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Angel valuations soften as deal activity spreads nationwide

Angel valuations softened for a second year running in 2017 as deal activity spread to less costly areas of the country, according to the latest Halo Report.

The report, which studies angel group activity and rounds not exceeding $4 million, found the median pre-money valuation fell modestly last year to $3.5 million. The median was more than $3.6 million in 2016 and $4.6 million in 2015.

The report suggests angel groups may be negotiating better terms and doing a greater number of smaller, initial investments. But the work, published by the Angel Resources Institute, Florida Atlantic University and PitchBook, also discovered deal activity diversified beyond California, where 30 percent of deals took place in 2016 and 20.6 percent in 2017.

Regions with higher shares of the nation’s activity included Texas, the Southwest, the plains states and the Southeast.

The average angel-group deal size for the year was $637,000, and 62.3 percent of deals were structured with preferred stock while 33.8 percent were done with convertible notes.

Deals also included more women. In 2016, 17 percent of investments went to companies with women on the founding team. That rose to 25.7 percent in 2017.

Companies with only male founders accounted for 74.3 percent of deals, compared with 83 percent in 2016.

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