Angel Investing in Canada on the Rise

July 19, 2012

The National Angel Capital Organization has released its Investment Activity by Canadian Angel Groups 2011 Report.

According to the report, there were 134 angel group investments in 2011 (103 new and 31 follow-on) totalling $82.4 million ($60.5 million new and $21.9 follow-on). That’s an average of about $600,000 per initial investment and $700,000 per follow-on.

These numbers are much larger than in 2010, which saw just 90 investments (80 new and 10 follow-on) totalling only $35.3 million ($34.2 new and $1.1 follow-on). In 2010, the average initial investment was just $440,000 and the average follow-on was only $110,000.

ICT represented 51% of all investments, with clean technology the second most popular at 17%.

According to the report, 70% of recorded investments involved a co-investor, with 74% of these being either independent angel investors or investors associated with an angel group.

Further, 49% of investments indicated government support in the form of a regional economic development agency program, while 72% of investment exits were from a “sale to/merger with another company.” Four years or more was the length of time investments took to mature before an exit took place.

“The impact, importance and growth of the Angel community in Canada is clear, with more Angels investing more capital in more companies across the country in 2011,” said Bryan Watson, Executive Director of NACO. “To continue to support this trend of investment into Canada’s emerging companies, the Government of Canada must develop national programs that reduce the substantial risk Angel investors face and leverage additional capital into the market through co-investment programs, tax credits and direct support to the Angel community.”

“Angel investor groups invested significantly more capital in 2011 than in 2010,” said Michelle Scarborough, Chair of NACO. “For 2011, NACO estimates that Angel investors in Canada invested just under $1 billion into high-growth, early-stage companies across all industries and geographies. As such, Angels continue to fill an important financing gap at the early and growth stage of company development, putting our own capital to work along with our expertise, helping to mentor entrepreneurs during critical stages of company development and helping accelerate company growth.”

This study was funded by Industry Canada and BDC Venture Capital.

“Angels are playing a considerable part in starting to fill the financing gap that Canadian startups continue to face in their early stage,” said Michael Mahon, Director, Strategic Initiatives and Investments at BDC VC. “Canada needs strong angel networks capable of providing not only early-stage funding, but also mentorship to entrepreneurs. It is important to get a better understanding of the Canadian angel capital market so that we can more effectively support it.”