2014 naco report angel investing in canada

8/20/2019 2014 NACO Report Angel Investing in Canada

1/77

2014 Report on

Angel Investing Activityin Canada

Harnessing the Power of Angel Investors

Released June 2015


2/77

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.


3/77

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


4/77


6/77

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.


7/77

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


8/77

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



9/77

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



10/77

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



11/77

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.


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



12/77

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.



13/77

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


Established groups are defined as groups that

are at least 6 years old.


14/77

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.


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.


15/77

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


Young Angel Groups


0 20 40 60 80 100 120 140 160 180



16/77

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).


In about 86% of Angel groups, more than 50%

of members had entrepreneurial experience.


17/77

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.


Young Angel Groups


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.



18/77

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 16 6 779 49 1 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


$1001+ Central Established Yes 165 22 11,403 69 5 5 No

n.r. means the observation was not reported.



19/77

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



$1-$250 Western Young 40

$1-$250 Western Established 65

$1-$250 Central Young 33$1-$250 Central Established 52


$251-$500 Eastern Established 22

$501-$750 Central Established 94






$751-$1000 Eastern Established 85

$751-$1000 Central Young 95$751-$1000 Central Established 22


$1001+ Central Established 165

Total 17 3 14 14 4 5 4

Table 3: Angel Group Sources of Revenue



20/77

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).



21/77

3.1 Geographical and Sector Focus

3.2 Applications, Presentations, and

Funding

21

23



22/77

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%




23/77

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 Young No

Western Young YesCentral New No

Central New Yes

Central Established No



Central Established Yes





Central Established YesCentral Established Yes


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.


The bulk of Angel groups were open to

investments in multiple industries.


24/77

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



25/77

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).



26/77

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%



27/77

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



28/77

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




29/77

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).



30/77

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)


22%5%

73%

33%2%

65%

25%

75%



31/77

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)


Investments)


Investments)

9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0


Investments)


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.



32/77

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



33/77

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


107 Investors




34/77

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


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)




35/77

Figure 21:

Panel A: Investment Amount by Region (n=30)


$90

$80

$70

$60

$50

$40

$30

$20

$10

$-

Region


$ Invested)


$ Invested)


$ 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%


$4.0

$3.5

$3.0

$2.5

$2.0

$1.5

$1.0

$0.5

$-

Region


$ Invested)


$ Invested)


$ Invested)



36/77

Top 5 Canadian Angel Groups by Dollar Amount

Invested in 2014

Golden Triangle Angel NetworkOntario

Anges QuébecQuebec


Northern Ontario AngelsOntario


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


Omega StarOntario

Angel One Investor Network Ontario

Mistral Venture PartnersOntario


5

1

4

3

2

1



37/77

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%).



38/77

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)



39/77

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.



40/77

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


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%).



41/77

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).



42/77

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.



43/77

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



44/77

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.



45/77

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



46/77

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


18

16

14

12

10

8

6

4

2

0

Median: $4.0 M

Average: $5.6 M



47/77

Panel B: New Versus Follow-on

New Follow-on

New Investments


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


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


Other


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



48/77

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.



49/77

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.



50/77

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%).



51/77

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.



52/77

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

2014 naco report angel investing in canada

Documents