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Deal Structures 3.4
A ngels use a variety of investment instruments. The two most commonly used instruments are pre- ferred shares (48%) and convertible debentures (43%). The third most commonly used instrument, SAFEs, were used in 6% of investments. Debt instruments are un- common, used in just 1% of cases (Figure 13). Three clear trends are apparent. First, the proportion of deals using preferred shares has increased significantly in recent years (19% in 2019; 33% in 2020; 35% in 2021). Second, the increase in the use of SAFEs, up from 7% in 2020 to 16% in 2021, was reversed in 2022. This might reflect
the sharp decrease in valuations in 2022: SAFE agree- ments are ‘founder friendly’ and typically used to con- vert at an inflated valuation. Third, an ongoing decline in the use of common shares – as a result of increased use of preferred shares and SAFEs – has accelerated. Common shares were used 14% of the time in 2021, but just 2% of the time in 2022.
2023 ANNUAL REPORT ON ANGEL INVESTING IN CANADA
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