New NACO survey reports 120% increase in angel activity and jump in follow-on activity

The National Angel Capital Organization (NACO) reported $89 million in new investment by its members in 2013, a 120% increase over the previous year, according to a report based on its latest annual survey. The survey is estimated to have captured approximately 10% of activity within the asset class, suggesting that Canadian angels invested nearly $900 million across the country.

The report captured the activity of 29 of NACO's 32 member angel groups and represents the most accurate and detailed accounting of angel activity achieved to date. Entitled 2013 Report on Angel Investing Activity in Canada: Accelerating the Asset Class, it was prepared by Dr Paul Schure, associate professor at the Univ of Victoria department of economics and Melissa Dodaro, NACO's research and policy coordinator.

The 2013 total was achieved with 199 investments, compared to 2012 when 19 angel groups reported 132 investments valued at $40.5 million. The bulk of investment was directed towards firms in the life sciences and information and communications technologies (ICT) sectors, with clean tech ranking a distant third. Follow-on rounds accounted for 51% of the total, compared to 42% in 2011 and 18% in 2012. Central Canada attracted 54% of the investment dollars, where angels are most likely to provide follow-on financing. Central Canada's share is down from previous years as NACO picks up new western-based angel groups.

"Our survey continues to grow. There's buy-in from a larger swath of the angel population that's more representative of the country," says NACO executive director Yuri Navarro. "Our membership is now 40% based in western Canada with eight groups. Central Canada has 55% of our membership and there's 5% in Atlantic Canada."

Fed Dev Ontario's Investing in Business Innovation program is the most leveraged program in NACO's data sets for the past two years, although it decreased somewhat in 2013 as existing funding wound down. The program has been re-launched for 2014, however, and Navarro says he expects its leverage impact will pick up again.

Accelerators

For the second year, the NACO report captures the activity of a sizable number of Canada's accelerators, with 12 out of 18 responding to requests for information. Navarro says accelerators are an excellent feeder system for angel investment, giving NACO the ability to track the success of how the investment pipeline is connected and functioning

"The survey revealed that accelerator-backed companies are successful at attracting outside funding from angels, VC, government and other investors," states the report. "Angel investors were the greatest source of outside funding for accelerator-backed companies in 2013."

NACO has a three-to-five year plan to grow its annual survey, including a close examination of the relationship between angels and accelerators and an examination of the relationship between companies and their investors.

Navarro says the activities of his organization are helping to professionalize the angel asset class, and attract new members.

"As VC migrate to larger sized deals, angels are now taking responsibility for taking companies to the next stage of growth. We knew this through word-of-mouth and now it's showing up in the data," he says. "Angel investment is becoming professionalized and groups are forming to provide critical mass and education to individual investors."

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