EXECUTIVE SUMMARY Investment Activity in 2022
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The two most commonly used investment instru- ments are preferred shares (48%) and convertible de- bentures (43%). The third most commonly used instru- ment, SAFEs, were used in 6% of investments. Debt instruments are uncommon, used in just 1% of cases. The proportion of deals using preferred shares has in- creased significantly in recent years. The increase in the use of SAFEs, up from 7% in 2020 to 16% in 2021, was reversed in 2022. An ongoing decline in the use of com- mon 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. The median valuation in 2022 was $4.5 million which is lower than in both 2021 ($5 million) and 2020 ($6 mil- lion). However, there is considerable variation in valua- tions: 38% of investments were valued at $4 million or
less (with 21% valued at $2 million or less), with 54% val- ued at $6 million or less, while just over one-third (35%) of investments were made at valuations of $10 million or above. In comparison with 2021, in 2022 there was both a higher proportion of investments at $4 million or less and at $10 million and above, and fewer in the $4 million to $10 million range. Angel investors invest in a wide range of sectors of the economy. The dominance of the Information and Communication Technologies (ICT) sector continued in 2022, accounting for 39% of investments and 40% of the amount invested. HealthTech (which was not identi- fied as a separate sector in previous years) was the sec- ond biggest sector, comprising 14% of investments and 12% of the amount invested, followed by Services (12% of investments, 9% of the amount invested). ICT’s share of investments was higher than in both 2020 and 2021
2023 ANNUAL REPORT ON ANGEL INVESTING IN CANADA
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