Angel investors provide less money for small businesses and start-ups than venture capitalists, but they provide funds to more individual businesses, according to a report on angel investors released Tuesday by Score, a small-business service and mentoring organization.
Angel investors provided $23 billion in funds for small businesses and start-ups in 2012, while venture capitalists provided $27 billion. Angels are high-net-worth individuals who provide funding as debt or in exchange for equity in a business, while venture capitalists are usually firms that provide funding in exchange for equity.
According to Score, there are 268,000 angel investors and 522 active venture capital firms. Those angels made 67,000 deals in 2012, while the venture capitalists made 3,700 deals.
The typical angel investor is a successful entrepreneur investing personal money in a business that is geographically close to home, Score says. The angels, who judge potential investments primarily by return on investment, receive an average of 26 percent annual return.
Most angel investors are still white men, but 18 percent are women and 7 percent are minorities. Of the businesses that receive funding from angel investors, 18 percent are owned by women and 15 percent by minorities, Score says.
Computer software businesses receive the largest share of angel investor money at 23 percent, followed by healthcare at 14 percent and biotech and the media at 11 percent each.
