2016 Report on Angel Investing Activity in Canada. An Analysis of Business Angel Support to the Start-Up Funding Continuum

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1 216 Report on Angel Investing Activity in Canada An Analysis of Business Angel Support to the Start-Up Funding Continuum Released May 217

2 Authors Acknowledgements Colin Mason and Timothy Tjahjakartana Colin Mason is Professor of Entrepreneurship, Adam Smith Business School, University of Glasgow, Glasgow G12 8QQ, Scotland, UK. He was lead author of this report. Timothy Tjahjakartana is a Master of Science in Finance student at Simon Fraser University, Vancouver, Canada. He was responsible for the data analysis and prepared the tables and figures for this report. The authors and NACO wish to thank the members of the Project Steering Committee for their advice, direction, time and feedback during formative drafts of the report. Special thanks go to the Angel group managers who volunteered their valuable time and effort in providing the data for the major part of the report without them there would be no activity to report. PROJECT STEERING COMMITTEE Colin Mason, University of Glasgow Sarah Lubik, Simon Fraser University Timothy Tjahjakartana, Simon Fraser University Erika Kurczyn, BDC Capital David Rozin, RBC Michael Edwards, Mobio Technologies Inc. Yuri Navarro, National Angel Capital Organization PROJECT MANAGERS Baye Galligan, National Angel Capital Organization Elena Dudarenko, National Angel Capital Organization Melissa Dodaro, National Angel Capital Organization Pawan Agnihotri, National Angel Capital Organization COMMITTEE OBSERVERS Christina Adam, Innovation, Science and Economic Development Canada Shane Dolan, Innovation, Science and Economic Development Canada Jim Valerio, Innovation, Science and Economic Development Canada This report was made possible with the financial contributions from:

3 Filling a Critical Gap in the Early-Stage Funding Continuum The National Angel Capital Organization (NACO) is the national industry association championing the advancement of Angel investing in Canada. Start-ups depend on the availability of a coordinated support infrastructure as they develop along the journey from an idea to a scalable business and eventually into a globally competitive company. The early-stage capital investment from Angels directly supports entrepreneurs across Canada and fills the gap in the funding continuum between friends and family and larger-scale investments made by venture capitalists. Angel investors are also well-versed in the process of development and understand that start-ups require varying combinations of access to resources, mentorship and risk capital as they grow. We are pleased to present our 216 Report on Angel Investing Activity in Canada. Over the last seven years, this report has captured details of 1,413 investments in 773 companies totalling more than $56.2 million. Although this report presents only a fraction of the investment activity accomplished by our more than 3 national members who reported their data, it helps provide a basis for understanding Canada s Angel community and the broader early-stage ecosystem. As the steward of Angel intelligence in Canada, we understand the importance of collecting and disseminating investment research for our members, stakeholders and the innovation community at large. Reports like this help Angel investors and others to benchmark success, understand best practices, recognize leaders within our community, and provide policymakers with important data to make informed decisions. There is no way of knowing how many Angel investors actually exist in Canada. Angels can often operate as lone wolves, without the benefit of basic materials and information on early-stage investing. At NACO, our mission is to professionalize national Angel investment by providing these investors access to tools, resources and networks that will advance our community. The resulting co-investment, education, transparency and development of Canadian Angel best practices strengthens the early-stage ecosystem and helps build the next generation of successful Canadian companies. This annual report is one way we deliver valuable insights to the community. We would like to acknowledge the efforts of all who contributed to this year s report including members of the Project Steering Committee, our partners who have supported this initiative, and the Angel group managers who have taken the time to share their data with us. Without their collaboration, cooperation and investment, this report would not be possible. On behalf of NACO, we hope you enjoy learning more about our community and encourage you to participate in future research initiatives as we work to grow the power of our national Angel and early-stage investment community and drive greater economic prosperity in Canada. Bev Tudhope Co-Chair, NACO Board of Directors Ian Bandeen Co-Chair, NACO Board of Directors 216 Report on Angel Investing Activity in Canada 3

4 4 216 Report on Angel Investing Activity in Canada

5 Table of Contents Executive Summary 6 1. Introduction 9 2. Angel Group Characteristics The Investment Climate for Angel Investing Investment Activity in Group Best Practices and Challenges Conclusion 47 Annexes Report on Angel Investing Activity in Canada 5

6 Executive Summary Introduction This is the seventh annual Report on Angel Investment Activity in Canada. It is based on responses from 35 active Angel groups (34 groups reporting investment information and one group having no investments to report in 216), with 27 of these groups also participating in the 215 survey. Eight groups completed the survey for the first time. These groups report 418 investments that attracted $157.2 million invested by Angels. The trend is for more groups to make more investments, with proportionately more groups in 216 that have made 11 or more investments and fewer groups making five or fewer investments compared with previous years. However, there is no strong relationship between group size and number of investments made. The most active Angel groups (three of the top five in terms of both dollars invested and number of investments) are based in Central Canada (Ontario and Quebec). Angel Group Characteristics The majority (68%) of Angel groups are organized on a not-for-profit structure, while 26% are for-profit entities. The majority charge for membership, with fees ranging from less than $25 to over $1,. Just over 4% have no membership fee. Angel groups are becoming an increasingly established part of the Canadian entrepreneurial ecosystem. Onethird have been established for eight years or more, and 55% for five years or more. However, new groups are continually being founded, with one-third three years old or less. There is considerable diversity in the size of groups, with membership ranging from less than 1 to over 1. However, two-thirds of groups have between 26 and 1 members. Groups are getting larger, with just over half of the groups having a membership in excess of 5 in 216, compared with 41% in 215. There is considerable variation among groups in terms of their level of investment activity. One group made no investments in 216 (3%) and a further 6 (15%) made between one and five investments. At the other extreme, four groups (1%) each made more than 25 investments. The Investment Climate for Angel Investing Group managers were asked to rate the current climate in Canada for Angel investing on a scale of 1 (very poor) to 1 (excellent). The mean rating is 6.7, the median is 7. This is similar to the responses in 215. Ontario groups (7.1), larger groups (7) and groups specializing in Information and Communication Technologies (ICT) investments (7) each report the highest assessments of the investment climate. Negative aspects of the investment climate are reported to be the mismatch between the number of investment opportunities and the number of Angels, the proliferation of accelerators and incubators, and the low level of tax incentives. Investment Activity in 216 Angel groups made 418 investments in 216, investing a total of $157.2 million. This represents a significant increase in investment activity over 215 (a 48% increase in number of investments and a 15% increase in the amount invested), and a continuation of the year-on-year increases since Report on Angel Investing Activity in Canada

7 In many cases, Angels are investing as part of a larger syndicate, so the overall amount invested is much larger than that invested solely by Angels. The median deal size (including investment by reporting angel groups and their syndicates) for 216 is $559, while the mean is $1.7 million. The median amount invested by syndicate partners only is around $4,. Syndicate partners include other Angels, Angel groups, venture capital funds (VCs), government and strategic partners, but the most common category is A combination of syndicate partners. Investments by Angel groups include both new and follow-on investments in companies that the groups had previously invested in. Follow-on investments in 216 account for 37% of the total, but as follow-on investments are generally larger than initial investments, they account for 56% of the total amount invested. Investors use a variety of investment instruments, with none being dominant. Preferred shares account for 35% of the total, followed by convertible debentures with 32% and common shares at 27%. A further 5% of investments involved loans. Valuations are reported by only a minority of groups. From the data available, the majority of investments are valued at $1 2 million or $3 4 million, with the median valuation being $3.8 million. However, there are a few outliers that raise the mean valuation to $6. million. New investments attracted lower valuations (median $3 million) than follow-on investments (median $4 million). There are also variations in valuation across sectors, with Life Sciences having the highest valuation. Investment activity is dominated by the ICT sector. However, in 216 for the first time, its share of investments falls below half (45%). Since the size of investments varies among sectors, the distribution of investments by amount is somewhat different, with Life Sciences accounting for 45% (which only accounts for 15% of investments) compared with just 26% by ICT. This reflects the lower size of ICT investments compared to those in other sectors. The Life Sciences sector has the highest median and mean investment sizes. The majority of the investee businesses (56%) are small, with 1 or fewer employees at the time of the investment, and only a small proportion (13%) have more than 5 employees. Angel investment activity continues to be distributed unevenly across Canada. Central Canada (Ontario and Quebec) attracted 61% of investments and 65% of the amount invested in 216. Western Canada attracted about one-third of investments. Meanwhile, Eastern Canada attracted just 1% of investments and.25% of the amount invested. Measured on a per capita basis, Western Canada has the most investment activity per million population, slightly ahead of Central Canada. Eastern Canada s low level of investment activity is well below the national average, so it is not simply a function of the smaller geographical area or the population size of the region. Groups in Central Canada invested the largest amounts, on average. Angel investment is largely local. For 216, 29% of investments are in the same city as the Angel group and a further 55% are in the same province. The trend over the past four years has been for the proportion of investments in the same city to decline, while investments in the same province have increased. The companies that raise financing from Angels are a small minority of those that approach Angel groups. The groups received over 5, approaches for funding, an increase of nearly 9 over the 215 figure (19%), which itself was 5% higher than in 214. Only 3% of these businesses were selected for presentation to investors. Among these businesses, just 3% attracted sufficient interest for Angels to perform due diligence (9% of the original number that applied). Investors invested in the vast majority of the businesses that were subject to due diligence (85%). The total number of businesses that successfully raised funding 418 is just 7.8% of the total that applied for funding. 216 Report on Angel Investing Activity in Canada 7

8 Group Best Practices and Challenges As in previous activity reports, group managers were asked to convey their best practices and challenges. Whereas in 215 this information was elicited in interviews, this year it was collected using the questionnaire survey. The strongest theme running through the responses is the emphasis on the need to perform vigorous and robust pre-screening and vetting of businesses before passing them on to the next stage in the process either an investment committee or the members. This typically occurs on a one-to-one basis and generally takes the form of advanced due diligence. This is the gatekeeper function that is often the prime role of group managers, but in some reported cases, external professionals were also involved. The objective is to ensure that only those businesses that are judged to be investment-ready will be presented to the group s members. There are four themes among the challenges that respondents raise. First, several groups highlight their lack of administrative support, which, in turn, restricts their ability to organize events, track companies and track data. This is associated with the limited operational finance of these groups. Second, several groups identify a lack of member engagement; for example, in doing due diligence. Third, and a specific example of the previous point, is the lack of Angels who are willing to take the lead on deals. Finally, several respondents highlight the lack of exits (Angels selling their interest in a business). This has two knock-on effects: first, investor fatigue; and second, a lack of capital to reinvest. Conclusion The main points to emerge from this report are as follows: First, the Angel market in Canada continues to be buoyant. There are more groups than ever before, and groups are becoming larger in terms of their number of members. The number of investments is increasing year-on-year, not just because of the emergence of new groups, but also because many of the established groups made more investments. The amount invested has increased as well. Demand for funding is growing, although the majority of the companies approaching the groups are regarded as not being investment-ready. However, it also needs to be recognized that several Angel groups are operating in the face of significant challenges, notably concerning their lack of resources. Second, Business Angels and specifically Angel groups should not be seen as simply funding the seed and start-up phases of firm development. They are also active in financing the growth of early-stage companies; first, on account of investing alongside other investors in larger syndicated investments; and second, making follow-on investments in their investee businesses (accounting for 37% of investments and 56% of the amount invested in 216). The implication is that Business Angels are also an important source of growth financing, an aspect of Angel investing that was ignored by the recent Advisory Council on Economic Growth, which identified the lack of Canadian start-ups that achieve significant size. Finally, the evidence presented in this report suggests that provincial and federal governments might consider action on the following issues to maintain and promote the vitality of the Angel market: Financial support for the operating costs of Angel groups Support for investment readiness programs Establishment of co-investment funds Improved tax incentives, notably with tax incentives available at the federal level Report on Angel Investing Activity in Canada

9 1. Introduction 216 Report on Angel Investing Activity in Canada 9

10 1. Introduction The importance of Business Angels in the entrepreneurial ecosystem is well recognized both in Canada and internationally. Their main focus is on funding businesses at the seed, start-up and earlygrowth stages. Indeed, international studies show that Angels make at least 2 times the number of investments at these stages than venture capital funds do. This reflects the much smaller size of investments that Angels make. Nevertheless, in many cases, the amounts that Angels invest in businesses at these early stages also exceeds that of venture capital funds. 1 The nature of Angel investing has been changing over the past decade or more as individuals recognize the advantages of investing alongside other Angels as part of a larger, managed group. These include opportunities to diversify 2, better deal flow, access to the expertise of other investors and the use of professionalized investment practices. The higher cost base of Angel groups means that the very small investments traditionally made by solo Angels are no longer economic to make, while a group s much greater financial resources means that they can make larger investments and follow-on investments. This is significant in the context of the report of the Advisory Council on Economic Growth 3 published earlier this year, which identifies the lack of Canadian start-ups that achieve significant size. Either they do not grow or they are acquired while still small. One consequence is the small number of Canadian companies that are global leaders. Another is that Canada s start-ups achieve smaller exits, thereby limiting the potential for entrepreneurial recycling. 4 This scale-up problem (which is not unique to Canada) contributes to Canada s productivity gap with the USA. The Council attributes this problem, in part, to the limited access to value-added capital for early stage, expansion and growth. Surprisingly, the report does not make any reference to Angel financing. However, as this report and other research 5 both show, Angels are making bigger investments and are participating in syndicated deals alongside other Angel groups and smaller and specialist venture capital funds, as well as with public sector coinvestment funds, where these exist. Support for Angels, particularly in the form of assistance to establish more and better-resourced Angel groups, should be part of the solution to the lack of capital for scale-up, especially at the early and expansion stages. 1 In the USA, Gaston (1989) estimated that in 1984, Business Angels invested $32.7 billion compared with $4.2 billion by venture capital funds (Gaston, R J, 1989, The scale of informal capital markets, Small Business Economics, 1, ). More recently, the Center for Venture Research at University of New Hampshire estimated that in 215, Business Angels invested $24.6 billion in 71,1 businesses. unh.edu/files/webform/full%2year%2215%2analysis%2report.pdf By comparison the venture capital industry invested $6 billion (a total that is skewed by a small number of mega-investments) in just 1,4 companies. In Europe, Business Angels invested 6.1 billion in 32,94 businesses, whereas venture capital invested just 21.1 billion in early-stage deals (EBAN: European Early Stage Market Statistics wp-content/uploads/216/6/early-stage-market-statistics-215.pdf Bear in mind, too, that venture capital investments are highly concentrated geographically (e.g., 57% of US venture capital is invested in California), so in many states, regions and countries, Angel investing will exceed venture capital investments. 2 Assume an Angel had $1, to invest. As a solo Angel s/he would probably have to invest all of that in a single business. However, as part of a group, that Angel could invest $2, in each of five businesses along with other group members). 3 Advisory Council on Economic Growth (217) Unlocking Innovation To Drive Scale and Growth. innovation-2-eng.pdf 4 The learning of the entrepreneurs is likely to be restricted and the wealth created for the shareholders (entrepreneurs and external investors) likely to be limited, which reduces their re-investment potential. 5 EBAN, op. cit. It notes that Co-investment continues to rule, although more business angels are starting to shift from investing with other business angels to investing through early-stage funds Report on Angel Investing Activity in Canada

11 An important by-product of the emergence of Angel groups is their visibility in what was previously an invisible marketplace populated by solo Angels operating under the radar. Groups can therefore be asked for information on the investments that they have facilitated, enabling the compilation of statistics on this critical segment of the entrepreneurial finance market. Canada is one of the few countries to be responding to this opportunity. This report The 216 Report on Angel Investment Activity in Canada is the seventh annual report conducted by the National Angel Capital Organization. Comparison with previous years gives a unique insight into Angel investment trends. The survey instrument used for this report can be found at research/angel-activity-reports/. It is modelled on the instrument used in previous years. However, over the years, the survey has been modified to enhance our understanding of Angel groups and their investment activity, with new questions added and other questions dropped if they had failed to produce meaningful responses. The survey questions are grouped into three sections: The survey went out to 56 Angel groups in the first week of January 217. This included groups that are current members of NACO, those whose membership has lapsed, and other groups that have been identified as involved in Angel investing but are not members of NACO. Two of the contacted groups describe themselves as being dormant. Each group was asked to complete the survey and then fill out a separate deal report for all deals made in 216. Thirty-five groups completed the survey, with 34 groups providing investment information and one group reporting no investment activity. Eight groups completed the survey for the first time. The remaining 27 groups that had participated in the 215 survey participated again this year. The statistics from these groups enables a year-onyear analysis of investments to be made that eliminates the effects of new respondents. Follow-up interviews were successfully conducted with 21 respondents to confirm survey responses that were unclear and to address unanswered questions. Questions on the characteristics of Angel groups Questions on the investments made by Angel group members Questions on exits from past investments 216 Report on Angel Investing Activity in Canada 11

12 Table 1 profiles the 35 Angel groups that participated in the 216 survey. These groups report 418 investments that attracted $157.2 million invested by Angels. Many of these investments also include other investors, so the overall amount invested was much larger. The 34 active groups that report investments in 216 is an increase of three compared with 215. Eight groups report for the first time in the 216 survey, seven of which made investments during the reporting period. It should be noted that these are not necessarily new groups. Their median age is 2.7 years compared with 7.8 for groups that also reported investments in 215 (Table 1). They are also much smaller than the established groups in terms of their median number of members and median investment activity, but the mean amounts are skewed by the presence of one very large group that, although established for several years, is reporting investment data for the first time (Table 1). 6 Comparing 216 responses with those of 215 indicates that Angel groups are becoming larger (Table 1, columns 3 and 4). The median number of members increased from 42 to 51 while the average (mean) almost doubled to 1. The number of investments per group also increased (median from 6 to 1; mean from 8.8 to 13.) while the amount invested per group rose from $283, to $418,. Total group investment is significantly up from $133.6 million in 215 to $157.2 million in 216. It is clear from these summary statistics that Angel investment activity in Canada is buoyant and growing. Table 1: The 216 Angel Group Survey Participant Overview Groups That Participated in 215 & 216 (n=27) Groups Reporting for the First time (n=8) All Respondents, 216 (n=35) Median age (years) Average age (years) Median number of members Average number of members Number of groups that made investments (n) Number of active groups making no investments Investments made by group members (k) Median number of investments Average number of investments All Respondents, 215 (n=32) Per Angel group median investment $2,53, $568, $1,537,111 $1,564,326 Per Angel group average investment $4,132,39 $5,79,54 $4,492,881 $4,174,327 Groups reporting investment information n=27, k=313 n=7, k=15 n=34, k=418 n=31, k=283 Per company median investment amount $125, $1, $125, $15, Per company average investment amount $356,468 $435,13 $376,198 $472, Total investment amount (all groups) $111,574,528 $45,676,322 $157,25,85 $133,578,493 6 The way in which this group operates means that they do not have an ongoing relationship with the investors or businesses and so are unaware of the outcomes of their investment facilitation role. However, in 216, for the first time, they surveyed their investors to identify the investments that they had made as a result of the group s facilitation activity Report on Angel Investing Activity in Canada

13 Of course, these trends are influenced by the inclusion of groups reporting for the first time in the 216 survey. To exclude the influence of these groups, Table 2 only includes the 27 groups that reported for both 215 and 216. This confirms the growth of Canada s Angel market, with a rise in membership numbers and an increase in investment activity measured both in terms of number of investments and amount invested. Table 2: Groups Participating in Both the 215 and 216 Surveys (n=27) 215 Data 216 Data Median age (years) 6 7 Average age (years) Median number of members Average number of members Investments made by group members (k) Median number of investments Average number of investments Per Angel group median investment Per Angel group average investment Per company median investment amount Per company average investment amount Total investment amount (all groups) $1,67,5 $2,53, $4,73,75 $4,132,39 $125, $125, $443,573 $356,468 $11,843,758 $111,574,528 The report is structured as follows: Section 2 presents Angel group characteristics. Section 3 examines the views of group managers on the investment climate in Canada. Section 4 presents an analysis of the investments that Angel groups made in 216. This section discusses the number of deals and investment amounts of Angel groups in 216 and in previous years. It also presents an analysis of the investment funnel that tracks the diminishing number of businesses that originally approached the groups at each stage in the investment process. Here, information is presented on the sectoral and geographical investment characteristics, details on co-investments and syndicated deals, round size and company valuations. The section puts 216 investment in the context of Angel investing in previous years, as well. Section 5 presents a review of the best practices of Angel groups and the challenges that they currently face. Section 6 concludes the report by highlighting the key themes which emerge from the analysis. 216 Report on Angel Investing Activity in Canada 13

14 Unlike previous reports, this year s report does not include information on exits. This is because most groups are not able to report this information accurately. Angel groups typically are only involved in facilitating the investment and do not maintain contact with the business in the post-investment period. The limited number of responses raises concerns about their generalizability. There is also a wider concern about reliability of information Angels provide on the performance of their investments. There is a view although not supported by any evidence that Angels are self-selective in the information they report, perhaps because they can more easily recall their more successful investments. Groups that operate on a fund basis are in the best position to report investment outcomes, because they maintain a connection with their investee companies until exit, but few Angel groups operate with this model. Furthermore, it could be argued that this type of investment will fall outside the definition of Angel investing 7 if investors are not investing directly in a business and if they are not making their own investment decisions. This is an important omission but, as indicated above, unavoidable. The health of the Angel market is indicated, not just by how much is invested, but also by the outcomes of those investments company growth, investment returns and the overall level of exits. NACO is planning to work with Angel groups to overcome the challenges involved in obtaining reliable data on investment outcomes. 7 The standard definition of Business Angels is high net worth individuals who make their own investment decisions to invest their own money, along with their time and expertise, directly in unquoted companies in which they have no family connection, in the hope of financial gain Report on Angel Investing Activity in Canada

15 2. Angel Group Characteristics 2.1 Introduction Organizational Structure Fee Income Age of Group Size Membership Numbers Investment Activity by Group Report on Angel Investing Activity in Canada 15

16 2. Angel Group Characteristics 2.1 Introduction This chapter profiles Angel groups in Canada. The story is one that is part stability, reflecting the presence of a number of longer-established groups; and part change, arising from newly reporting groups that, in a number of cases, have a somewhat different modus operandi. It should be noted that groups did not always answer all of the questions, so totals in the figures and tables are often less than Organizational Structure Angel groups organize themselves in a variety of ways. In Canada, a not-for-profit structure is preferred, with 68% of groups structured in this way, almost identical to the previous year. A further 26% are for-profit entities (Figure 1). This represents a doubling in the proportion compared with the year before. Other forms of organization are much less common than in previous years, with one as an informal club and the other unspecified. Figure 1: Corporate Legal Structure (n=34) 3% % 3% 26% 68% For-Profit Corporation Not-for-Profit Organization Not Legally Structured: Part of a Larger Legal Entity Other Not Legally Structured: Informal Club/Network Report on Angel Investing Activity in Canada

17 2.3 Fee Income A majority of groups charge for membership. Yearly membership fees range from under $25 to over $1,. New and young groups tend to have free membership (Figure 2A). Membership is more likely to be free for individuals (41% of groups) than for corporate entities (25%; Figure 2B). This variation in membership fees reflects, at least in part, differences in the types of services offered by the groups, as highlighted in last year s report. There is no membership fee for 4% of the groups. Figure 2A: Membership Fees by Age of Group (n=27) Number of Groups Free $1-25 $251-5 $51-75 $751-1, $1,+ Membership Fees Established Angel Groups Young Angel Groups New Survey Participants Figure 2B: Membership Fees for Individuals and Corporations (n=27) Number of Groups Free $1-25 $251-5 $51-75 $751-1, $1,+ Membership Fees Individual Membership Corporate Membership 216 Report on Angel Investing Activity in Canada 17

18 2.4 Age of Group Plotting the age of groups results in a multi-modal distribution (Figure 3). One-third have been established for eight years or more, 55% for five years or more. However, new groups are continually being founded, with one-third three years old or less. The Canadian Angel landscape is therefore continually being refreshed with new groups, in many cases offering different models of investing Figure 3. Years in Operation (n=33) Number of Groups Yr 2 Yrs 3 Yrs 4 Yrs 5 Yrs 6 Yrs 7 Yrs 8 Yrs 9 Yrs 1+ Yrs Number of Years in Operation Groups That Participated in 215 Groups New to 216 Sample Report on Angel Investing Activity in Canada

19 2.5 Size Membership Numbers There is considerable diversity in the size of groups, with membership ranging from less than 1 to more than 1 (Figure 4). However, one-third of groups have between 26 and 5 members, and a further one-third have between 51 and 1 members. Compared with the size distribution in 215, the 216 distribution is skewed more to the right, with just over half of the groups having a membership in excess of 5, compared with 41% in 215. The clear conclusion is that Angel groups are growing their membership. The one caveat is that all members are regarded as equal, whereas in reality some members will be more active than others, and some will be passive. This may relate to the group s investment model. It seems reasonable to speculate that the very biggest groups, exceeding 1 members, are likely to have greater numbers of passive investors. Figure 4. Size of Group Membership (n=33) Number of Groups Number of Group Members Established Angel Groups Young Angel Groups New Survey Participants 216 Report on Angel Investing Activity in Canada 19

20 2.6 Investment Activity by Group There is considerable variation among groups in terms of their level of investment activity. One group made no investments in 216 (3%) and a further six (15%) made between one and five investments. At the other extreme, four groups (1%) each made more than 25 investments (Figure 5). The trend is for more groups to make more investments. Comparing 216 with previous years, there are proportionately more groups that made 11 or more investments and fewer groups that made five or fewer investments. Figure 5. Number of Investments Made by Angel Groups Percentage of Angel Groups (n=25) (n=25) (n=31) (n=34) Year Report on Angel Investing Activity in Canada

21 There is no strong relationship between group size and number of investments made. Most groups, regardless of the size of their membership, have made less than 15 investments. The groups with the most investments each have over 5 members. But even some of these bigger groups have made relatively few investments. Figure 6. Group Size and Number of Investments (n=31) 4 35 Number of Investments Organization Size Established Angel Groups Young Angel Groups New Survey Participants Note: Two Angel groups have been excluded from the above graph because of their high membership numbers. 216 Report on Angel Investing Activity in Canada 21

22 The most active Angel groups (three of the top five in terms of both dollars invested and number of investments) are based in Central Canada (Ontario and Quebec; Table 3). This has been a consistent pattern over the years, despite changes in the actual groups that constitute the most active list. The most active young groups defined as those that have been established in the past five years exhibit much greater change from 215. This is to be expected as groups pass from the young category to the established category. Three groups in the amount invested list and four groups in the number of investments list are new to the top-five ranking. There is also greater geographical diversity among the top-five young groups, with only one of the most active groups in terms of number of investments based in Central Canada. However, four of the top five in terms of amounts invested are based in Ontario. Table 3. Top Canadian Angel Groups by Investment Activity A: By Dollar Amount Invested B: By Number of Investments Made 216 Rank Group 215 Rank 1 igan Partners 1 2 Anges Québec 3 3 Northern Ontario Angels new to top 5 4 XDL Capital new to top 5 5 VA Angels TEC Edmonton Rank Group 215 Rank 1 Northern Ontario Angels 1 2 Open Angels Canada new to top 5 3 VA Angels TEC Edmonton 3 4 Anges Québec 2 5 York Angels 4 C: Young Groups: By Dollar Amount Invested D: Young Groups: By Number of Investments 216 Rank Group 215 Rank 1 Southeastern Ontario Angel Network 2 Brightspark new to top 5 3 The GreenSky President s Club new to top 5 4 China Canada Angel s Alliance 3 5 Open Angel Canada new to top Rank Group 215 Rank 1 Open Angel Canada new to top 5 2 Rhiza Capital Inc. new to top 5 3 Spark Angels new to top 5 4 Mean Eyed Cat Venture Labs 2 5 Mistral Venture Partners new to top Report on Angel Investing Activity in Canada

23 3. The Investment Climate for Angel Investing 216 Report on Angel Investing Activity in Canada 23

24 3. The Investment Climate for Angel Investing Group managers were asked to rate the current climate in Canada for Angel investing on a scale of 1 (very poor) to 1 (excellent). The mean rating is 6.7, the median is 7. However, there is variability in these scores, which range from 3 to 1. This is similar to the responses in 215, where the median was also 7, but the mean score was marginally lower at 6.5. Some respondents added the observation that they felt the investment climate is much better than it was ten years ago. Figure 7. Rating of the Investment Climate (n=32) Number of Companies Rating of Environment Report on Angel Investing Activity in Canada

25 Drilling down into the 216 responses reveals some variation in responses: Ontario groups report a much higher assessment (mean of 7.1) compared with the remainder of the country: the average score for groups in the rest of the country is 6.1. Ontario has more investors looking to make investments as well as having more investment opportunities. Bigger groups those with more than 2 members also give higher scores, with an average rating of 7.. Groups with a focus on ICT give a higher rating (average of 7) compared with groups with other sector foci and those with no sector foci. The interviews with managers elaborated on the reasons for the scores they gave. There is little consistency in these comments. However, three themes can be identified concerning the investment climate. First, there is a clear sense, among several groups, of a mismatch between the number of investment opportunities and the number of Angels. There were, in general, considerable numbers of companies seeking investment but few potential investors. Respondents suggest that this is related to their lack of liquidity, conservative attitudes to what investment opportunities they will consider, and the lack of lead investors to pull investments together. Second, there has been a proliferation of accelerators and incubators. On the one hand, Angels feel that that it is a positive development if they get validation from these organizations. But on the other hand, Angels feel that these organizations are competing against their unique investment proposition as the first external investor after 3F (founder, family and friends) money. There is also a view that accelerators and incubators are leading to inflated valuations. 216 Report on Angel Investing Activity in Canada 25

26 Finally, there is a view that tax incentives could be better. Specifically, it was suggested that tax incentives should be available at the federal level, as this would enable tax incentives to be larger. In addition, inter-province investments would not be disadvantaged as they are at present by tax incentives being province-based. This is a particular disadvantage for Atlantic Canada because of the smaller population of its provinces and its relatively compact geography. The reverse logic also benefits investors in Ontario, who enjoy a large volume of investment opportunities on account of the size of the province. These problems of small provinces are reinforced by the regulation of investment activity being undertaken at the provincial level. In general, where there are different tax regimes between adjacent jurisdictions, this will create a barrier to cross-border investment flows. 8 8 This is well illustrated in the case of Northern Ireland and the Republic of Ireland. See SQW (216) Funding for Growth: The Business Angel Market on the Island of Ireland. Inter-Trade Ireland: Newry: Co. Down Report on Angel Investing Activity in Canada

27 4. Investment Activity in Investments Deal Structures Valuations Investment Characteristics Industry Sector Investment Characteristics Region Investment Characteristics Firm Size The Financing Funnel Report on Angel Investing Activity in Canada 27

28 4. Investment Activity in Investments Angel groups made 418 investments in 216, investing a total of $157.2 million. This represents a significant increase over the investment activity reported for 215 (a 48% increase in number of investments and a 15% increase in the amount invested) and a continuation of the year-on-year increases since 213 (Table 4, Figure 8). Table 4. Angel Investment Trends Total Number of Groups Reporting Number of Groups Reporting Investments Number of Investments Amount Invested ($M) Figure 8. Investment Activity by Angel Groups Investment Amount (millions of $) (n=25, k=134) 214 (n=25, k=237) 215 (n=31, k=283) 216 (n=34, k=418) Year New ($) Follow-on ($) Unspecified ($) Report on Angel Investing Activity in Canada

29 In many cases, Angels are investing as part of a larger syndicate, so the overall amount invested is much larger than Angel investments alone would indicate (Figure 9), with a median of $5, or more in recent years. For 216, the median deal size (including investment by reporting angel groups and their syndicates) is $559, while the mean is $1.731 million. The median amount invested by syndicate partners only is around $4, (Figure 1). Figure 9. Deal Sizes 9 1,731 1,8 Deal Size (thousands of $) , , ,6 1,4 1,2 1, (k=14) 214 (k=144) 215 (k=15) 216 (k=178) Year Median Mean Figure 1. Amounts Invested by Syndicate Partners 9 8 1,53 1,8 1,6 Deal Size (thousands of $) , ,4 1,2 1, (k=76) 214 (k=14) 215 (k=15) 216 (k=173) Year Median Mean 216 Report on Angel Investing Activity in Canada 29

30 Syndicate partners include other Angels, Angel groups, venture capital funds (VCs), government and strategic partners, but the most common category is A combination of syndicate partners (Figure 11). The largest deals involve venture capital funds: they have by far the highest median and mean size of investment among the partners (Figure 12). We have limited information on any sources of government financial support that investee companies have been using. However, programs with provincial/regional support were the most frequently used, by 82% of firms, Figure 11. Syndicate Partners 15% 2% 6% 9% 58% 7% 2% A combination of syndicate partners Angel Groups Government Individual Angel Investors Other Venture Capital Strategic Partner Report on Angel Investing Activity in Canada

31 a much higher proportion than used the NRC s IRAP (Industrial Research Assistance Program) or SRED (Scientific Research and Experimental Development). Firms could report more than one source of government funding (Figure 13). Figure 12. Investments by Syndicate Partners Deal Size (thousands of $) Total Syndicate (k=134) Angel Groups (k=6) Individual Angel Investors (k=12) 525 VC (k=5) Government Strategic (k=5) Partner (k=2) Type of Syndicat Partner Other (k=4) UnknownCombination (k=1) (k=45) Median Mean Figure 13. Government Programs Leveraged (k=38) 1 Percentage of Companies Industrial Research Assistance Program (IRAP) at the NRC Scientific Research and Experimental Development (SRED) Programs with Provincial/Regional Scope 216 Report on Angel Investing Activity in Canada 31

32 Investment activity can be broken down into new investments and follow-on investments in companies that the groups had previously invested in. In three of the past four years, about two-thirds of investments have been new and one-third have been follow-on. In 215, new investments were higher at 74% (Figure 14). Since follow-on investments are generally larger than initial investments, they account for a larger share of the amount invested (Figure 15). Indeed, in three of the past four years, over half of the money invested was in followon investments. In 216, follow-on investment comprises 56% of the total amount invested, lower than in 215 (65%) but higher than in 214 (32%) and 213 (57%). Figure 14. Number of Investments: New and Follow-on Investments Percentage of Investments (n=25, k=134) (n=25, k=237) (n=31, k=283) (n=34, k=418) Year New (#) Follow-on (#) Figure 15. Amount Invested: New and Follow-on Investments Percentage of Investments (n=25, k=134) (n=25, k=237) (n=31, k=283) (n=34, k=418) Year New ($) Follow-on ($) Report on Angel Investing Activity in Canada

33 4.2 Deal Structures Investors report using a variety of investment instruments, with none being dominant. Preferred shares account for 35% of the total, followed by convertible debentures with 32% and common shares at 27%. A further 5% of investments involve loans (Figure 16). Compared with 215, this represents a decline in the use of common shares and modest increases in the use of preferred shares and convertible debentures. Figure 16. Deal Structures (n=26, k=165) 27% 35% 2% 5% 32% Common Shares Convertible Debentures Loans (Debt) Other Preferred Shares 216 Report on Angel Investing Activity in Canada 33

34 4.3 Valuations As in previous years, valuations are reported by only a minority of groups (Figure 17). From the data available, the majority of investments are valued at $1 2 million or $3 4 million, with the median valuation being $3.8 million. However, there are a few outliers that raise the mean valuation to $6 million. Not surprisingly, new investments attracted lower valuations (median $3 million, 81% below $4 million) than follow-on Figure 17. Valuations (a) Total (k=6) 25 Number of Investments Up to $2M $2-4M $4-6M $6-8M $8-1M $1M + Valuations (millions of $) (b) New Investments (k=21) Number of Investments Up to $2M $2-4M $4-6M $6-8M $8-1M $1M + Valuations (millions of $) Report on Angel Investing Activity in Canada

35 investments (median $4 million, 38% below $4 million). There are also variations in valuation across sectors, with Life Sciences having the highest valuation. (c) Follow-on Investments (k=24) Number of Investments Up to $2M $2-4M $4-6M $6-8M $8-1M $1M+ Vaulations (millions of $) (d) Sector Breakdown Number of Investments Up to $2M $2-4M $4-6M $6-8M $8-1M $1M + ICT (k=29) Up to $2M $2-4M $4-6M $6-8M $8-1M Valuations (millions of $) $1M + Other (k=13) Up to $2M $2-4M $4-6M $6-8M $8-1M $1M + Life Sciences (k=14) 216 Report on Angel Investing Activity in Canada 35

36 4.4 Investment Characteristics Industry Sector Investment activity continues to be dominated by the Information and Communication Technologies (ICT) sector. However, in 216, ICT s share of investments falls below half (45%) for the first time since we began reporting on Angel investment activity. There are increases in the share of investments in the Services sector, although its share remains low (8%), and in the Other sector, which has been steadily rising year-on-year, accounting for 2% in 216 (Figure 18). But because the size of investments varies among sectors, the distribution of investments by amount is somewhat different, with Life Sciences accounting for 45% (which only accounts for 15% of investments) compared with just 26% by ICT (Figure 19). This reflects Figure 18. Number of Investments Among Industry Sectors Percentage of Investments Year Clean Tech Energy ICT Life Sciences Services Manufacturing Other Figure 19. Amount of Investment Among Industry Sectors Percentage of Investments Year Clean Tech Energy ICT Life Sciences Services Manufacturing Other Report on Angel Investing Activity in Canada

37 the lower size of ICT investments compared with the other sectors; indeed, ICT s average size of investment has been declining year-on-year, perhaps reflecting the declining costs involved in starting up such companies. The Life Sciences sector has the highest median and mean investment sizes (Figure 2). Figure 2. Investment Amount by Industry Sectors (a) Angel Group Medians (per Investment) 4 (in thousands of $) ICT (k=78, 18, 119, 122) Life Science (k=32, 43, 55, 42) Services (k=1 3, 3, 22) Others (k=19, 37, 67, 54) Industry Sector (b) Mean Investment Size Among Industry Sectors 16 (in thousands of $) ,23 1, ICT (k=78, 18, 119, 122) Life Science (k=32, 43, 55, 42) Services (k=1, 3, 3, 22) Others (k=19, 37, 67, 54) Industry Sector Report on Angel Investing Activity in Canada 37

38 4.5 Investment Characteristics Firm Size Given that Angels typically invest early in the financing life cycle of businesses, it is not surprising to observe that a majority of the investee businesses are small, with 1 or fewer employees at the time of the investment, and only a small proportion have over 5 employees (Figure 21). However, the situation in 216 is slightly different compared with previous years, with 13% of investee businesses having more than 5 employees. Figure 21. Firm Size at Time of Investment Percentage of Companies (k=55) 214 (k=111) 215 (k=117) 216 (k=92) Year Report on Angel Investing Activity in Canada

39 4.6 Investment Characteristics Region Angel investment activity continues to be distributed unevenly across Canada. Central Canada (Ontario and Quebec) attracted 61% of investments and 65% of the amount invested in 216. Western Canada attracted about one-third of investments, and Eastern Canada attracted just 1% of investments and.25% of the amount invested (Figure 22). When expressed per capita, this indicates that Western Canada has the most investment activity per million population, slightly ahead of Central Canada, and that Eastern Figure 22. Regional Breakdown of Investments (a) Number Number of Investments Western Canada (38.52% of Investment) Central Canada (6.53% of Investment) 4 Eastern Canada (.96% of Investment) Region New Follow-on (b) Amount Investment Value (in millions of $) Western Canada (34.43% of $ Investment) Central Canada (65.32% of $ Investment).4 Eastern Canada (.26% of $ Investment) Region New Follow-on 216 Report on Angel Investing Activity in Canada 39

40 Canada s low level of investment activity is well below the national average, which is not simply a function of the smaller geographic area or the population size of the region (Table 5). Groups in Central Canada invested the largest amounts, on average. Groups in Eastern Canada made much smaller investments. The average amount invested by groups in Western Canada has fluctuated year-on-year (Figure 23). Table 5. Regional Breakdown of Investments Per Million Population in 216 Region Number of Investments West Central East Canada Amount Invested Figure 23. Regional Breakdown of Average Amounts Invested by Angel Groups Amount Invested (in thousands of $) Western Canada (k=2, 43, 66, 161) Central Canada (k=135, 164, 214, 253) Eastern Canada (k=4, 3, 3, 4) Canada (k=159, 21, 283, 418) Region Report on Angel Investing Activity in Canada

41 Figure 24 confirms that Angel investment is largely local. For 216, 29% of investments are in the same city as the Angel group and a further 55% are in the same province. The trend over the past four years has been for the proportion of investments in the same city to decline while investments in the same province have increased. The proportion of cross-border investments both in other provinces and international in 216 is higher than in the previous four years. But it is premature to suggest that this is a clear trend. Figure 24. Distance of Investee Companies from Angel Group Location Percentage of Companies (k=92) 214 (k=139) 215 (k=168) 216 (k=251) Year Same City Same Province Rest of Canada International 216 Report on Angel Investing Activity in Canada 41

42 4.7 The Financing Funnel The companies that raise financing are a small minority of those that approach Angel groups. We can characterize venture financing as a financing funnel. A large number of companies approach groups to seek funding. Many of these are deemed to be not suitable to be exposed to potential investors. However, this is not necessarily entirely a negative outcome. These entrepreneurs may receive valuable feedback to help them become investment-ready in the future. Of those that are invited to present, only a minority will be of potential interest to investors. Some of these will be rejected as investors do their due diligence. This leaves a small fraction of the businesses that originally approached the group that get funding. The financing funnel for 216 is shown in Figure 25. Figure 25. Funding Success Funnel (n=26, k=165) Applications Due Diligence Presentation Funded Report on Angel Investing Activity in Canada

43 In 216, the groups received over 5, approaches for funding. This is an increase of nearly 9 over the 215 figure (19%), which itself was 5% higher than in 214. So, quite clearly, the demand for Angel financing is on a steep rise. Only 3% of these businesses were selected for presentation to investors. Among these businesses, just 3% attracted sufficient interest for Angels to perform due diligence (9% of the original number that applied). Investors invested in the vast majority of the businesses that were subject to due diligence (85%). The total number of businesses that successfully raised funding 418 is just 7.8% of the total that applied for funding. 9 As noted above, this is a 47% increase on investment activity in 215 (283 investments) and a 96% increase on 214 (237 investments). It is interesting to note that the presentation rate is higher for 216 than in 215 and 214, which may suggest that the quality of proposals is increasing. However, the funding rate is similar to that in 215, while the application success rate is very similar to that in both 214 and 215, despite the much larger number of applications (Table 6). We therefore have the paradox that, despite increased numbers of members and in the context of more applications and more investments, the proportion of applicants that successfully raise financing remains fairly constant. Table 6. Presentation, Funding and Application Rates Presentation rate Funding rate Application success rate Notes: 1 The ratio of presentations to applications. 2 The ratio of presentations that result in funding. 3 The ratio of applications that attract funding. 9 These statistics are remarkably similar to those of European Angel groups: 31% of the business proposals received were evaluated and 7% were funded (EBAN, 216: European Early Stage Market Statistics 215). 216 Report on Angel Investing Activity in Canada 43

44 However, there is considerable variation in these ratios across groups (Figure 25). This reflects the different operating models that groups have. For example, some groups undertake very little screening, presenting the majority of their applicants to their members, while at the other extreme there are groups that are highly selective, showing only a small proportion of their applicants to their members. Moreover, the groups that did the most screening in other words, had the lowest presentation rate also had the most investments and invested the most money (Figure 26). Figure 26. Group Presentation Rates by Group $ Total Invested (millions of $) $4 $3 $2 $1 $ % 1-2% 21-4% % % % Total Number of Investments Presentation Rate / Group (#Presentations / #Applications) Total Dollars Invested Total Number of Investments Figure 27. Investment Rates by Angel Group 1..8 Rate Percentage Angel Group Presentation Rate (#Presentations / #Applications) Application Success Rate (#Funded / #Presentations) Funding Rate (#Funded / #Presentations) Report on Angel Investing Activity in Canada

45 5. Group Best Practices and Challenges 5.1 Best Practices Challenges Assessment Report on Angel Investing Activity in Canada 45

46 5. Group Best Practices and Challenges As in previous surveys, group managers were asked to report on their best practices and challenges during 216. Whereas in 215 this information was elicited in interviews, this year it was collected using the questionnaire survey. 5.1 Best Practices The strongest theme running through the responses is the emphasis on the need to perform vigorous and robust pre-screening and vetting of businesses before passing them on to the next stage in the process either an investment committee or the members. This typically occurs on a one-to-one basis and generally takes the form of advanced due diligence. This is the gatekeeper function that is often the prime role of Angel group managers, but in some reported cases, it involved bringing in outside professionals. The objective is to ensure that only those businesses that are judged to be investment-ready will be presented to the groups members. As noted earlier, this rigorous process has resulted in the rejection of the majority of businesses that approached the groups in 216. In other cases, the emphasis was on mentoring the entrepreneur prior to going in front of investors. This typically included help with their pitch presentation. For some funding applications, groups offered standardized investment documents, especially legal ones. Some Angel groups highlight their emphasis on lead Angels. One group states that it requires one investor to indicate their willingness to take on the role of lead investor and champion the investment to the rest of the group in order to proceed to a proposal. A handful of groups report that they offer investor training. However, in general, capacity-building is focused more on the education and training of entrepreneurs rather than of investors. Some groups emphasize that their strength is in their understanding of their members, the high level of member communication and engagement, and the sharing of expertise. A new theme, reflecting the emergence of groups that focus on attracting and investing in foreign entrepreneurs who set up businesses in Canada, is to access the Federal Start-up Visa Program and provide immigration consulting services. Another group highlights its unique cross-border platform. 5.2 Challenges Comments on challenges coalesce around four themes for 216. First, several groups highlight their lack of administrative support which, in turn, limits their ability to organize events, track companies and track data. This is associated with limited operational finance of several groups. Second, several groups identify a lack of member engagement, for example, in doing due diligence. Third, and a specific example of the previous point, is the lack of Angels who are willing to take the lead on deals. Finally, several respondents highlight the lack of exits. This has two knock-on effects: first, investor fatigue; and second, a lack of capital to reinvest. 5.3 Assessment The analysis of Angel investment activity in the earlier sections of this report, which highlights year-on-year increases in investment activity, suggests a very healthy Angel market in Canada, with the possible exception of Eastern Canada. This section provides a useful reality check on that positive picture. Although many groups are operating very effectively, especially in the way in which they screen investment proposals, the other side of the picture is that several groups have little or no administrative support and limited member engagement on account of their financial resources, all of which impact negatively on their effectiveness Report on Angel Investing Activity in Canada

47 6. Conclusion 216 Report on Angel Investing Activity in Canada 47

48 6. Conclusion This is the seventh Annual Report on Angel Investment Activity in Canada. The data it captures represents the investment activity of Angels who invest as part of Angel groups, termed the visible part of the market. 1 The invisible market comprises investments by Angels investing on their own and who, for the most part, operate anonymously. The conclusions of this report are based on responses from 35 Angel groups, with 34 of these groups providing investment information. The Angel market in Canada continues to be buoyant. There are more groups than ever before, and groups are becoming larger in terms of their number of members. The number of investments is increasing year-on-year not just because of the emergence of new groups but also because many of the established groups have invested more, both in terms of dollar amount and number of investments. The amount invested has also increased. Demand for funding grew in 216, although the majority of the companies approaching the groups were regarded as not being investment-ready. This has not changed over the years, so the application success rate has remained fairly static. All of this feeds into the view held by the group managers that the investment climate, with a median of 7 and mean of 6.7, is marginally higher than last year. It would be helpful in future reports to obtain scores for specific aspects of the investment climate, as well (e.g., deal flow, tax, exits, membership recruitment, availability of co-investors and follow-on investors). It is also important to highlight the relevance of Angels as a source of finance in the current debate on barriers to the scale-up of Canadian entrepreneurial companies. First, by aggregating the investment capacity of individual Angels, Angel groups are able to make bigger investments than those of most solo Angels. Second, Angel groups frequently participate in larger syndicated deals involving other investors (other Angels, other Angel groups, venture capital funds, strategic partners and others). Third, one-third of Angel group investments are follow-on investments, supporting the growth of their investee companies. These investments are generally larger than the initial investment. The implication is that Business Angels and specifically Angel groups should not be seen as simply funding the seed and start-up phases of firm development. They are also an important source of growth financing. The scale and nature of this investment activity underlines the vital importance of the Angel community in the entrepreneurial ecosystem and its need to take a prominent position in entrepreneurship policy debates. However, Angel activity varies across the regions of Canada. Investment activity is focused on Central Canada, which has 21 reporting Angel groups, representing 6% of the total number of reporting groups. Nevertheless, Western Canada actually has more investment activity on a per capita basis. Investment activity is extremely low in Eastern Canada (although the region also contains other investment groups and individuals which are not members of NACO). 1 This concept was introduced in Mason, C. M. and Harrison, R. T. (28) Developing Time-Series Data on the Size and Scope of the UK Business Angel Market (Small Business Investment Task Force, BERR, Sheffield) Report on Angel Investing Activity in Canada

49 Nonetheless, these favourable headline statistics should not obscure some challenges that at least some Angel groups are encountering. First, some groups identify a mismatch between the demand for financing and their investment capacity. While this reflects the general challenges associated with recruitment and training of potential investors, it also reflects the lack of exits that some groups highlight. This creates negative feedback loops involving Angel investment fatigue and lack of liquidity, which serve to discourage further investment. It is unfortunate that this lack-of-exits aspect of investing is also extremely difficult to collect reliable data on. There is clearly a need to explore other ways in which the exit stage in the investment process can be identified, quantified and scrutinized. Several Angel groups also identify their lack of administrative support that stems from the limited financial base of their groups and curtails the activities that they could undertake. A less frequently voiced challenge, but no less significant, is the difficulty that some groups have in engaging their members, for example, to undertake due diligence or lead an investment. This may reflect the fact that Angel groups are attracting a different type of investor who does not want to or does not have the skills to perform these roles. Whatever the reason, the effect is to reinforce the capacity problems of groups in undertaking support functions. Finally, does the evidence presented in this report suggest that provincial and federal governments should take action to maintain and promote the vitality of the Angel market? First, should Angel groups receive some form of financial support to cover some of their administrative costs? On the one hand, Angel groups could be seen as economic development organizations which benefit the local and regional economy. Moreover, the businesses that are rejected in the funding process nevertheless receive advice and feedback from group managers and members that might enhance their prospects of obtaining financing in the future. 11 On the other hand, their members are investing for personal financial gain and groups could be expected to generate more income through membership fees or sponsorship. Second, and related to the previous point, one of the key costs for Angel groups is the screening and due diligence that they undertake. In other countries, investment readiness programs are often delivered by government agencies, in many cases working in conjunction with Angel groups. 12 Third, reflecting the concerns of the Advisory Council on Economic Growth about the lack of growth capital to enable companies to scale up, there may be a case for establishing a co-investment fund that invests alongside Angel groups. There are different models, but the Scottish scheme that invests passively on a parri passu basis with both Angel groups and venture capital funds 11 As one experienced business Angel (Nelson Gray) once said: The first business plan you write is not the one that gets funded. 12 See the following: Mason, C M and Harrison, R T (21) Investment readiness: a critique of government proposals to increase the demand for venture capital, Regional Studies, 35, Mason, C M and Harrison, R T (24) Improving access to early stage venture capital in regional economies: a new approach to investment readiness, Local Economy, 19, Mason, C and Kwok, J. (21) Investment readiness programmes and access to finance: a critical review of design issues, Local Economy, 25 (4) Report on Angel Investing Activity in Canada 49

50 is widely admired, wherein the decision is automatic to invest in any prospects that are presented by its preapproved investment partners and that conform to the scheme s eligibility criteria. Groups get a deal fee for each investment that goes ahead, which addresses the administrative-costs issue. However, there is no publicly available assessment of its performance. An evaluation of a different model, in which the cofund makes its own investment decision, identified that firms benefitted from having a longer financial runway. However, the uncertainty created regarding whether the matched funding will come through and the requirement for the lead investor, rather than the entrepreneur, to make the pitch to the co-investment fund, both attracted 13, 14 criticism from Angels. Fourth, is there a need for more effort to expand the number of active Angel investors? Tax is a key issue here. Should Canada provide more generous tax incentives to encourage Angel investment, or encourage specific types of investment (e.g., seed investing as in the case of the UK s Seed Enterprise Investment Scheme)? Compared to international counterparts, such as the UK, the level of tax incentives available to Canadian Angels is quite low. Moreover, the provincial basis for tax incentives disadvantages Angel investing in Eastern Canada because it does not apply in the case of cross-province investments where the investor is in one province and the business is in another. While tax benefits are a common tool to encourage private investment, they are not without criticism. Tax incentives especially generous ones can be argued to discourage the appropriate level of due diligence by Angels and de-emphasize the need to achieve an exit. Additionally, there have been few evaluations of the impact of tax incentives, and the emphasis in such evaluations is typically on additionality and displacement effects rather than on business-growth outcomes. A recent review of more than 5 tax schemes worldwide for Business Angels, conducted by two Canadian academics, concluded that most schemes are not effective. The study attributed this largely to poor scheme design. 15 Furthermore, expanding the investor base involves more than just tax incentives. Groups may need to undertake greater promotion of their group and activities, and increase investor training. At the present time, much of the capacity-building undertaken by groups addresses the investment readiness of investee companies. Perhaps there is a need for greater emphasis on investor readiness. As noted above, many groups lack the financial resources to pursue this type of initiative. In view of the gaps in the supply of financing at various points in the company lifecycle identified in the report of the Advisory Council on Economic Growth often referred to as the funding escalator it would be appropriate to keep these, and other potential policy interventions, under review. 13 Owen (Baldock), R and Mason, C, (216) The role of Government co-investment funds in the supply of entrepreneurial finance: an assessment of the early operation of the UK Angel Co-Fund, Environment and Planning C: Government and Policy. Online first. DOI: /263774X For an overview of co-investment funds, see Swedish Agency for Growth Policy Analysis (213) Business Angels, Co-Investment Funds and Policy Portfolios Carpentier, C and Suret, J-M (216) The effectiveness of tax incentives for business angels. In Landström, H and MASON, C (eds.) (216) Handbook on Research on Venture Capital. Volume 3: Business Angels (Edward Elgar: Cheltenham), pp Report on Angel Investing Activity in Canada

51 Annexes 216 Report on Angel Investing Activity in Canada 51

52 Annex 1 Table A1 Angel Group Activity Survey Data (n = 35) Membership Fee ($) Region of the Angel Group Age of the Angel Group Group Has a Formal Selection Process Number of Angel Group Members Number of Investments Made Amount Invested ($) Amount Invested per Member ($) Number of Full-time Staff Number of Part-time Staff Angel Group Negotiates with Firms for Interested Members Free Central Established Yes ,945, 31, No Free Central Young Yes ,663, 89,15 3 No Free Central New Yes 1 7 4,18,4 4,18 6 No Free Central Young Yes ,53,587 41,536 2 No Free Central Young Yes ,25, 92, No Free Central Established No 2 9 1,, 5, 4 No Free Central Established Yes , 26,438 3 No Free Western Young Yes , 7,845 1 No Free Central New Yes , 5,333 2 No Free Western New Yes , 4,167 2 No Free Western Young Yes No 1 25 Western Established Yes ,9 4,536 1 No 1 25 Western Established No ,53, 81,613 1 No 1 25 Western New Yes ,599,399 38,226 1 No Central Established Yes 4 9 5,52, 138, 2 No Central Established Yes ,54,457 2, No Central Young Yes ,4, 35,897 2 No Central Established Yes ,537,111 46,579 3 No Central Established Yes ,882,42 67, No Central Established Yes ,6,5 98, No Central Established Yes , 8,88 2 No Central Established Yes ,881,622 45,74 3 No Eastern Established Yes ,9 4,764 3 No Central Established Yes ,15,438 51, No 11+ Western Established Yes ,192, 63,15 7 No 11+ Central Established Yes ,11,593 83, No 11+ Western Established Yes , 1,711 4 No 11+ Western Young Yes , 12,5 1 3 No 11+ Central Young Yes ,5, 34, No New 45 37,67,883 No Central Established Yes ,6, 83, 4 1 No Western New Yes , 139,429 3 No Western Young No 7 525, 2 No Central New No , 2,667 No Eastern New No 4 6 No Report on Angel Investing Activity in Canada

53 Table A2 Angel Group Sources of Revenue Angel Group Operational Funding Sources Membership Fee ($) Age of the Angel Group Region of the Angel Group Number of Angel Group Members Member Fees Sponsorships Funding Received from a Separate Parent Entity Provincial Government Funding Federal Government Funding Revenue Generated Revenue Generated from Events Revenue Generated From Other Prospective Investee Firms One or More Members' Personal Funds Other Free Established Central 449 x x Free Young Central 86 x x x Free New Central 1 x x x Free Young Central 85 x x Free Young Central 35 x x Free Established Central 2 x Free Established Central 32 x x x Free Young Western 116 x x x Free New Central 3 x x Free New Western 24 x Free Young Western 52 x x x x 1 25 Established Western 39 x x x x 1 25 Established Western 31 x x x x 1 25 New Western 68 x x x x Established Central 4 x x x x Established Central 51 x x x x Young Central 39 x x x Established Central 33 x x x x Established Central 72 x x x x Established Central 31 x x x Established Central 52 x x x x Established Central 63 x x x x Established Eastern 85 x x x x Established Central 1 x x x x 11+ Established Western 13 x x x 11+ Established Central 18 x x x x 11+ Established Western 76 x x 11+ Young Western 26 x 11+ Young Central 43 x New Established Central 2 x New Western 7 x x Young Western x New Central 3 x x New Eastern 4 x x TOTAL Report on Angel Investing Activity in Canada 53

54 Table A3 Recent Developments to Angel Groups Location Age Members Active Members Applications Presentations Number of Investments Value of Investments Central Established 56% 38% 2% 17% 3% 113% Central Young 51% 133% 167% 8% 2% 67% Central Young 31% 1% 2% 16% 5% 132% Central Young 17% 329% 11% 32% Central Established 38% 85% 2% 953% Central Established 23% 45% 2% 13% 75% 64% Central Established 9% 17% 69% 14% % 243% Central Established 4% 133% 27% % 133% 38% Central Young 86% 13% 47% 13% 3% 591% Central Established 2% 52% 33% 12% 21% 18% Central Established 2% 4% 62% 8% 86% Central Established 11% 33% 69% % 7% 15% Central Established 26% 74% 7% 13% 5% 94% Central Established 37% 19% 27% 21% 11% 41% Central Established 11% 78% 14% 41% 18% 255% Central Established 3% 11% 22% % % 31% Central Young 2% 2% 2% 2% 267% 7% Central Established 82% 65% 25% % 1% 31% Eastern Established % 4% 39% % 33% 6% Western Young 1% 25% 3% 5% 67% 231% Western Young % 1% 85% 35% 8% 1% Western Established 3% 43% 41% 17% % 47% Western Established 35% 29% 26% % 56% Western Established 2% 5% 1% 3% 4% 5% Western Established 36% 153% 1% 1% 71% 85% Western Young 7% 75% % 5% 5% Western Young 6% 6% # Change: +1% or more # Change: 1% < Change < +1% # Change: 1% or less Canada 17% 39% 39% 33% 61% 43% Report on Angel Investing Activity in Canada

55 Table A4 Sector Focus of Angel Groups Region of the Angel Group Age of the Angel Group Sector Focus Life Sciences ICT Clean Tech Manufacturing Services Energy Other Western Young No x x x x x x x Western New Yes x x x Western Young Yes x x x x x x Western Established Yes x x x x x x x Western Established Yes x x x x Western New Yes x Western Established No x x x x x x x Western Established No x x x x x x x Western Young Yes x x x x x Western New Yes x x x x x Western Young Yes x x SUBTOTAL N = 11 Yes = Central Established Yes x x x x x x x Central Young Yes x x x Central New Yes x Central Young Yes x x x x x x x Central Young Yes x x x Central Established Yes x x Central Established Yes x x x Central New Yes x x x x x x Central Established Yes x x x x x x Central Established Yes x x x Central Young Yes x x x Central Established No x x x x x x x Central Established Yes x x Central Established Yes x x x x x x Central Established Yes x x Central Established Yes x Central Established Yes x x x x Central Established No x x x x x x x Central Young Yes x Central Established Yes x x Central New Yes x SUBTOTAL N = 21 Yes = Eastern Established Yes x x x Eastern New Yes x x x x SUBTOTAL N = 2 Yes = TOTAL Report on Angel Investing Activity in Canada 55

56 Annex 2: Data Dictionary and Glossary Active members: Angel groups members that participated in at least one deal during the year. Application success rate: The reported number of investments made by the Angel group divided by the reported number of funding applications received by the Angel group. Co-investment: When two or more Angel investors from the same group participate in the investment. Comparison Sample: In each year, all Angel groups that participated in the survey in the current as well as previous year. Deal: A deal is an investment round in a single company. Deal size: The total amount of financing received by a company from all sources in a financing round, including from co-investors and syndicate partners. Deal size was only available for those deals for which Angel groups provided the information. Established Angel groups: Angel groups that have been established at least 6 years ago. Exit: When Angel investors divest ownership from a company Follow-on Investment: An investment made by an Angel group into a company that has received prior funding from the Angel group. Funding rate: The reported number of deals divided by the reported number of presentations. Investment Amount: For each deal, the amount invested by a specific Angel group into a single company by group members. This does not account for other sources of capital received in the deal New Angel Groups: Angel groups that participated for the first time in the survey. New Investment: An investment made in a company that has never received prior financing from the Angel group. Pre-money Valuation (Valuation): The value of a company s equity as imputed from the investment or the deal (not including the round amount which will be transferred to the company). Presentation rate: The reported number of firms that presented to Angel groups divided by the reported number if firms that requested to be considered for funding from that group. Syndication: When investors from outside of the Angel group are involved in a deal Report on Angel Investing Activity in Canada

57 Annex 3: Steering Committee Members Christina Adam, Advisor, Innovation, Science and Economic Development Canada Christina recently joined ISED to work on developing policy to support innovative high-growth-potential businesses through Angel investment and venture capital. Prior to joining ISED, Christina spent a number of years working as the Vice President and in-house council at an SME in Vancouver. She is a certified Project Management Professional and holds an MBA and Juris Doctor from the University of Ottawa and a BSc from the University of British Columbia. Shane Dolan, Manager of Growth Capital Policy, Innovation, Science and Economic Development Canada Shane develops policy to support innovative start-ups in areas including venture capital, Angel investment, and business incubators and accelerators at Innovation, Science and Economic Development Canada. Shane has over 1 years of experience in the federal public service. He has a Master of Business Administration and a Bachelor of Commerce. Mike Edwards, CEO, Mobio Technologies Inc. A lifelong entrepreneur, Mike Edwards has started and invested in technology companies for over 2 years. Presently, Mike is the CEO of Mobio Technologies Inc. Prior to taking the lead at Mobio, Mike was Executive Director of GrowLab. Mike invests in smart people with big ideas, and thrives on helping other entrepreneurs turn a napkin sketch into a prosperous business. He has invested in more than 4 technology startups. As a team member of Startup Visa Canada, Mike is actively involved in growing and supporting the Canadian startup community and connecting local entrepreneurs with the right investors, mentors and influencers in Silicon Valley, New York, Europe and Asia. In addition, Mike currently serves on the board of directors for Launch Academy, a grassroots accelerator. Erika Kurczyn, Manager, National Partnerships, BDC Erika Kurczyn, oversees technology and innovation partnerships for BDC in Canada and abroad. Erika is a corporate affairs professional with over 1 years of international experience in multiple fields such as venture capital, mining, commercial banking and international trade in both the private and public sectors. She holds a Bachelor of Arts (Honours) in International Studies from York University, and has completed executive training in venture capital at the Venture Capital Institute, and in business administration, management and public relations at the Rotman School of Management, Schulich School of Business, and at McGill University. 216 Report on Angel Investing Activity in Canada 57

58 Dr. Sarah Lubik, Director of Entrepreneurship, Simon Fraser University Dr. Sarah Lubik is Simon Fraser University s (SFU) first Director of Entrepreneurship, promoting the power of, and need for, interdisciplinary teams to solve wicked problems. She is Co-Champion of the Technology Entrepreneurship@SFU program, a lecturer in Entrepreneurship and Innovation in Beedie School of Business and a researcher in technology management, including incubation, university entrepreneurship, commercialization of science-based innovations and innovation ecosystems. She is also a certified business coach and the founder and marketing director of a high-tech start-up: Lungfish Dive Systems. Sarah holds a BBA (Honours) from SFU and a Masters and PhD from the University of Cambridge. Colin Mason, Professor of Entrepreneurship, Adam Smith Business School, University of Glasgow Colin Mason is Professor of Entrepreneurship in the Adam Smith Business School, University of Glasgow. He has also held visiting positions at various Canada universities and currently holds a visiting position at the Sobey School of Business at St Mary s University in Halifax. He is recognised as a leading academic authority on angel investing. He has written extensively on business angel investing over the past 25 years. During this time he has been closely involved with government and private sector initiatives to promote business angel investment, both in the UK and elsewhere. He was joint winner of the ESRC s 215 Outstanding Impact in Business award for his research with Prof Richard Harrison on business angels. He was co-author of two annual reports on business angel investment activity in the UK (28-9 and 29-1) on behalf of the Department for Business, Innovation and Skills. He worked with Canada s National Angel Capital Organization on the first and second annual reports on angel investment activity. colin.mason@glasgow.ac.uk. Yuri Navarro, CEO, National Angel Capital Organization Yuri Navarro is a strategy consultant with more than eight years of experience working with government and businesses in the Ontario technology sector. Yuri has presided over the renewal and growth of the National Angel Capital Organization since 212 by focusing on the organization s value to stakeholders and supporting the growth and professionalization of Canada s Angel asset-class Report on Angel Investing Activity in Canada

59 David Rozin, National Director, Client Segment Strategy, RBC As National Director, Client Segment Strategy, David leads strategy development for key industry segments within RBC s Commercial Bank: Technology, Media, Retail and Health Care. Upon joining RBC in 28 as a commercial banker, David focused on the Technology and Clean Technology sectors. Through working with some of Canada s most successful and innovative companies, David developed expertise supporting the unique financial needs of Technology entrepreneurs and investors. With over 2 years of experience in Financial Services, David has worked across a diverse set of platforms including Mutual Funds, Insurance, and Retail and Commercial banking. David earned a BA degree from Concordia University in Montreal and an MBA from the Rotman School of Management (University of Toronto). Timoth Tjahjakartana, Master of Science, Simon Fraser University Timothy is a Master of Science in Finance candidate at Simon Fraser University. He graduated from the University of British Columbia with a Bachelor of Commerce Degree, specializing in Marketing. At NACO, he is heavily involved in the formulation of the report, from data collection to the writing phase. His role mainly deals with the data and figures used throughout the report; and he also assists the main author as well as the project manager to organize, write, and finalize the product. Jim Valerio, Director of Research and BDC Policy, Department of Innovation, Science and Economic Development Jim is the Director of Research and BDC Policy at the Department of Innovation, Science and Economic Development. He has been developing economic policy for over 14 years in areas that include innovation, commercialization, entrepreneurship, and access to financing for innovation-based businesses. This augments 2 years of international private sector development and senior management experience delivering complex electronic hardware and software products. Jim is an electrical engineer with a Masters in Business Administration. 216 Report on Angel Investing Activity in Canada 59

60 Annex 4: Project Managers Pawan Agnihotri, Database Manager, National Angel Capital Organization At NACO, Pawan assists in developing and executing projects in support of NACO s database strategy and related policy and education initiatives. He manages NACO s Angel activity database and leads database initiatives. Pawan is an MBA graduate from Rotman School of Management and also holds a Master s degree in engineering from Indian Institute of Technology (IIT), Kanpur, India. Melissa Dodaro, Product Manager, MaRS Data Catalyst Melissa holds an MBA from Ryerson University s Ted Rogers School of Management and a BA in Psychology from the University of Ottawa. While working on this project, Melissa was responsible for all research and education projects at NACO, including the Report on Angel Investing Activity in Canada and NACO Academy. Melissa currently works for MaRS Data Catalyst and is responsible for partner and product management, working with ecosystem partners like NACO to create insightful and valuable data outputs. Elena Dudarenko, Operations Coordinator, National Angel Capital Organization At NACO, Elena is responsible for supporting operations and coordinating projects including the Report on Angel Investing Activity in Canada, Report on Early-Stage Support for Canadian Companies, NACO Academy and The Western Canadian Angel Network (WCAN) program. Elena holds a Master s degree in International Financial Management and graduated from the Centennial College s Marketing Research and Analytics program. Baye Galligan, Analyst, Lumira Capital At NACO, Baye was responsible for developing and executing projects in support of NACO s research strategy and related policy and education initiatives. Baye came to NACO from Maple Leaf Angels, one of Ontario s most prominent Angel groups, where she was their Associate Director. She has a passion for innovation and has previous experience as a researcher at both Harvard University and the University of Toronto. Baye has an HBA from the Richard Ivey School of Business and a Masters in Organic Chemistry from Harvard University Report on Angel Investing Activity in Canada

61 Annex 5: Angel Groups Anges Québec is a network of 19 private investors that identifies, finances and coaches innovative Québec companies with high growth potential as well as real estate developers seeking capital and support. In this capacity, Anges Québec works with a number of key Québec organizations interested in the development and promotion of Québec-based enterprises. Our members are experienced entrepreneurs and professionals who contribute to the launch and growth of businesses in a variety of markets and product applications. Since its inception, Anges Québec members have made more than 125 investments and reinvestments in over 85 promising start-ups. Brightspark Ventures is a successful Canadian early-stage VC founded in They make venture capital investment accessible to individual investors, with quality deal flow that ranks in the top quartile of the VC industry. The Brightspark managing partners veteran VCs and entrepreneurs conduct due diligence and curate the best investment opportunities to present to their network of 1,5+ individual investors. Brightspark will create a Limited Partnership Fund unique to each investment, and investors can review the deals for free on their website before choosing to invest. Learn more at CCAA CHINA CANADA ANGELS ALLIANCE China Canada Angels Alliance (CCAA) is a Canadian Angel group based in Toronto. Registered in 214, CCAA is committed to building a cross-border ecosystem for early-stage innovative companies between China and Canada through coinvestments, value-added mentorship, and connections to overseas channels and resources. As of April 216, CCAA represents 3 prominent and resourceful Angel investors, mostly from China, and 11 private institutions and funds from China. We may work with companies from any sector, however preference is given to early-stage companies in the following markets: ICT, Fintech, Health Care & Medical Devices, Mobile, Clean Tech, and AI. The GreenSky Presidents Club (GPC) is a new model for syndicated Angel investing. GPC Angels co-invest with the GreenSky Accelerator Fund I and II (the GreenSky Funds), who act as the lead investor(s) on a deal. Co-investing with the GreenSky Funds gives Angels access to the best of the over 5 deals per annum that GreenSky reviews, and provides these Angels with direct access to the institutional due diligence reports prepared by GreenSky. This syndicated approach provides serious early-stage investors with better-quality deal flow, preferential pricing and increased probability of a successful exit through experienced, professional management. 216 Report on Angel Investing Activity in Canada 61

62 igan Partners is a venture capital firm investing in emerging tech companies. With a focus on Digital Health and B2B SaaS, we invest in dynamic management teams, empowering them to build impactful businesses. We have built large successful companies and understand the challenges facing growing businesses, having faced them ourselves. We provide early-stage companies with smart capital, a unique active management approach, and exclusive access to a network of industry partners and sector specific co-investors to help them succeed. The Mean Eyed Cat s investors are split into five groups that co-invest and syndicate with each other on a consistent basis. These investors are spread across Southern Manitoba with concentrations in such cities as Winkler and Steinbach. Investments made by the group are primarily in the area of Enterprise Software, Fintech, Manufacturing and Agriculture with the initial deal size typically between $ million. In an average year, about 3% of the investments are in new ventures with the remaining investments as follow-ons in existing deals. Such follow-on investments are typically syndicated with other groups in Canada (Alberta, BC and Ontario) and the US (North Dakota, South Dakota, Iowa and Tennessee) and are usually in the $3-million-plus range. The investment group is overwhelmingly male with the average investor being in his late 5s and an owner/operator of an agricultural operation, real estate company or manufacturing company. Mistral Venture Partners is a seed- and early-stage venture capital firm based in Ottawa with offices in Toronto and Palo Alto, California. We leverage our global experience and presence while working closely with each of our companies to prepare them for later-stage financing and growth. We use our combined network of venture investors, Executive Fellows, customers and advisors to accelerate growth and funding. We believe that the promise of the Internet of 2 years ago is the reality of today. We look for investments that leverage the power of the Internet to make businesses smarter. These include companies leveraging Mobile, IoT, Cloud, AI, Security and Networking innovation. Northern Ontario Angels covers the area north from Barrie to the Manitoba border. This area is approximately 82,378 square miles and covers five large centres as well as a number of smaller communities, including 12 First Nations communities. We have recently implemented a chapter structure that provides for five chapters in our area, one in each of the larger centres in the North North Bay, Sault Ste. Marie, Sudbury, Timmins and Thunder Bay. Our goal is to have a part-time person on the ground in each of these communities to work with our investor members and companies seeking investment. Our strongest successes are the investors that support and believe in our communities by investing or mentoring new and growing businesses. For more information please visit: Report on Angel Investing Activity in Canada

63 Open Angel was started in 214 as an experiment to create pitch events that resulted in meaningful interactions between Angel investors and entrepreneurs. Today we are a membership-based non-profit organization that offers consistent high-quality deal flow of seed-stage technology companies to Angel investors. In addition to pitch events, we hold member socials where Angel investors can meet and share deals in progress. We are growing beyond our original scope of event production with initiatives to create standard deal documents and specialized mentorship for start-ups seeking investment, but we continue to measure our success in terms of investments made. Rhiza Capital is intent on growing local economies and healthy communities by connecting capital to impact ventures. Rhiza s impact investments are those made in companies, organizations and funds with the intention to generate social and environmental impact alongside a financial return. The investment market in Canada is undergoing a shift towards impact and local as we see more and more people looking to invest their money with meaning. A major driver in this change is the increasing demand for investment vehicles that align with community values. Rhiza sets itself apart from other investment companies by creating community among the family of portfolio businesses. By facilitating this interconnectedness, each portfolio business is more resilient, thereby strengthening each fund, Rhiza itself, and the community. Rhiza Capital Inc. is a joint initiative between Community Futures Sunshine Coast, Sunshine Coast Credit Union and Powell River Community Investment Corporation. More information about Rhiza, including its portfolios, can be found at: The Southeastern Ontario Angel Network (SOAN) was created in 214 to cover the region serviced by the Regional Innovation Centre, Launch Lab. That area of coverage includes Belleville, Kingston, Brockville and Cornwall. The Network has been operating for three years and has 1+ members who have invested $14.4 million during that time. The SOAN has the support of the regional innovation ecosystem participants, including local economic development agencies, CFDCs, educational institutions, accelerators and incubators, PARTEQ Innovations and the Regional Innovation Centre, Launch Lab. It is recognized that, in order to drive economic development in this region, local investment will be required, and the SOAN plays a vital role in supporting this economic development mission. The regional innovation ecosystem is very involved in the support of the SOAN. All groups help with identification of investment opportunities and the recruitment of members. The SOAN is not focused on any specific sector. Our members cover a very broad area of interests and we will accept, for review, any reasonable investment opportunity. These will generally, but not always, be start-ups or early-stage technology companies, but our Network will remain sector and technology agnostic. 216 Report on Angel Investing Activity in Canada 63

64 Our vision is to play a small, but meaningful and catalytic, role in the transformation of the Durham Region local economy from one focused on metal-bashing to one centred around knowledge-based sectors. We do this by investing in high-potential entrepreneurs with innovative, order-of-magnitude scalable opportunities. In many situations, we re betting on the jockey, rather than the horse. We re open to all forms of deal structure and are sector and business-stage agnostic and (while all things being equal would prefer to invest in entrepreneurs from our region), we are geographically agnostic too. A good opportunity, is a good opportunity after all. For the past 13 years, VA Angels has supported entrepreneurship and investing around the globe. Investments have been made across Canada, in the US, Africa, and the UK. In operation since June 23, VA Angels is the largest gathering of Angel investors in Western Canada, with more than 13 paid members and chapters in Calgary, Kelowna, Winnipeg, and a joint-venture partnership in Edmonton known as TEC VA. In 216, VA Angels added two satellite chapters in Northern BC and Medicine Hat and two funds totaling over $11 million. Since its inception, the members of VA Angels have raised over $47 million for more than 151 companies. Follow us on For more information please visit: Since 1996, XDL Capital Group (XDL), has supported entrepreneurs building technology-related companies in new and growing business sectors as a family office managing the assets of its founder and associates. We invest our own money, uniting our interests with each investee. We provide focused attention on our investments and share our experience, networks and knowledge to help them grow and prosper. XDL is led by Dennis Bennie, who has more than 3 years of experience in conceptualizing, starting, growing, financing, and managing both private and public companies focused in the technology sector. York Angel Investors Inc. s focus is to create a superior return on investment for our Angels and for the entrepreneurs with whom we work. YAI Angels come from a wide variety of business backgrounds. As successful entrepreneurs and business people, we pool our collective knowledge, experience, connections and capital to invest in excellent Angel opportunities. The diversity of our group ensures our investees receive SMART money: money with experience and connections. Our collaborative mentorship approach and strategic financing support entrepreneurs through various stages of early growth. Our investments often represent the bridge between the selffinanced or seed stage and the venture capital and/or private equity level of funding. During the past 9 years, YAI has been involved in more than 8 deals, invested over $14.8 million, had four exits, and has grown to more than 7 members Report on Angel Investing Activity in Canada

65 Notes: 216 Report on Angel Investing Activity in Canada 65

66 Notes: Report on Angel Investing Activity in Canada

67 This report is produced by the National Angel Capital Organization. The National Angel Capital Organization accelerates a thriving, early-stage investing ecosystem in Canada by connecting individuals, groups, and other partners that support Angel-stage investing. NACO provides intelligence, tools and resources for its members; facilitates key connections across networks, borders and industries; and helps to inform policy affecting the Angel asset-class. National Angel Capital Organization MaRS Centre, West Tower Suite 45, 661 University Avenue Toronto, ON M5G 1M1 Copyright 217 National Angel Capital Organization Permission to Reproduce Except as otherwise specifically noted, the information in this publication may be reproduced, in part or in whole and by any means, without charge or further permission from the National Angel Capital Organization, provided that due diligence is exercised in ensuring the accuracy of the information reproduced; that the National Angel Capital Organization is identified as the source institution; and that the reproduction is not represented as an official version of the information reproduced, nor as having been made in affiliation with, or with the endorsement of, the National Angel Capital Organization.

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