Median Angel Deal Size Rises As Startups Look For More Runway Amid A Series A Bottleneck

The median size of angel deals rose to $640,000 in the third quarter of last year — a five-quarter high — as startups looked for more runway amid a bottleneck for Series A rounds. Silicon Valley Bank partnered with data company CB Insights and the Angel Resource Institute to survey different angel groups about activity in the fall of last year.

The report didn’t provide any data on the overall volume on angel investments, but it did have information on average round sizes and valuations. Early-stage valuations remained stable with the average at around a $2.6 million pre-money valuation (or before investors put in capital).

There are a couple reasons that angel round sizes got bumped up late last year, said Carrie Merritt, who heads public relations for Silicon Valley Bank.

One is that there are more health care and enterprise deals, which are more capital intensive. Another reason is that founders and angels are realizing that they need more financial runway if there is a bottleneck at the Series A level. (An earlier report based on CB Insights data showed that while the number of seed and angel deals has exploded, the number of Series A deals has remained consistent.)

If early-stage companies get a bit more breathing room, they can also hit certain distribution and sales milestones (on top of product ones), which could make Series A terms more favorable to the founders and early backers. At the same time, Merritt said that super angel or seed venture funds are “encroaching” on traditional angel territory.

Another trend Silicon Valley Bank pointed out was that syndications declined in the third quarter. They don’t really know why this is happening, however. Unsurprisingly, investments in mobile-related startups jumped up. They also said that 10 percent of angel group deals are structured with convertible debt. One reason founders and early angels might favor convertible debt is that it puts off actually pricing a round until later when a more experienced VC firm might come in. Since Silicon Valley Bank hasn’t tracked this trend longer-term; they don’t quite know how it’s developing over the long-term.