While those who run venture capital funds may get more attention, angel investors invest in far more start-ups in a given year.

The National Venture Capital Association cites data from Thomson Reuters that show 728 companies obtained their initial investments from venture funds in 2009 - a total of $3.3 billion invested.

In contrast, 57,225 businesses raised $17.6 billion from 259,480 individuals in 2009, according to the Center for Venture Research at the University of New Hampshire.

However, like the shrinking venture capital industry, angel investment has also been declining, said the center. Its data for the first six months of 2010 show that the $8.5 billion invested was down 6.5 percent compared with the same period of 2009.

And the center noted that only 26 percent of the angel funding went to companies in the seed and start-up stages, far below the 45 percent two years ago.

Another trend cited by University of New Hampshire researchers is the rise in "latent angels" - wealthy individuals involved in one of the many organized angel groups who could invest, but have not. The percentage of latent angels had risen to 65 percent during the first half of 2010 from 36 percent in 2008.

Locally, there are several active angel networks, including the Mid-Atlantic Angel Group, which has been raising its second fund. Timothy E. Flatley, a Berwyn investment adviser and chairman of what he calls MAG II, said the $4.8 million committed so far has exceeded the first fund's $4.4 million.

It was quite a challenge to raise money for a fund born "in the teeth of the crisis," said Flatley, referring to the financial and economic meltdowns.

But he was clearly hoping for more participation after the decision was made to extend the "hard close" for MAG II from April to the end of December.

After all, the first fund made 13 investments since its start in 2005. Investors got money back after acquisitions involving two of them:

Preclick Corp., of Atlantic Highlands, N.J., was acquired by Smilebox Inc., a Redmond, Wash. photo service, for an undisclosed amount in 2009.
Protez Pharmaceuticals Inc., a Malvern antibiotics developer, was bought by Novartis AG for $100 million in 2008.

Ten other companies that MAG I had invested in remain active; one firm failed.

It's a batting average that makes Flatley's point about the value of relying on the "collective genius" of angel investors involved in a group rather than trying to pick winners on their own.

The maximum amount MAG injects into a company is $250,000, with $150,000 reserved for follow-on investment.

He wouldn't say how much money that MAG I had invested in Protez, only that the fund had made back four times on its investment. And that amount would have been higher had Novartis not shelved the Protez compounds in September, eliminating future payments based on various milestones.

Given that $1 million in funds from the Commonwealth of Pennsylvania has been invested in each of the two MAG funds, here's hoping for the taxpayers' sake they have a few more home runs in that portfolio.

Flatley, who is president of Sterling Investment Advisors Ltd., said he thinks this is probably the best time to be investing in young firms. One reason is that valuations are "much more realistic" than they were three or four years ago, he said.

Flatley is an angel whose wingspan covers 14 companies that he's invested in personally since 1999. He said he does it because he believes the returns from angel investing will outgain stock market returns over a five- to seven-year period.

But he also views angel investing in terms of economic development: finding new growth companies and helping them to expand and create jobs.

"This is a extremely time-consuming commitment," he said. "But this is how you get economies going, by putting money into newer companies."