2022 Report on Angel Investing in Canada 110822

EXECUTIVE SUMMARY Investment Activity in 2021

48

This represents a significant recovery in investment ac- tivity compared with 2020. The number of investments in 2021 was 39% higher than in 2020 with the amount invested more than double the 2020 figure (+110%). Looked at from a longer-term perspective, both the number of investments and the amount invested is the highest ever recorded. The median size of investment in 2021 was $84,000 which was slightly lower than in 2020 ($100,000). How- ever, the mean size of investment was $346,000 com- pared with $290,000 in 2020. Follow-on investments accounted for 23% of invest- ments and 20% of the total amount invested. This is significantly lower than in 2020. This is likely to reflect a pandemic effect as in 2020 angels focused more on supporting their existing investee companies to ensure that they had sufficient financial resources to survive

the economic downturn caused by the pandemic and appeared less interested in making new investments.

Angels use a variety of investment instruments. The two most commonly used instruments in 2021 were pre- ferred shares (35%), followed by convertible debentures (33%). Simple Agreements for Future Equity (SAFEs) were used in 15% of investments. Debt instruments were uncommon, used in just 1% of cases. The proportion of deals using preferred shares has increased significantly in recent years. There has also been a sharp increase in the use of SAFEs, up from just 7% in 2020.* The median valuation in 2021 was $5 million, lower than in 2020 ($6 million) but the same as in 2019. Just un- der one-quarter (23%) of investments were valued at $4 million or less (with 4% valued at under $1 million), with 55% valued at $6 million or less. Just over one-quarter

*SAFEs help streamline pre-seed and seed financing relative to convertible notes. SAFEs defer the need to arrive at a company valuation.

2022 ANNUAL REPORT ON ANGEL INVESTING IN CANADA

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