From the March 2006 issue of Entrepreneur

If you're up on your VC and angel investor news, you've heard the reports that funds are flush with cash and ready to invest. Whether that will pay off for your company may depend on the stage of your business. As both professional VCs and individual angel investors try to minimize their risks, they appear to have a growing preference for later-stage growth investments over seed stage opportunities.

A new study from the Center for Venture Research at the University of New Hampshire's Whittemore School of Business and Economics offers some proof. Although the dollar amount invested by angels appears to be holding steady, the report showed an 11 percent shift in angel investments away from seed and startup stage ventures during the first half of 2005 compared to the same period of 2004.

The report also acknowledges the growing popularity of angel groups. What is not clear is whether the trend toward organized group investing is leading to more angel activity or less. The CVR report indicates that groupthink may be making some individuals more conservative. CVR categorized 66 percent of angel group members as latent, or inactive, during 2005. That's a sharp increase from 56 percent in 2004 and 48 percent in 2003.

On the other hand, the rapid growth in angel groups may be skewing the results, says James Geshwiler, managing director of Lexington, Massachusetts, angel group CommonAngels and co-founder of the Angel Capital Association. Geshwiler says the growing membership base makes the percentages less relevant.

"Some [angels] may be taking a little time to learn the process, but that's a transitory issue--it's not market driven," says Geshwiler. "I've seen nothing this year except activity picking up. Our group is on a near-record pace for the year."