equally distributed across the country when parsed either East and West or North and South at approximately 50% / 50%.”
  • You can also see this distribution in the list of the most active angel groups by total deals this year through Q3:  Tech Coast Angels, Houston Angel Network, Central Texas Angel Network, Alliance of Angels, New York Angels, Wisconsin Investment Partners, Sand Hill Angels, Keiretsu Forum, Queen City Angels, Launchpad Venture Group, Golden Seeds and Maine Angels.
  • While the report has adjusted how it categorizes industry sectors in its new partnership with PitchBook, it shows that software and healthcare alone cover half of the investments by dollars for the last five quarters.

Check out the report at your convenience and let me know what insights you get from it.  I look forward to the next report for the full year 2015 and also to a study on the returns of angels in these groups from Rob Wiltbank and Wade Brooks, ARI’s executive director next spring.