The center said only 26 percent of the angel funding went to companies in the seed and start-up stages, far below the 45 percent two years ago.
Another trend cited by University of New Hampshire researchers is the rise in "latent angels" - wealthy individuals involved in one of the many organized angel groups that could invest, but have not. The percentage of latent angels had risen to 65 percent during the first half of 2010 from 36 percent in 2008.
Locally, there are several active angel networks, including the Mid-Atlantic Angel Group, which has been raising its second fund. Timothy E. Flatley, a Berwyn investment adviser and chairman of what he calls MAG II, said the $4.8 million committed so far exceeded the first fund's $4.4 million.
It was quite a challenge to raise money for a fund born "in the teeth of the crisis," said Flatley, referring to the financial and economic meltdowns.
But he was clearly hop-
ing for more participation after the decision was made to extend the "hard close" for MAG II from April to the end of December.
After all, the first fund had made 13 investments since its start in 2005. Investors got money back after acquisitions involving two of them:
Preclick Corp., of Atlantic Highlands, N.J., was acquired by Smilebox Inc., a Redmond, Wash., photo service, for an undisclosed amount in 2009.
Protez Pharmaceuticals Inc., a Malvern antibiotics devel-
oper, was bought by Novartis AG for $100 million in 2008.
Ten other companies that MAG I had invested in remain active; one firm failed.
It's a batting average that makes Flatley's point about the value of relying on the "collective genius" of angel investors involved in a group rather than trying to pick winners on their own.
The maximum amount MAG injects into a company is $250,000, with $150,000 reserved for follow-on investment.
He wouldn't say how much money that MAG I had invested in Protez, only that the fund had made back four times its investment. And that amount would have been higher had Novartis not shelved the Protez compounds in September, eliminating future payments based on various milestones.
Given that $1 million from the Commonwealth of Pennsylvania has been invested in each of the two MAG funds, here's hoping for the taxpayers' sake they have a few more home runs in that portfolio.
Flatley, president of Sterling Investment Advisors Ltd., said he thinks this is probably the best time to be investing in young firms. One reason is that valua-
tions are "much more real-
istic" than they were three or four years ago, he said.
Flatley is an angel whose wingspan covers 14 companies that he has invested in personally since 1999. He said he does it because he believes the returns from angel investing will outgain stock-market returns over five to seven years.
But he also views angel investing in terms of economic development: finding new growth companies and helping them to expand and create jobs.
"This is a extremely time-consuming commit-
ment," he said. "But this is how you get economies going, by putting money into newer companies."
Contact Mike Armstrong at 215-854-2980 or email@example.com. See his blog at .