April 21, 2004--In 2003, investments made by angel investors totaled $18.1 billion, up from $15.7 billion in 2002, according to the Center for Venture Research at the University of New Hampshire in Durham, N.H. All told, in 2003, 42,000 ventures received angel funding from 222,000 individuals, with an average of four to five investors joining forces to fund a start-up.

The industries that gained the most from the increase in investment activity were software, which garnered 26% of the total investments made in 2003, as well as life sciences, which garnered 13%, and hardware and manufacturing, which both garnered 12%.

Traditionally, angels have been the biggest source of seed and start-up capital for entrepreneurs in the U.S. In 2003, 52% of angel investments went to early-stage companies. However, over the last three years, angel investors have increased their post seed stage funding, which suggests market conditions are requiring angels to provide additional rounds of financing for their investments. In 2003, post seed stage funding represented 35% of the investments made by angel investors.

"The post-seed funding gap, in the $2 to $5 million range, has forced angels to redistribute seed investment dollars to this post seed stage in order to fill the needs created by the post seed gap," said Jeffrey Sohl, the director of the Center for Venture Research. With angels shifting their investment dollars, fewer dollars are left for companies seeking seed and start-up capital in the U.S.