5.1 Summary CONCLUSION
This is the 10th annual report on angel invest- ment activity in Canada, reporting on investments by angel groups. It underlines once again the maturing of Canada’s angel landscape. More than 60% of the angel groups are five or more years old, while nearly one-third are ten or more years old. The size of angel groups in terms of number of members has increased. There is a growing number of larger groups with more than 100 members. Women comprise 17% of the members of angel groups, the same proportion as in 2018. This proportion is in line with international compar- isons. For the second year running, there was a decline in the number of entrepreneurs approaching angel groups. In turn, groups only invest in a small proportion of the companies that approach them. In 2019 this figure was 2.4% for angel capital, compared to a 0.05 to 1% conversion rate in traditional venture capital funds. The proportion of entrepreneurs successfully converting an investment pitch into a successful fundraise has decreased significantly as compared to 2018 (6.4%). Nonetheless, an entrepreneur’s chance of success with angels is still considerable relative to venture capital. Angel groups that responded to the request for information made 299 investments in 2019, investing a total of $163.9million. This is the highest recorded annual amount invested, up 14.8% on the 2018 figure and marginally exceeded the previous record amount in 2017. However, the number of investments was significantly low- er than in the previous three years. This reflects a significant increase in the mean size of invest- ment (reflecting one very large investment) but a decline in the median size of investment com- pared with the two previous years. There has also been a decrease in the average number of investments made by groups. Investments are
primarily in tech, notably ICT and Life Sciences and Healthcare. The majority of investments are in businesses with less than 10 employees, emphasizing the role of angels in financing emerging businesses. Investments continue to be concentrated in Central Canada, reflecting the concentration of angel groups in this region. The majority of investments involve investors investing in businesses that are located in the same province in which they live. However, the propor- tion of cross-provincial investments is the highest ever recorded. The report also emphasizes the role that angel investors play through angel groups in financing the early scale up of their investee companies. The membership base of angel groups provides the financial resources to enable them to make fol- low-on investments. In 2019, 45% of investments were follow-on, an increase from previous years. Follow-on investments accounted for 38% of the total amount invested. The growing significance of follow-on investments reflects the maturing of an- gel groups. As groups get older, they tend to allocate more of their investment to companies in their existing portfolio rather than to new businesses. Angel groups were fairly positive about the invest- ment environment in Canada in 2019. The ratings that they give to the investment climate has been consistent over the past four years (median of 7 on a scale from 1 (poor) to 10 (excellent). The most fre- quently voiced concerns related to investor fatigue, which is in turn attributed to the lack of liquidity events, the poor quality of deal flow, reflecting a lack of investment readiness amongst entrepre- neurs that approach angel groups, and a lack of incremental resources to support their members with due diligence and post-investment manage- ment support of their portfolio companies.
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ANNUAL REPORT ON ANGEL INVESTING IN CANADA
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