2020 Report on Angel Investing In Canada

INVESTMENT ACTIVITY IN 2019

3.1 Demand For Angel Finance

Fourteen groups reported their deal flow infor- mation for 2019. These groups received 6,551 approaches for funding. This is relatively unchanged in comparison to the 2018 figure, which was itself a 21% decline on the 2017 figure. This is a higher figure than in 2015 and previous years (Figure 8).

On average, each group receives 364 applications. Annual trends are influenced by differences in the number of groups reporting this information each year.

FIGURE 8 Number of Businesses Seeking Funding from Angel Groups: Trends Over Time

8000

8529

6000

6551

6541

5345

4000

4473

2000

0

2015

2016

2017

2018

2019

INVESTMENT ACTIVITY IN 2019

3.2 The Financing Funnel

Angels invest in only a small proportion of the companies that approach them to raise finance. We can characterize venture financing as a funding funnel. A large number of companies ap- proach angel groups to seek funding. The majority of these are rejected by the group’s management at the initial screening stage, being considered as not suitable to be assessed by group members. Some will be deemed to be un-investable, others do not fit with the Group’s investment focus and yet others will be judged not to be investment ready. However, this is not necessarily entirely a negative outcome. These entrepreneurs may receive valuable feedback to help them become investment-ready in the future or be directed to more appropriate financing sources. Of those that are invited to present to members, only

a minority will be of potential interest to investors. Some of these will be rejected as investors do their own due diligence. A small fraction of the busi- nesses which originally approached angel groups, receive funding. Thirteen groups reported full information on the number of companies at each stage in the investment funnel. Only 9% of the businesses that approached these groups were selected for presentation to investors. Angels undertook due diligence on 56% of these businesses. Angels invested in 45% of the businesses that reached the due diligence stage. This represents just 2.4% of the businesses that initially approached these groups for funding.

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ANNUAL REPORT ON ANGEL INVESTING IN CANADA

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