2014 NACO Report Angel Investing in Canada
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Transcript of 2014 NACO Report Angel Investing in Canada
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2014 Report on
Angel Investing Activityin Canada
Harnessing the Power of Angel Investors
Released June 2015
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This report was made possible with the financial contributions from:
Authors Acknowledgements
Paul Schure
Department of Economics, University of Victoria
Melissa Dodaro
National Angel Capital Organization
This report is based on the data from the 2014
Canadian Angel Group Survey and follow-up telephone
interviews. All data collection and writing were done
by the authors in conjunction with the 2014-15 ProjectSteering Committee.
NACO and the report authors wish to thank the members
of the 2014-15 Project Steering Committee for their
direction, expert advice, and comments. A special
thank you to Thomas Hellmann (Oxford University),
Yuri Navarro (NACO), Younes Errounda (Industry
Canada), Jim Valerio (Industry Canada), Shane Dolan
(Industry Canada), Erika Kurczyn (BDC Capital), Jeri
Ross (KPMG Enterprise), and Karen Grant (Angel One
Investor Network) for leading the direction of the report.
NACO also thanks Industry Canada for providingadditional analysis and content to be included in this
report, and the Network of Angel Organizations -
Ontario for their valued contribution to Ontario data
collection. We would like to recognize David Valliere
(Ryerson University) for peer reviewing a draft version
of this report and providing his insight.
Special acknowledgements go out to the Angel group
managers who volunteered their valuable time to provide
the data for this report – without them there would be
no activity to report.
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The National Angel Capital Organization (NACO) is the
industry association championing Angel investors and
their investments across Canada. We represent more
than 2100 investors who help Canadian entrepreneursin every region and industry to execute their vision and
compete on the global stage. Our members provide
companies with patient risk capital, expert advice and
professional networks when traditional financial and other
institutions cannot.
The role of Angel investors is critically important to
Canada’s economic prosperity. As the steward of Angel
research in Canada, we understand the importance
of collecting and disseminating information about our
investor community for our members and stakeholders
and the innovation community at large. Reports like
this help Angel investors and others to benchmark their
success against that of peers, learn best practices, and
recognize leaders within our community.
We are proud to share with you our fifth annual Report on
Angel Investing Activity in Canada. While this report only
captures the investment activity of a fraction of our more
than 2,100 members across the country, it helps to provide
us with a basis for understanding Canada’s Angel
community and our broader early stage ecosystem.
Working to encourage and support entrepreneurs as they
realize their vision for a prosperous future is part of theDNA of the Angel investor. Over the last 5 years, this report
has captured over $270 million in 712 investments in 409
companies. We are encouraged by the results of this year’s
report, which show that Angel investment continues to
grow and become more connected. Working together,
these individuals and groups are supporting the
entrepreneurs who continue to form the backbone of our
future economic prosperity.
It is our mission to professionalize Angel investment in
Canada, giving Angel investors the tools, resources and
networks to develop a robust investment community.
We hope this report will contribute to that goal by providingCanadian Angel investors with a better view of the positive
impact of their activities and the knowledge they need to
reduce risk and improve investee company success.
Finally, I would like to acknowledge the efforts of all of
those who contributed to this year’s report, including the
members of the project steering committee, our partners
who have supported this initiative, and the Angel group
managers who have taken the time to share their data
with us. Without their collaboration and investment, this
initiative would not be possible.
We hope you enjoy learning more about our communityand look forward to having you join us as we work to
harness the power of Canada’s Angel investing asset-class
in 2015.
Yours truly,
Harnessing the Power of Angel Investing
Michelle Scarborough
Chair
NACO Board of Directors
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Executive Summary
1 | Introduction
2 | Angel Group Characteristics
3 | Investment Selection
4 | Investments in 2014
5 | Exits in 2014
6 | Economic Prole of Angel-Backed
Firms
7 | Angel Group Best Practices and
Challenges
8 | Conclusion
Annex: Data Dictionary and Glossary
5
7
9
20
26
52
55
68
66
70
Table of Contents
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This 2014 Report on Angel Investing Activity in Canada
identifies key statistics and trends in the visible Canadian
Angel capital market as measured by the activity of Angel
groups. This report was compiled from an analysis of thedata on Angel group operating statistics and Angel
investments that NACO collected from Canadian Angel
group managers through surveys and follow-up interviews.
This year’s report includes a special section that presents
an economic profile of Angel-backed firms, which is the
product of a collaborative effort by Industry Canada,
Statistics Canada, and NACO. The results presented in
this section were compiled from the Reports on Angel
Investing Activity in Canada survey data and from Statistics
Canada administrative databases. It is hoped that as the
volume of collected data increases over the next few years,
a sufficiently robust longitudinal database of Angel
investments can be created that will enable an econometric
analysis of the economic performance and impact of the
population of Canadian Angel-backed firms.
Economic Profile of Angel-Backed Firms
Industry Canada created a longitudinal dataset of 110
Angel-backed firms by linking data from NACO’s Canadian
Angel Group Surveys of 2010, 2011 and 2012 to Statistics
Canada administrative databases. An analysis of the
sample showed that in the year that they first reported an
Angel investment, most Angel-backed firms performedR&D, posted high levels of R&D intensity, had negative
net income, paid high wages, and were small in terms of
both revenue and employment.
The 2012 performance of the surviving Angel-backed firms
was subsequently compared to firms in three comparison
groups from the general population of Canadian small
firms: small manufacturing firms; small professional,
technical and scientific services firms; and small R&D
active firms. It is important to note that Angel-backed
firms in this analysis were young, with most of them having
received their first round of financing in 2010, 2011 or 2012.
Of the Angel-backed firms in the sample, 60% were R&D
active in 2012 while this was true for less than 8% of the
manufacturing and the professional, technical and scientific
services firms. It was also found that Angel-backed firms
tended to be highly R&D intensive and expectedly
unprofitable given their young age and R&D intensity. Theyemployed highly qualified professionals as reflected by
the high average wages they paid, even when compared
with R&D active firms among the three comparison groups.
Activity Overview
The Angel group data set provides a reliable picture of the
characteristics and activity of the visible Angel capital
market1 in Canada. The 2014 Angel Group Survey was
completed by 30 Angel groups. These 30 Angel groups
reported 237 investments and 217 deals in 181 companies
in 2014, for a total amount of $90.5 million.
The year 2014 saw a 2% increase in funding and a 17%
increase in the number of investments. Deal size increased
as well and two more exits were repor ted than in 2013.
There was a big shift in the composition of investments in
2014. New investments increased by 66%, while follow-on
investments decreased by 37%. A higher share of
investment went to new companies in 2014 as opposed
to existing portfolio companies, which represents a reversal
of the trend observed in 2013.
Angel group investment activity remained concentrated
in Central Canada. Of the $90.5 million reported Angel
investments, 89% were made in Central Canada, 10% in
Western Canada, and 1% in Eastern Canada. Angel groups
invested substantially larger amounts in Central Canada
than elsewhere. In terms of numbers of investments, 70%
were in Central Canada, 28% in Western Canada, and 2%
in Eastern Canada.
Angel Groups
Canadian Angel groups represented over 1,700 Angel
investors, of whom 30% were in Western Canada, 63% in
Central Canada, and 7% in Eastern Canada. Membership
numbers decl ined compared to the 2013 figure of 2,100 Angels. Applications for funding by companies also
declined. However, the average number of investments
Executive Summary
5 | 2014 Report on Angel Investing Activity in Canada
1 For the purposes of the repor t, the visible Angel market consists of the Angel groups known to NACO. This report captures the majority of the visible Angel
capital market in Canada, but not all. In Canada, as in the US and elsewhere in the world, Angel investment activity in the visible Angel market is overshadowedby the investments placed by private individuals outside of Angel groups, which are impossible to track.
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per group increased, and a bigger percentage of group
members invested in 2014 compared to 2013.
There was ample diversity among Angel groups in terms
of their size, activity level, geographic focus, cost of
membership, funding model, services provided to members,
and the degree of professionalization. Approximately 60%
of the groups were structured as not-for-profit organizations,
7% were for-profit, 20% were informal clubs/networks,
while 10% were branches of larger legal entities. Except
for a few, most Angel groups noted that they would
consider investment opportunities in Information and
Communications Technology (ICT) and Life Sciences, the
top two recipient sectors of Angel capital. Overall, Angel
groups had a broad industry focus.
Some groups were very selective and invited only a smallpercentage of their applicant firms to present to investors.
Other groups invited almost all applicant firms to present
to the group members. The more selective groups funded
a larger percentage of the firms that were invited to present
to investors.
Investments
Over 80% of Angel funding was concentrated in two
sectors: ICT and Life Sciences, with about equal shares.
Clean Tech found itself in a distant third place with 3% of
the funding. ICT investments tended to be much smaller
than those in Life Sciences however, ICT attracted a
higher number of investments (55%) than the Life Sciences
sector (22%).
The bulk of the investments by Angel groups were made
in the city or province where they were located and the
median investment amount per Angel group was $160,000.
Angel groups in Central Canada made the largest
investments (median of $200,000), followed by groups
in Eastern Canada (median of $134,000) and Western
Canada (median of $100,000). The median investment
amount in an ICT or a Clean Tech company was $125,000,
compared to a median amount of $250,000 invested ina Life Sciences company.
Co-investments (joint investments with Angels in the
same group) occurred in 65% of the investments, with
the most common co-investment scenario occurring
between just two partners. Syndication (Angel investmentwith investors from outside of the group) occurred in 75%
of the deals. Of the deals for which the syndication
partner was known, 53% were syndicated with Angel
investors from outside of the group, 15% with venture
capitalists (VCs), 12% with a government partner, and
16% with another financier. Only 8% of the investments
had multiple types of syndication partners.
The median deal size was $883,000, substantially higher
than its 2013 figure of $500,000. At $723,000, the median
deal size in ICT was about half that of Life Sciences
($1,405,000). Three somewhat surprising findings on
deal size were that: (i) deal size for follow-on investments
was about the same as for new investments; (ii) the same
was true for the deal sizes of pre- and post-revenue firms,
and (iii) deal sizes were not larger for syndicated deals.
Valuations and exits
The number of reported exits in 2014 remains low, and
about the same as those reported in 2013. Angel groups
reported 10 positive exits (from nine companies), of which
eight were M&As and one was an IPO. The survey
respondents reported that three Angel-backed companies
went out of business.
The median and average (pre-money) valuations in 2014
were $4.0 million and $5.6 million, respectively. They were
not as high as in 2013 when the median and average
valuations were $5.0 million and $6.1 million, respectively.
Median valuations were about the same across sectors.
Follow-on investments tended to be associated with
higher company valuations.
2014 Report on Angel Investing Activity in Canada | 6
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1 | Introduction
2 As defined by the National Instrument 45-106. According to a publication of the Ontario Securities Commission in 2012 (OSC Exempt Market Review: OSC
Staff Consultation Report Paper 45-710, Considerations for New Capital Raising Prospectus Exemptions. Toronto: OSC) there are between 391 and 857thousand people in Canada who potentially meet the accredited investor criteria.
3 For example, we asked whether Angel groups collect any demographic information on their membership.
4 Comparisons based on amounts/volumes in this report are based on the subsample of 26 Angel groups. With our sample we trust we capture the visible
Angel cap ital market in Canada wel l. It has to be kept in mind that statements in this repor t do not necessaril y reflect t rends in broader Canadian Angelcapital market as research shows that large numbers of Angel investors operate outside the realm of Angel groups.
Angel investors play a crucial role in the Canadian
entrepreneurship ecosystem. They often fund companies
at the critical, early stage of firm development, and offer
other valuable input, such as mentorship, access tonetworks, and expertise. Angel investors can search for
business opportunities by joining Angel groups, which
are membership forums of accredited investors2 who meet
regularly to review investment opportunities. For companies,
Angel groups offer a number of advantages. One is simply
the fact that they are visible. Instead of a time-consuming
search for Angel investors, companies can submit an
application for funding directly to an Angel group.
The 2014 Report on Angel Investing Activity in Canada is
based on the fifth Canadian Angel Group Survey that has
been conducted by the National Angel Capital Organization
(NACO). Its goal is to identify key statistics and trends in the
Angel capital market in Canada. Since 2010, the report
has captured over $270 million in 712 investments in 409
companies. The report also includes a special section
that presents the economic profile of Angel-backed firms
from the 2010, 2011 and 2012 surveys. This was the result
of collaborative work between NACO, Industry Canada
and Statistics Canada.
The survey instrument used for this report can be found at
http://nacocanada.com/knowledge/research/Angel-ac-
tivity-reports/. It has been modelled after the instruments
used in earlier years. New questions have been added
to increase our understanding of the structure of Angel
groups, their application procedures, and investmentprocesses. New questions have also been added to
explore a possible future expansion of the scope of the
report.3 The survey questions are classified into three
categories:
• Questions on the characteristics of the Angel group,
• Questions on investments placed by Angel group
members, and
• Questions about any exits from past investments in
companies.
NACO invited 39 Angel groups with five or more membersto complete the online survey with nine of these groups
approached for the first time in 2014. The response rate
was 77%, with 30 groups completing the survey, including
four new respondents. Fortunately, 26 of the 27 groups
(96%) that participated last year participated again this
year (Table 1). A high response rate among last year’s
participants is very important as it makes comparison of
market volumes between last year and this year possible.4
7 | 2014 Report on Angel Investing Activity in Canada
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Following the survey, all groups were asked to participate
in a follow up interview. The goal was to confirm the survey
information that was unclear, to address unanswered
questions, to collect additional information on reportedexits, and to enquire about best practices. Follow-up
interviews were conducted with 23 respondents.
Thirty Angel groups participated in the 2014 survey
(Table 1). In 2014, the 30 Angel group survey respondents
reported 237 investments and 214 deals for a total amount
of $90.5M. Twenty-six of the 30 groups participated both
this and last year. Based on this comparison sample of
26 Angel groups it is estimated that in 2014 the visible
Angel market grew by 2% in terms of dollars invested and
17% in terms of numbers of investments. The median
amount invested in a company was $145,000 and the
average $282,000.5
The report is structured as follows. Section 2 presents
Angel group characteristics, while Section 3 explains how
Angel groups select the companies they invest in. Section
4 presents the findings from our analysis of the investments Angel groups made in 2014. This core section discusses
the number of deals and investment amounts of Angel
groups, details on co-investments and syndicated deals6,
round size, and company valuations. Section 5 presents
the findings from the analysis of reported exits. Section 6
presents an economic profile of Angel-backed firms that
was by linking data from NACO’s Canadian Angel group
surveys of 2010, 2011 and 2012 with data from Statistics
Canada administrative databases. Section 7 presents
the best practices and challenges as reported by Angel
group managers. Section 8 provides conclusions and
Annex A includes a data dictionary and glossary.
5 Where applicable both medians and averages are reported in the report. Both the median and the average are indicators of what happens to a “typical”
observation. However, the median is a more robust statistic that is not influenced by several large or small observations, while the average is.
6 In the context of the report we speak of co-investment if multiple group members invest together in a company, and syndication in case one or multiple groupmembers invest alongside parties outside the Angel group – think of Angels, VCs, strategic investors, financial institutions, etc.
Table 1: The 2014 Angel Group Survey - Participant Overview
Angel Group Characteristics In 2013 and 2014 Sample(n= 26)
New in 2014 Groups(n=4)
Full Sample(n=30)
Median Age (years) 6.0 1.5 6.0
Average Age (years) 7.3 1.5 6.3
Median Number of Members 46.5 40.0 41.0
Average Number of Members 56.0 62.5 55.1
Groups (n) that Made Investments in 2014 n=23 n=2 n=25
Investments (k) Made by Group Members in 2014 k=226 k=11 k=237
Median Number of Investments 6.0 2.0 6.0
Average Number of Investments 8.7 2.8 7.6
Median Dollars Invested (per Angel Group) $2,300 thousand $350 thousand $1,500 thousand
Average Dollars Invested (per Angel Group) $3,400 thousand $352 thousand $2,900 thousand
Groups (n) Reporting Company InvestmentInformation in 2014
n=21 n=0 n=21
Investments (k) and Deals (d) with CompanyInformation
k=203, d=183 k=0, d=0 k=203, d=183
Median Investment Amount $145 thousand n/a $145 thousand
Average Investment Amount $394 thousand $128 thousand $382 thousand
Total Investment Amount (All Groups) $89.1 million $1.4 million $90.5 million
2014 Report on Angel Investing Activity in Canada | 8
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2.1 Organizational Structure
2.2 Age
2.3 Size and Composition
2.4 Services offered, Funding and Level
of Activity
2.5 Trends
10
11
12
16
19
2 | Angel Group Characteristics
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2.1 Organizational Structure
There are many ways in which Angel groups can organize
themselves. Sixty percent of Canadian Angel groups were
legally structured as not-for-profit organizations, while 20%
were informal clubs or networks, 10% were branches of
larger legal entities such as industry organizations or
universities, and 7% were structured as for-profit
corporations (Figure 1).
In follow-up interviews, it was revealed that the majority
of Angel groups operate as networks. Angel networks
invite selected applicant firms to make a pitch, but leave
the subsequent investment decisions to individual members
of the network. Of the 30 groups, there were as many
as 29 groups that operated as a network. There was at
least one group where the members were shareholders
of a fund, however, the group itself had no legal structure.
2 | Angel Group Characteristics
Figure 1: Corporate Legal Structure (n=30)
Not-For-Profit Corporation
Not Legally Structured
Other
60%
20%10%
7%
3%
Not Legally Structured: Part of a Larger Legal Entity
For-Profit Corporation
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N u m b e r o f G
r o u p s
7
6
5
4
3
2
1
0
Number of Years in Operation
Groups that participated in 2013 Groups New to 2014 Sample
Figure 2: Years in Operation (n=30)
1 2 3 4 5 6 7 8 9 10+
Years
2.2 Age
The Angel group/network is an established institution in the
early-stage investing ecosystem in Canada7. The typical
Angel group is 6-7 years old (Figure 2). Twenty four of the
30 participating groups were at least 5 years old. The four
groups that were new to the survey were also new to the
market, with an average age of one and half years.
The typical Angel group is 6-7 years old.
Twenty four of the 30 participating groups
were at least 5 years old.
7 In computing the age, it is assumed, for convenience, that the age of a group that formed in year yyyy is 2015 – yyy y years. For example, a group foundedin 2014 is current 2015 – 2014 = 1 year old.
11 | 2014 Report on Angel Investing Activity in Canada
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2.3 Size and Composition
The size of Angel groups could be measured by the number
of members: the number of active members (defined as
the members who are involved in at least one deal in the
past 12 months) the number of investments or the amount
invested.
Twenty-three groups had between 26 and 100 members
and, with a few exceptions, young groups were somewhat
smaller than established ones (Figure 3). Established groups
are defined as groups that are at least 6 years old.
Figure 3: Number of Group Members 2014 (n=30)
Number of Group Members
11 to 25 Over 10051 to 100
N u m b e r o f C o m p a n i e s 12
10
8
6
4
2
0
Established Angel Groups
Young Angel Groups
New Survey Participants
26 to 501 to 10
2014 Report on Angel Investing Activity in Canada | 12
Established groups are defined as groups that
are at least 6 years old.
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Active Membership Total Membership
Total Group Members
Figure 4: Number of Active Angel Group Members (n=30)
T o t a l A c t i v e M e m b e r s i n
2 0 1 4
180
160
140
120
100
80
60
40
20
0
0 20 40 60 80 100 120 140 160 180
There is wide variation in the percentage of active
members in an Angel group (Figure 4). However, having
more members in a group is associated with somewhat
higher investment activity (Figure 5, Panel A). There is noobvious link between geographic focus of groups and
the number of investments they make (Figure 5, Panel B).
In 2014, the number of Angel groups that did at least 5
investments recovered from the decline experienced in
2013 (Figure 6). This may suggest a broader recovery in
2014 of the Angel capital market which was in decline in20138.
13 | 2014 Report on Angel Investing Activity in Canada
8 The apparent growth of Angel groups with no deals is spurious and reflects the fact that two of the four new participants have not (yet) generated any deal flow.
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Region Within a Province
Region Spanning Multiple Province/States
Do Not Invest Based on Geography
Province
Panel B: By Angel Group Regional Focus
25
20
15
10
5
0
Angel Group Size
N u m b e r o f I n v e s t m e n t s M a d e
0 20 40 60 80 100 120 140 160 180
Canada
Unknown
Figure 5: Group Size and Number of Investments Made (n=30)
Panel A: By Angel Group Age
25
20
15
10
5
0
Angel Group Size
N u m b e r o f I n v e s t m e n t s M a d e
Established Angel Groups
Young Angel Groups
New Survey Participants
0 20 40 60 80 100 120 140 160 180
2014 Report on Angel Investing Activity in Canada | 14
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0
1-5
6-10
11-25 Investments
Figure 6: The Distribution of the Number of Investments
by Angel Groups: 2012-2014
Year
P e r c e n t a g e o f A n g e l G r o u p s
2013 (n=29)2012 (n=20) 2014 (n=30)
100%
80%
60%
40%
20%
0%
5%
45%25%
25%
14%
52%10%
24%
17%
30%23%
30%
75%-100%
50%-75%
25%-50%
0-25%
Figure 7: Percentage of Angel Group Members with
Entrepreneurial Background
Year
P e r c e n t a g e o f A n g e l G r o u p s
2013 (n=26)2012 (n=20) 2014 (n=22)
100%
80%
60%
40%
20%
0%
5%
30%25%
40%
4%
12%35%
50%
14%
41%45%
Angel capital is crucial for companies for more than just
the funding provided. Angels provide entrepreneurs with
advice, mentorship, and access to networks. This makes
the composition of Angel groups’ membership relevant.NACO routinely collects information on the percentage of
members that have entrepreneurial experience.
Overal l, in about 86% of Angel groups, more than 50% of
members had entrepreneurial experience. Most changes
over time are small, but the number of Angel groups in
which at least 50% of the members have entrepreneurialexperience has increased (Figure 7).
15 | 2014 Report on Angel Investing Activity in Canada
In about 86% of Angel groups, more than 50%
of members had entrepreneurial experience.
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2.4 Services Offered, Funding and Level of Activity
Angel groups offer a variety of services to their members.
These go well beyond networking oppor tunities and
prospecting potential investment opportunities. Examples
include training opportunities; free or inexpensive access
to legal services; access to term sheet templates; advice
on valuation and how to structure deals; and assistance
with due diligence and negotiations with firms. From the
survey and the follow-up interviews it is clear that there
is a wide variation in the services that Angel groups offer.
The level of available administrative support differs
substantially from group to group (Table 2). For instance,
one group noted that it employs five full-time and five
part-time staff, while other groups reported relying purely
on volunteers from its members. There is also a substantialvariation in membership fees. Young groups tend to
charge smaller fees than established groups (Figure 8).
The link between the level of services offered by a group and
the level of the group’s investment activity was analyzed.
A group with several full-time staff members or high
membership fees is expected to offer better-quality services
than a group with a low number of staff members or low
membership fees. The amount invested per Angel group
was regressed on the available administrative support
and membership fees. The regression suggests there
is a positive relationship between these two variables.
Specifically, every full-time employee tends to add $1.1
million to the total invested by the group.
Seventeen Angel groups relied on sponsorships and 14
Angel groups benefited from government funding (Table 3).
Angel groups that received government funding often
received it from both federal and provincial levels of
government. It is clear that young Angel groups, includingthe four new participants, were less likely to attract funding
from sponsorships or government.
Established Angel Groups
Young Angel Groups
New Survey Participants
Membership Fee
Figure 8: 2014 Membership Fees of Angel Groups (n=28)
N u m b e r o f G r o u p s
12
10
8
6
4
2
0Free $501-750 $751-1000 $1001+$251-500$1-250
17 Angel groups relied on sponsorships and
14 Angel groups benefited from government
funding.
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Table 2: Angel Group Size, Investment per Member and Employment (n=30)
Membership
Fee
Region of
the AngelGroup
Age of
the AngelGroup
Group
has aFormalSelectionProcess
# of
AngelGroupMembers
# of
InvestmentsMade
Amount
Invested (inthousands
of dollars)
Amount
Investedper Member(in thousandsof dollars)
# of
FullTimeStaff
# of
PartTimeStaff
Angel
GroupNegotiateswithFirms forInterestedMembers
Free Western Young Yes 5 0 0 0 0 1 No
Free Western New No 154 0 0 0 0 0 No
Free Western New Yes 30 7 700 23 0 0 No
Free Central Young Yes 95 7 21,900 231 3 1 Yes
Free Central Young No 12 0 0 0 0 0 Yes
Free Central Young Yes 41 4 3,300 80 0 0 Yes
Free Central Young Yes 33 4 1,525 46 1 4 No
Free Central Young No 12 2 250 21 n.r. n.r. n.r.
Free Central New Yes 16 0 0 0 0 3 Yes
Free Central New Yes 50 4 709 14 3 2 Yes
Free Central Established No 78 3 2,330 30 0 1 No
Free Central Established Yes 78 7 4,223 54 1 0 No
Free Central Established Yes 68 25 8,610 127 1 1 No
$1-$250 Western Young Yes 40 4 440 11 0 1 No
$1-$250 Western Established Yes 65 13 3,600 55 1 2 No
$1-$250 Central Young No 33 12 5,615 170 0 0 No
$1-$250 Central Established Yes 52 6 4,517 87 1 0 No
$251-$500 Western Established Yes 56 15 561 10 0 0 No
$251-$500 Eastern Established Yes 22 0 0 0 0 2 No
$501-$750 Central Established Yes 94 15 4,600 49 1 3 No
$501-$750 Central Established Yes 58 6 2,905 50 2 0 No
$501-$750 Central Established Yes 16 6 779 49 1 2 No
$501-$750 Central Established Yes 41 18 1,745 43 0 2 No
$751-$1000 Western Established Yes 127 24 2,795 22 0 8 No
$751-$1000 Western Established Yes 29 4 880 30 1 4 No
$751-$1000 Eastern Established Yes 85 3 602 7 3 0 Yes
$751-$1000 Central Young Yes 95 17 4,142 44 2 2 No
$751-$1000 Central Established No 22 1 205 9 0 2 No
$751-$1000 Central Established Yes 35 8 2,221 63 1 2 No
$1001+ Central Established Yes 165 22 11,403 69 5 5 No
n.r. means the observation was not reported.
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Angel Group Operational Funding Sources
Membership
Fee
Region
of the
Angel
Group
Age of
the Angel
Group
# of
Angel
Group
Members
Sponsorships Funding
Received
from a
Separate
Parent
Entity
Provincial
Gov’t
Funding
Federal
Gov’t
Funding
Revenue
Generated
from
Investments
Made
Revenue
Generated
from
Events
One or
More
Members'
Personal
Funds
Free Western Young 5
Free Western New 154
Free Western New 30
Free Central Young 95Free Central Young 12
Free Central Young 41
Free Central Young 33
Free Central New 16
Free Central New 50
Free Central Established 78
Free Central Established 78
Free Central Established 68
$1-$250 Western Young 40
$1-$250 Western Established 65
$1-$250 Central Young 33$1-$250 Central Established 52
$251-$500 Western Established 56
$251-$500 Eastern Established 22
$501-$750 Central Established 94
$501-$750 Central Established 58
$501-$750 Central Established 16
$501-$750 Central Established 41
$751-$1000 Western Established 127
$751-$1000 Western Established 29
$751-$1000 Eastern Established 85
$751-$1000 Central Young 95$751-$1000 Central Established 22
$751-$1000 Central Established 35
$1001+ Central Established 165
Total 17 3 14 14 4 5 4
Table 3: Angel Group Sources of Revenue
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Table 4: Recent Developments to Angel Groups (n=26)
Location Age Members ActiveMembers
Applications Presentat ions Number ofInvestments
Value ofInvestments
Western Established 30% -48% n.r. -5% -13% 12%
Western Established -86% -80% -94% -7% -20% -57%
Western Established -74% 3% -5% 35% 9% -75%
Western Established -32% n.r. -30% -40% 200% 300%
Western Young -17% 0% 0% 0% 0% n.r.
Western Young 0% 33% 11% -33% 0% -23%
Central Established 18% -5% 19% 2% 29% 65%
Central Established 32% 0% 5% 39% 29% -58%
Central Established -16% -39% -76% -27% 100% -6%
Central Established -4% n.r. -37% 0% -17% 50%
Central Established 57% 150% -11% -17% 50% 10%
Central Established 24% n.r. 850% n.r. n.r. n.r.
Central Established 33% 825% -4% -20% 50% 882%
Central Established -38% 5% 107% 3% 25% -40%
Central Established 10% n.r. -25% 0% n.r. n.r.
Central Established 26% 33% -56% 11% 75% 438%
Central Established -51% -76% -8% 13% 60% 48%
Central Young -12% -3% -34% 33% -15% -28%
Central Young 0% n.r. -30% n.r. -33% -95%
Central Young -65% -11% -33% 1150% 40% 71%
Central Young 83% 83% 20% 100% 33% 129%
Central Young 37% 78% -38% -33% -43% -55%
Central Young 0% n.r. n.r. n.r. -100% -100%
Central Young 313% 317% 11% n.r. 100% 294%
Eastern Established 6% 43% -35% 0% -25% -15%
Eastern Established -12% n.r. -52% 100% 0% n.r.
# change +10% or more 10 8 6 8 12 10
# -10% < change < +10% 6 6 5 8 4 2
# change -10% or less 10 5 13 6 8 10
Canada -31% 10% -17% 1% 17% 2%
n.r. means the observation was not reported.
2.5 Trends
A year-over-year comparison is best done by focusing
on the 26 groups that participated in the survey both in
2013 and in 2014 (Table 1). Overall, membership numbers
declined by 31%. However, the number of active members
increased by 10%, the number of investments increased
by 17%, and the amount invested increased by 2%.
The number of applications for funding decl ined by
17%, yet there were about the same number of investor
pitches. The statistics for individual groups vary and
there are always several groups that move against the
general trend. For example, despite the overall decline
in membership numbers, 9 of the 26 groups saw their
membership numbers increase (Table 4).
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3.1 Geographical and Sector Focus
3.2 Applications, Presentations, and
Funding
21
23
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3.1 Geographical and Sector Focus
Most groups indicated that they have a geographic
focus (Figure 9). No group reported that it focused on a
single city. But the geographic focus of half the groups
was still either a region within the group’s province (30%)
or the entire province (20%). Other groups indicated that
their focus spanned multiple provinces or states (17%),
Canada (10%); or that they had no geographic focus (20%).
Figure 9: Angel Group Geographical Focus (n=30)
Region Within a Province
Region Spanning Multiple Province/States
Do Not Invest Based on Geography
Province
Canada
Unknown
20%
30%
3%
17%
10%
20%
3 | Investment Selection
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Table 5: Sector Focus of the Angel Groups (n=29)
Region ofthe AngelGroup
Age of the Angel Group
SectorFocus
LifeSciences
ICT Clean Tech Manufacturing Services Energy Other
Western New No
Western New Yes
Western Established No
Western Established No
Western Established No
Western Established No
Western Young No
Western Young YesCentral New No
Central New Yes
Central Established No
Central Established No
Central Established No
Central Established Yes
Central Established No
Central Established Yes
Central Established Yes
Central Established Yes
Central Established YesCentral Established Yes
Central Established No
Central Young Yes
Central Young Yes
Total 14 27 27 23 22 16 19 15
Fourteen of the 30 groups (47%) reported having a sector
focus (Table 5). Despite this, the bulk of Angel groups,
including those that reported having a sector focus, were
open to investments in multiple industries. Seven of the30 Angel groups (24%) had a narrower focus on three or
fewer industry sectors. In 2013, as many as 13 (48%) of
the 27 Angel groups reported that their group focused on
three or fewer industr ies. Angel groups seemed to have
widened their reach. In their majority, Angel groups were
open to oppor tunities in Life Sciences, ICT, Clean Tech,
and Manufacturing; and a little over half of the groups
would consider investing in Services, Energy and “Other”
industries. Angel groups in the more “crowded market”
of Central Canada, were more likely to have a sector focus,which is particularly true for young groups.
2014 Report on Angel Investing Activity in Canada | 22
The bulk of Angel groups were open to
investments in multiple industries.
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3.2 Applications, Presentations, and Funding
In 2014, 30 Angel groups received 2,972 applications.
Twenty four of those groups scheduled 695 company
presentations to the group members and 25 groups made
237 deals (Figure 10).
3.2. Applications, Presentations, and Funding
Based on data provided by 22 groups, presentation rates,
funding rates and application success rates were analyzed.
Presentation rate is defined as the ratio of presentations
and total number of applications. Funding rate is defined
as the percentage of presentations that resulted in a deal.
Finally, the application success rate is defined as the
percentage of applications that resulted in a deal.30 Angel groups received 2,972 applications
leading to 25 groups funding 237 deals.
2972
695*
271
237
Figure 10: Funding Success Funnel (n=30)
* Based on 24 of the 30 groups that reported the number of presentations held
Applications
Due Diligence
Presentations
Funded
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Figure 11: Company Selection by Angel Group (n=22)
Angel Group
R a t e P e r c
e n t a g e
100%
80%
60%
40%
20%
0%
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Presentation Rate (# Presentations / # Applications)
Funding Rate (# Funded / # Presentations)
Application Success Rate (# Funded / # Applications)
Presentation rates differed substantially among groups,
with some groups reporting 100% presentation rates.
These groups do not appear to carry out any screening
on behalf of their members. Other groups appeared to
be highly selective, only allowing a small percentage of
applicants to present to their group members (Figure 11).
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There is also notable variation among groups in terms of
funding rates and application success rates. The more
selective groups tended to report high funding rates, while
the less selective groups tended to report low fundingrates. A negative relationship appears to exist between
the presentation rate and the funding rate (Figure 12). A
similar pattern was observed in 2013.
Company presentations at selective Angel groups more
often resulted in an investment. Clearly, the selection
processes implemented at some of the more selective
groups resulted in higher quality presentations and couldbe deemed a valuable service for the groups’ membership.
Figure 12: Group Investments and Presentation Rate
Presentation Rates of Canadian Angel Groups
T o t a l D o l l a r s I n v e s t e d ( m i l l i o
n s o f $ )
T o t a l I n v e s t m e n t s
$50
$40
$30
$20
$10
$-
120
100
80
60
40
20
0
Total Dollars Invested Total Investments
1-20% 61-80% 81-100%41-60%21-40%0%
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4.1 Overview
4.2 Breakdown by Number of Investments
4.3 Breakdown of Amount of Investment
4.4 Deal Structure
4.5 Investment Amounts
4.6 Co-Investment Activity
4.7 Syndication
4.8 Deal Size
4.9 Valuations
4.10 Comparison with the US Angel
Capital Market
4.11 Distance from the Angel Group
4.12 Stage of Development
4.13 Company Size
4.14 Assistance through Government
Programs
27
29
33
36
38
39
41
43
45
47
49
50
50
51
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4.1 Overview
The total amount of Angel investment captured by the
surveys increased from $40.5 million in 2012 to $88.7
million in 2013 to $90.5 mil lion in 2014 (Figure 13). This is
due in part to an increase in the number of respondents.
To estimate the growth of the visible Angel capital market,
the comparison sample was introduced in the 2013 report.
It was argued that this comparison sample produced a
reasonable estimate of the growth of the visible Angel
market. In 2013, the comparison sample consisted of
17 groups that par ticipated in both the 2012 and the2013 survey. It was concluded that, between 2012 and
2013, the visible Angel capital market in Canada had
contracted by 13%.
Figure 13: Amounts of Investments: 2012-2014
New
Follow-on
Unspecified
I n v e s t m e n t A m o u n t ( m i l l i o n s o f $ )
$90
$80
$70
$60
$50
$40
$30
$20
$10
$-
Year
2013(n=25, k=199)
2014(n=25, k=237)
2012(n=19, k=139)
7.34.3
28.9
28.861.7
45.65.7
37.4
4 | Investments in 2014
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In 2014, the comparison sample consisted of 26 groups
that participated in the survey in both 2013 and 2014
(Table 1). The growth rate of the visible Angel capital market
in 2014, based on the comparison sample (Figure 14),was 2%9.
Furthermore, the amount invested in follow-on investments
grew between 2012 and 2013 but shrank between 2013
and 2014. Conversely, new investments declined between
2012 and 2013 but increased between 2013 and 2014(Figure 14).
New
Follow-on
Total
Figure 14: Growth of the Visible Angel Capital Market in Canada
G r o o w t h R a t e
66%
2%
-47%
168%
-13% -37%
2013(n=17)
2014(n=26)
The visible Angel capital market grew 2%
in 2014.
9 Not shown in the figure is that numbers of investments, which increased by as much as 17% (see Table 4).
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4.2 Breakdown by Number of Investments
The median and average number of investments per Angel
group in 2014 were 6.0 and 7.6, respectively (Table 1).
The figures for 2013 were 5.0 and 6.9, respectively. The
number of investments was not collected prior to 2013.
Based on 198 investments for which industry information
is available, more than half of the investments in 2014 were
made in ICT companies, and about a fifth in Life Sciences
companies (Figure 15). “Other” sectors attracted 10% of
the deals, followed by manufacturing with 7% and Clean
Tech with 5%.
A quarter of the 237 investments in 2014 were follow-on
(beyond first-time, even if by different investors in the
Angel group), clearly lower than their 33% share in 2013(Figure 16). New investments (defined as the first time any
of the Angel group members invests in the company)
represented 75% of the total (Figure 16).
Of 237 investments, 25% were follow-on and
75% were new.
Figure 15: Percentage of Investments: Total Number of
Investment by Sector: 2012-2014
Life Sciences
Services
Manufacturing
Clean Tech
Energy
ICT
Other
Year
P e r c e n t a g e o f I n v e s t m e n t s
2013 (k=134)2012 (k=110) 2014 (k =198)
100%
80%
60%
40%
20%
0%
7%53%
18%
22%
3%59%
24%
12%
5%55%
22%
7%0%10%
0%
Figure 16: Number of Investments: 2012-2014
New
Follow-on
Unknown
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Year
2013(n=25, k=199)
2014(n=25, k=237)
2012(n=19, k=139)
P e r c e n t a g e o f I n v e s t m e n t s
22%5%
73%
33%2%
65%
25%
75%
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Like last year, most investments were made in Central
Canada, but Western Canada (BC, AB, SK) had a vibrant
local Angel capital market as well (Figure 17, Panel A),
considering its smaller population compared to CentralCanada (Figure 17, Panel B). Groups in Central Canada
participated in more follow-on investments (28%) than
Angel groups in the West (18%), a pattern observed in
2013 as well.
New Follow-on
Figure 17:
Panel A: Number of Investments by Region (n=30)
Central Canada(70% of
Investments)
Eastern Canada(2% of
Investments)
180
160
140
120
100
80
60
40
20
0
Western Canada(28% of
Investments)
N u m b e r o f I n v e s t m e n t s
18%82%
33%67%
28%72%
New Follow-on
Panel B: Number of Investments per Million of People (n=30)
Central Canada(70% of
Investments)
Eastern Canada(2% of
Investments)
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Western Canada(28% of
Investments)
N u m b e r o f I n v e s t m e n t s
18%82%
33%67%
28%
72%
Most investments were made in Central
Canada, but Western Canada had a vibrant
local Angel capital market as well.
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Top 5 Young Canadian Angel Groups by Number of
Investments in 2014
XDL Capital GroupOntario
Mistral Venture PartnersOntario
iGan PartnersOntario
Omega StarOntario
Saskatchewan Capital NetworkSaskatchewan
Angel One Investor NetworkOntario
2013 Rank
N/A
N/A
N/A
N/A
N/A
N/A
4
4
1
4
3
2
1
Top 5 Canadian Angel Groups by Number of
Investments Made Made in 2014
VA Angels Alberta
Capital Angel NetworkOntario
Northern Ontario AngelsOntario
2013 Rank
4
New
4
1
1
Anges QuébecQuebec
Angel One Investor NetworkOntario5
1
4
3
2
1
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Figure 18: Investments and Membership by Region in 2014
= 5% of Membership Distribution
Number of Investments Made in 2014
Value of Investments Made in 2014
Western Canada
Central Canada
Eastern Canada
506 Investors
$9.0 million in 67 investments
28% 10%
70% 89%
2% 1%
1,094 Investors
$81.0 million in 167 investments
107 Investors
$0.6 million in 3 investments
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They were:
1. Information and Communication Technology (ICT)
2. Life Sciences3. Clean Technology
Thirty-two percent of all investment amounts went to
follow-on investments, and 68% were in new investments
(Figure 20). The amount invested in follow-on investments
grew substantially between 2012 and 2013, but shrunk
between 2013 and 2014. The reverse trend was observed
for the amount invested in new investments.
4.3 Breakdown of Amount of Investment
Life Sciences and ICT attracted 83% of the total amount
invested by Angel investors in 2014 (Figure 19). There is a
major difference between the number of investments and
amounts invested. Despite a higher number of investments
in the ICT industry than in the Life Sciences industry, both
sectors received similar investment amounts. The average
investment size was greater for Life Sciences. In the visible
Angel market, the top three sectors in 2014 in terms of
total Angel investment amounts remained unchanged.
Life Sciences and ICT attracted 83% of the
total amount invested by Angel investors in
2014.
Figure 19: Percentage of Investments: Total Amount of
Investments by Sector: 2012-2014
Life Sciences
Services
Manufacturing
Clean Tech
Energy
ICT
Other
50%
21%
8% 45%
33%7%
13% 42%
41%
3%
Year
P e r c e n t a g e o f I n v e s t m e n t s
2013 (k=134)2012 (k=110) 2014 (k =197)
100%
80%
60%
40%
20%
0%
21% 10%
Figure 20: New/Follow-on Composition of Investments by
Investment Amount, 2012-2014
18%11%
71%51%6%
42%32%0%
68%
New
Follow-on
Unspecified
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Year
2013(n=25, k=199)
2014(n=25, k=237)
2012(n=19, k=139)
P e r c e n t a g e o f I n v e s t m e n t s
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Figure 21:
Panel A: Investment Amount by Region (n=30)
I n v e s t m e n t A m o u n t ( m i l l i o n s o f $ )
$90
$80
$70
$60
$50
$40
$30
$20
$10
$-
Region
Central Canada(89% of
$ Invested)
Eastern Canada(1% of
$ Invested)
Western Canada(10% of
$ Invested)
9%91% 7%
93%
35%65%
Central Canada was dominant in terms of investment
amounts (Figure 21, Panel A). Furthermore, investment
size in Central Canada was larger than elsewhere in
Canada with Central Canada Angel groups investing
more in follow-on investments than elsewhere in Canada.
Per capita investment amounts in Central Canada are
also at least four times as high as elsewhere in Canada
(Figure 21, Panel B).
New Follow-on New Follow-on
Panel B: Investment Amount per Millions of People (n=30)
9%91%
7%93%
35%
65%
I n v e s t m e n t A m o u n t ( m i l l i o n s o f $ )
$4.0
$3.5
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$-
Region
Central Canada(89% of
$ Invested)
Eastern Canada(1% of
$ Invested)
Western Canada(10% of
$ Invested)
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Top 5 Canadian Angel Groups by Dollar Amount
Invested in 2014
Golden Triangle Angel NetworkOntario
Anges QuébecQuebec
XDL Capital GroupOntario
Northern Ontario AngelsOntario
iGan PartnersOntario
2013 Rank
New
5
New
1
2
5
1
4
3
2
1
Top 5 Young Canadian Angel Groups by Dollar
Amount Invested in 2014
2013 Rank
N/A
N/A
N/A
N/A
N/A
XDL Capital GroupOntario
Omega StarOntario
Angel One Investor Network Ontario
Mistral Venture PartnersOntario
iGan PartnersOntario
5
1
4
3
2
1
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4.4 Deal Structure
Information on the financial instruments used by Angel
investors was reported by 14 Angel groups for 100
investments. The most commonly used financial
instruments were common shares (44%), preferred shares
(35%), and convertible debentures (11%) (Figure 22).
The data show that most groups worked with one or two
different instruments.
4%1%
44%
5% 11%
35%
Figure 22: Deal Structure (n=14, k=100)
Common Shares
Other
Loan (Debt)
Preferred Shares
Multiple Securities
Convertible Debenture
The most commonly used financial instruments
were common shares (44%), preferred shares
(35%), and convertible debentures (11%).
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4.5 Investment Amounts
The median amount invested was $160,000, while the
average was more than twice as large ($384,000) (Figure
23). The regional breakdown in 2014 shows that Central
Canada-based Angel groups made the largest
4.5. Investment Amounts
investments in companies. Across Canada in 2014,
the median investment amount had decreased by 23%
between 2013 and 2014, from $209,000 to $160,000
(Figure 23).
(k=9) (k=98)(k=20)
Western Canada Central Canada Eastern Canada Canada
(k=135)(k=43) (k=164) (k=3) (k=4) (k=3) (k=110) (k=159)(k=210)
600
500
400
300
200
100
0
Region
383
137175
209160135 134
175 175215 200
100
M e d i a n A m o u n t ( t h o u s a n d s o f $ )
Figure 23: Investment Amounts by Region: 2012-2014
Panel A: Angel Group Medians (per Investment)
2012 2013 2014
2012 2013 2014
(k=24) (k=112)(k=60)
Western Canada Central Canada Eastern Canada Canada
(k=135)(k=66) (k=167) (k=3) (k=4) (k=3) (k=139) (k=199)(k=236)
600
500
400
300
200
100
0
Region
283223
292
446384
176201
305 298
516 485
136
A v e r a g e
A m o u n t ( t h o u s a n d s o f $ )
Panel B: Angel Group Averages (per Investment)
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Figure 24: Investment Amounts by Industry Sector: 2012-2014
Panel A: Angel Group Medians (per Investment)
2012 2013 2014
M e d i a n A m o u n t ( t h o u s
a n d s o f $ )
(k=57, 78, 108) (k=103, 32, 43) (k=8, 5, 9) (k=18, 19, 37)
ICT Life Sciences Clean Tech Other
700
600
500400
300
200
100
0
Industry Sector
238 250 244
118 125
250 240
573
125180
125
250
2012 2013 2014
Panel B: Angel Group Averages (per Investment)
A v e r a g
e A m o u n t ( t h o u s a n d s o f $ )
Industry Sector
(k=58, 78, 108)
ICT Life Sciences Clean Tech Other
(k=103, 32, 43) (k=8, 5, 9) (k=18, 19, 37)
368306 326
642
348
810 1587
385
257302
271323
700
600
500
400
300
200
1000
The median investment amount in the Life Sciences
was the largest at $250,000 in 2014 due to few large
investments. It was twice as large as in ICT and Clean
Tech (Figure 24).
The median investment amount in ICT has been
decreasing since 2012, while the average has stayed
approximately the same. However, the median invest-
ment amount in the Life Sciences has been flat, whilethe average has increased substantially in the last three
years.
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4.6 Co-Investment Activity
In this report, co-investment refers to the scenario when
multiple investors from the same Angel group participate
in the same investment. Co-investment information
gathered has traditionally been satisfactory and in 2014,
it was available for 136 investments. Co-investment
happened in 65 percent of these investments (Figure 25).
Thirty five percent of investments involve only one investor.
11-20
21+
1
2
3
4
5
6-10
Figure 25: Number of Angel Group Members Involved in
the Same Deal
P e r c e n t a g e o f I n v e s t m e n t s
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Year
2013(k=128) 2014(k=136)2012(k=93)
17%
6%11%
6%20%
16%
33%12%
9%
8%5%
9%
13%
4%
40%21%
8%
7%2%
5%
18%
4%
35%
1%
35% percent of investments involve only one
investor. The most common co-investment
situation is co-investment with just one other
group member (21%).
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Number of Co-investors
Figure 26: Co-investment Group Size and Angel Group Investment Amount (k=136)
A m o u n t I n v e s t e d ( m i l l i o n s o f
$ )
$3.5
$3
$2.5
$2
$1.5
$1
$0.5
$-
1 3 4 5 6-10 11-20 21+2
The most common co-investment situation is co-investment
with just one other group member (21%). Yet, there is
plenty of variation. For example, in 9% of the investments
over 10 members co-invest.
While there are plenty of exceptions, the rule seems to
be that having a greater number of co-investors makes
for greater investment amounts (Figure 26).
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Figure 27: Types of Syndication Partners in 2014
Angel Capital
Angels & Government
Government & Banks
Government
Angels, VCs & Strategic Par tners
Angels & VCs
Other
VC
Not Syndicated (k=40)
Syndicated, Partner(s) Known (k=83)
Syndicated, Partner(s) Unknown (k=37)
49%
1%1%
2%4%
16%
12%
15%
4.7 Syndication
In this report, syndication refers to when Angel group
members invest together with outside parties. Angel groups
reported syndication information for 160 of the 237
investments, and indicated that 120 of these 160 deals
(75%) involve syndication. For 37 of the 120 syndicated
deals, the syndication partner was unknown (Figure 27).
For the remaining 83 deals, Angel groups had a variety
ication
of syndication partners, with about half (49%) of the deals
involving syndication with outside Angel groups, 15%
involving VCs, 12% involving Government, and another
16% involving “Other” syndication partners. Syndication
with multiple parties outside the Angel group took place
in 8% of the investments.10
10 Comparing the 2013 and the 2014 syndication results is not straightforward for two reasons. First, the questions as well as the set of available answerswere changed in the 2014 survey. Secondly, the identity of the syndication partners was known in only 38 of the 199 (19%) of the transactions in 2013. Yet,taking these 38 answers at face value, and comparing with the 2014 data would show that syndications with Angels outside the group as well with VCs
were both more common in 2013 than in 2014.
75% of deals involve syndication. Angel groups had a variety of syndication
partners, with about half (49%) of the deals
involving syndication with other Angels.
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In 2014, the median amount contributed by syndication
partners was $500,000, up from $415,000 in 2013, but on
par with the 2012 figure (Figure 28). The average investment
by syndication partners almost doubled during 2012-2014. This implies that while syndication might not play a larger
role in a typical (median) investment, its importance might
have increased for a few large deals.
Year
Figure 28: Investment by Syndication Partners 2012-2014
500
D e a l S i z e ( t h o u s a n d s
o f $ )
1200
1000
800
600
400
200
0
2013(k=76)
2014(k=104)
2012(k=57)
553 1,062
415
825
789500
Median Average
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4.8 Deal Size
For the 217 deals reported in 2014, information on deal
size was available for 144 deals. The median deal size has
somewhat recovered from its sharp drop in 2013. At about
$1.2 million, the average deal size was substantially larger
than in 2012 and 2013 (Figure 29).
For syndicated deals, the median and average deal sizes in
2014 were about $883,000 and $1,492,000, respectively
(Table 6), masking a wide variation between a minimum of
$33,000 and a maximum of $10 million. Median and
average deal sizes associated with follow-on investments
were not larger than deal sizes associated with new
investments. Deal sizes in Life Sciences (Median=1.4 million,
Average = 2.2 million) were twice as large as those in ICT
(Median=0.7 million, Average = 1.1 million), while deal
sizes for pre-revenue companies and post-revenue
companies were about the same.
Deal sizes depend on the type of syndication partner
(Figure 30). Syndications with other Angel capital (i.e.
other Angel groups, Angel funds, or individual Angels
outside the group) can lead to quite substantial rounds.
The median deal size of $1.0 million for deals syndicated
with other Angel capital is only slightly below the median
deal size when Angels syndicate with VCs. Syndications
with a Government party are associated with smaller
deals (Median=$0.4 million).
Year
Figure 29: Deal Sizes: 2012-2014
500
D e a l S i z e ( t h o u s a n d s o f $ )
1400
1200
1000
800
600
400
200
0
2013(k=104)
2014(k=144)
2012(k=57)
825
919
945
Median Average
1229
698
At about $1.2 million, the average deal size was
substantially larger than in 2012 and 2013.
Deal sizes in Life Sciences were twice as large
as those in ICT.
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1000
Median
Figure 30: Deal Sizes for Syndicated Investments in 2014
D e a l S i z e ( t h o u s a n d s o f $ )
2000
1800
1600
1400
1200
1000
800
600
400
200
0
Unknown(k=36)
VC(k=13)
Other AngelCapital(k=30)
Government(k=15)
Non-Angels(k=39)
Others(k=13)
TotalSyndicated
(k=104)
1492
1188
425
815
1373
1670
756 756748
1808
1045
1655
883
Average
Table 6: Deal Size Statistics (thousands of $)
Categories Sample Size Median Average Minimum Maximum
All Investments k=144 698 1229 15 10400
Syndicated k=104 883 1492 33 10400
Non-syndicated k=40 220 547 15 3500
New k=105 695 1208 15 10400
Follow-on k=39 725 1285 30 6000
ICT k=70 650 1041 15 9914
Life Sciences k=35 1400 2002 50 7500
CleanTech k=7 125 346 100 1042
Other k=31 500 1021 25 10400
Unknown k=1 50 50 50 50
Pre-Revenue Companies k=40 804 1550 30 7500
Post-Revenue Companies k=46 870 1098 40 4950Unknown k=58 441 1112 15 10400
0-5 Employees k=44 530 1010 30 5000
6-10 Employees k=22 853 1203 50 4000
11+ Employees k=30 1478 1894 160 75000
Unknown k=48 313 1027 15 10400
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4.9 Valuations
Collecting company valuations continues to be a challenge.
Angel group managers repor ted company valuations for
56 of the 217 deals. The median and average valuations
in 2014 were $4.0 million and $5.6 million, respectively
(Figure 31, Panel A). Compared to valuations reported for
the United States in the Halo report, Canadian valuations
were somewhat higher. Yet they were not as high as in
2013 when the median valuation was $5.0 million and the
average was $6.1 million.
4.9. Valuations
Follow-on investments tended to be associated with higher
valuations (Figure 31, Panel B). The median valuation was
$4 million for new investments and approximately $5.9
million for fol low-on investments. Last year, almost all
valuations that were below $2 million involved new
investments. With five follow-on investments of $2 million
or less, this is certainly not the case in 2014.
The high valuations in Canada were not due to a “Life
Sciences sector effect” (Figure 31, Panel C). The data
show that the average valuation in Life Sciences is higher
(because of the relatively many deals in the $10M+ range),
but also shows that median valuations were $4 million for
both ICT and Life Sciences. A possible explanation for
the higher valuation in Canada could be selection bias.Survey respondents only knew valuations for 56 of the
237 deals, and could have a tendency to only remember
the deals with higher valuations.
The median and average valuations were
$4.0 million and $5.6 million, respectively. In2013, the median valuation was $5.0 million
and the average was $6.1 million.
Figure 31: Company Valuations (k=56)
Panel A: Overall Distribution
Valuation (millions of $)
$2-4M $4-6M $6-8MUp to $2M $8-10M $10+M
N u m b e r o f I n v e s t m e n t s
18
16
14
12
10
8
6
4
2
0
Median: $4.0 M
Average: $5.6 M
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Panel B: New Versus Follow-on
New Follow-on
New Investments
Valuation (millions of $)
Follow-on Investments
$2-4M $2-4M$4-6M $4-6M$6-8M $6-8MUp to $2M Up to $2M$8-10M $8-10M$10+M $10+M
N u m b e r o f I n v e s t m e n t s
18
16
14
12
10
8
6
4
2
0
Median: $2.6 M
Average: $4.0 M
Median: $5.9 M
Average: $8.2M
ICT
Valuation (millions of $)
Other
N u m b e r o f I n v e s t m e n t s
18
16
14
12
10
8
6
4
2
0
$ 2 - 4 M
$ 4 - 6 M
$ 6 - 8 M
U p t o
$ 2 M
$ 8 - 1 0 M
$ 1 0 + M
$ 2 - 4 M
$ 4 - 6 M
$ 6 - 8 M
U p t o
$ 2 M
$ 8 - 1 0 M
$ 1 0 + M
$ 2 - 4 M
$ 4 - 6 M
$ 6 - 8 M
U p t o
$ 2 M
$ 8 - 1 0 M
$ 1 0 + M
Panel C: By Industry Sector
Median: $4.0 M
Average: $7.1 M
Median: $4.0 M
Average: $4.7 M
Median: $2.7 M
Average: $5.5M
Life Sciences
ICT Life Sciences Other
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4.10 Comparison with the US Angel Capital Market
Data on the US Angel capital market is published by the
Angel Resource Institute in the Halo Report. The Report
on Angel Investing Activity in Canada has a more
comprehensive coverage. Canadian statistics are compared
with the US statistics for the year 2014 where possible.11
ICT and Life Sciences are by far the most important sectors
for both the Canadian and US Angel capital markets. In
the US, “Internet”, “Mobile & Telecom”, and “Software”
combined, attract 54.1% of deals. This is almost identical
to the 55% share of ICT in the total number of deals
(Figure 15). “Healthcare” attracts 18.3% of investments
in the US, while the figure in Canada is 22%. In terms
of amounts, the Halo Report indicated that 57.8% of all
investment went towards one the three ICT sub-sectors,while the percentage for ICT in Canada is 42% (Figure 19).
Life Sciences investments attracted
41% of total invested amounts in Canada and 24.8%
in the US. In conclusion, in both countries ICT is the
primary and Life Sciences the secondary recipient offunding by Angel groups. In relative terms ICT appears
to be an even more important sector for the US than for
Canada, while the Life Sciences sector is relatively more
important for the Canadian Angel capital market.
The median deal size of Canadian investments in ICT
companies was C$650,000, while the median deal sizes
for US investments into Internet and Mobile/telecom
companies were C$1.32 million and C$1.36 million,
respectively (Table 6). The median deal size of Canadian
investments in Life Sciences companies was C$1.40
million, while the median deal sizes for US investmentsinto this industry was C$2.21 million. Deal sizes are
therefore much larger in the US. For ICT deals, they
are about double the Canadian deal sizes. However,
Healthcare deals are close to 60% larger in the US.
11 The 2014 ARI Halo Report was released on April 15, 2015. It was based on 870 deals reported by US Angel groups. See http://www.Angelresourceinstitute.
org/Research/Halo-Report/Halo-Report.aspx.
12 All USD values reported in the 2014 Halo Report are converted to CAD based on the average 2014 exchange rate of 1.104, as identified by the Bank of Canada:http://www.bankofcanada.ca/stats/assets/pdf/nraa-2014-en.pdf
In both the US and Canada, ICT and Life
Sciences are top recipients of funding.Deal sizes are much larger in the US. For ICT
deals, they are about double the Canadian
deal sizes. For Healthcare deals, they are
close to 60% larger.
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Last year’s report also showed much smaller deal sizes in
Canada than in the US. Syndication could be part of the
explanation, but the proportion of the US investments
that are syndicated is unknown. The Halo report doespublish deal size for investments that are syndicated with
non-Angels.
The median deal size for such Canadian investments is
C$0.76 million, while the corresponding US deal size is
close to three times as large, namely C$2.21 (Figure 30).
Investments that only involve Angels could be made by
just Angel group members (in this case the deal size equals
the Angel group commitment – see line 3 of Table 6), or
there could be syndicated with Angels outside the group.
An analysis of the Canadian data reveals that the median
deal size in Canadian Angel-only deals was C$0.43
million, while the US Angel-only deal size was C$0.88
million, just over double the Canadian deal size amount.
In conclusion, deal sizes are much smaller in Canada
than in the US. Both Angel-only investments and deals
that are syndicated with VCs, government, or “Other”
investors contribute to this outcome.
With Angel group deal sizes being much smaller in Canada
than in the US, it is expected that valuations are much
smaller in Canada as well. However, last year the reported
Canadian valuations were substantially higher than thosereported in the US. Median company valuation of C$4.0
million was associated with Canadian deals (Figure 31),
while the figure for the US was C$3.3 million. In 2014 the
reported valuations of companies backed by US Angel
groups are 17 percent lower than the reported valuations
in Canada.
The reported valuations of companies backed
by US Angel groups are 17 percent lower than
the reported valuations in Canada.
13 A possible (yet untestable) explanation for the higher-than-US Canadian valuations is sample selection. The survey respondents only report valuations for 56
of the 237 company investments. It is possible that there are disproportionately many high-valuation deals among the valuations that respondents know. If so,there would be an upward bias in the reported valuations for Canada.
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4.11 Distance from the Angel Group
A common finding in the literature on Angel investing is
that the majority of Angel investments are made by local
investors. Perhaps this is because it is easier to add value
through advice and monitoring when located nearby.
Or it could be that a possible bias against placing an
investment at a distance exists during the investment
selection stage. However, more recent studies show that
a substantial minority of Angels are no longer located
near portfolio companies, which points to a more subtle
role for distance in the Angel capital market.
4.11. Distance from the Angel Group
Data on the distance between the Angel group and
the investee company was available for 168 deals. The
bulk of Angel group deals targeted firms in the same
city (36%) or elsewhere in the province (55%). A small
number of deals targeted firms outside the province (8%)
or abroad (1%) (Figure 32). While most deals were made
within the province, there were fewer deals in the same
city than in the past. In 2012 and 2013 over half of the
deals were located in the same city.
Figure 32: Distance of Companies from Angel
Groups: 2012-2014
Year
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2013
(k=139)
2014
(k=168)
2012
(k=92)
P e r c e n t a g e o f C o m p a n i e s
Same City
Rest of Canada
Same Province (Different City)
International
41%3%
56%
38%6%
52%
4%
55%8%
36%
1%
The bulk of Angel group deals targeted firms
in the same city (36%) or elsewhere in the
province (55%).
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4.12 Stage of Development
Angels are sometimes assumed to play a particularly
important role in the very early stages of company
development, whereas venture capital investors are
known to gravitate towards “later-stage” startups.
This survey collected a rudimentary measure of firm
development stage for 103 of the 217 reported deals.
Of the 103 deals, 45% were in pre-revenue and 55%
in post-revenue companies. In 2013, the percentage of
investments in pre and post-revenue companies were
46% and 54%, respectively.
4.13 Company Size
The largest proportion (45%) of deals was in very small
firms with 1–5 full-time-equivalent employees (FTE) at the
time of investment. Companies with 6-10 FTEs and 11-25
FTEs each received about 25% of the amount invested by
Angel groups in 2014, while 6% of the investee companies
had more than 25 employees (Figure 33). The size
distributions for 2012 and 2013 look similar to that of 2014
(Figure 33).
Figure 33: Company Employees at Investment Moment
2012-2014
1 to 5
6 to 10
11 to 25
26 to 50
51+
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Year
2013(k=55)
2014(k=111)
2012(k=87)
P e r c e n t a g e o f C o m p a n i e s
18%26%3%2%
49%31%24%
44%
1%
25%24%
45%
5%1%
The largest proportion (45%) of deals was in
very small firms with 1–5 FTE employees at
the time of investment.
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4.14 Assistance Through Government Programs
Angel group managers repor ted that 28% of their
investments (67 of the 237) were placed in companies
that benefited from government programs, while the figures
for 2012 and 2013 were 38% and 22%, respectively
(Figure 34). The actual uptake of government programs
is almost surely higher than 28% as many managers fail
to answer this question. Figure 34 provides an overview
of the programs used.
The British Columbia Small Business Venture Capital Tax
Credit and the Scientific Research & Experimental
Development (SR&ED) supported all seven BC companies
that reported receiving a benefit from a government program.
The Industrial Research Assistance Program (IRAP) program