Angel investment jumped 66% in 2014

Report only includes visible help

Angel investors were somewhat bullish in 2014, investing $61.7 million in new ventures last year, a 66 per cent increase over the year before.

While that’s good news for new startups, the 2014 Report on Angel Investing Activity in Canada showed that follow-on investments fell 37 per cent last year to $28.8 million.

Yuri Navarro, executive director of the National Angel Capital Organization, said it’s normal to see fluctuations in the mix of investments of angel investors.

“Companies usually raise capital in an 18- to-24-month cycle,” Navarro said, adding that a dip in follow-on investments doesn’t necessarily mean that previous startups are failing.

“You could also say that angel investors have bigger appetite for risks … by investing in first-time companies,” he said.

“They are (also) seeing more high-quality opportunities they feel are worth investing in.”

The 2014 report recorded a two per cent increase in total angel investments in Canada: $90.5 million last year, compared to $89 million in 2013. There were also more investments in 2014 compared to previous years.

The report recorded 237 investments made by 30 angel groups across Canada, representing 1,700 angel investors. The 2013 report covered only 199 investments by 25 angel groups while the 2012 survey covered only 139 investments by 19 groups.

An angel group is composed of individual investors pooling their resources to invest in a deal.

Angel investors typically fund companies in the early, critical stages of development. But beyond financial support, these investors also offer mentorship, expertise and access to networks.

The NACO report includes only “visible” angels, or those accredited by Canada’s regulatory bodies. That limits the report’s scope to about 10 per cent of the estimated funds available in Canada’s angel community, Navarro said.

The Ontario Securities Commission estimates there are between 300,000 and 500,000 angel investors in Canada. Of those investors, NACO estimates that about 2,000 are visible angels.

The Organisation for Economic Co-operation and Development estimates that angel investors in Canada invest anywhere from $500 million to $1 billion annually.

As some venture capitalists have begun focusing on investments larger than $5 million, angel investors have become increasingly important to smaller ventures, Navarro said.

The average deal size last year was $1.2 million, a 27 per cent increase over the previous year.

Investments were still concentrated in central Canada and in two sectors — information and communications technology (ICT) and the life sciences — which captured 80 per cent of the total investments last year. The distant third-place sector of interest was clean technology.

A total of $81 million in 167 investments were concentrated in central Canada, which has been traditionally an economic powerhouse. The rest of the funds last year were mostly invested in Western Canada with only one per cent going to Eastern Canada, the report added.

You could say angel investors have bigger appetite for risks