Angels Making More Investments but Investing Less per Startup, Survey Finds

Angel investment activity in Canada increased last year, according to a new survey by the National Angel Capital Organization.

The survey, released on Wednesday, looked at investment activity in 2012 by 20 angel groups—around two-thirds of identifiable angel groups in Canada.

Overall, those groups made 139 investments last year, a 96 per cent increase over the 71 reported investments in 2011. Of those deals, 102 were new.

But despite the steep increase in deal volume, the total dollar value of these was only up 13 per cent, from $35.7 in 2011 to $40.5 million in 2012. According to the survey, that’s due to a decline in the average investment, from $506,679 in 2012 to $313,935.

Unsurprisingly, most of that money went to tech companies. Information and communications technology companies led the way, receiving 54 per cent of investments, by value, or $17.9 million. Clean tech and life sciences sectors also received a significant share of angel investment.

The survey also found that most companies who receive angel funding are small. 54 per cent of those companies have five or fewer employees, while only six per cent have over 25 employees.

Angel investors also appear to be looking for opportunities close to home. 37 per cent of investments made by angel groups went companies in the same city. Another 27 per cent went to companies in the same province as the angel group but in a different city.

It’s still hard for companies to secure angel funding. Only 7.3 per cent of companies who submitted their business plan to an angel group ended up receiving funding. While that number might be low—it’s still higher than it used to be—only 4.5 per cent of business plans received by angel groups in 2011 ended up receiving funding.

Business owners whose plans make it to the next step and are selected for review, have better odds, almost half of those plans end up receiving funding. Though, it isn’t easy to make it to the review stage: only 15 per cent of business plans are selected.

The NACO survey also looked at startup accelerators. It found that the average investment by an accelerator in a company was $50,000. But that seed money seems to be paying off—the four accelerators who provided details to the NACO reported that the 40 companies participating in their programs received additional investments of $13.65 million, from a variety of sources.

This is the third annual survey of angel activity by the NACO. Because it is self-reported and only looks at organized groups it only reflects a portion of all angel investments in Canada.