Angel investment activity in Canada increased last year, according to a recent survey by the National Angel Capital Organization.
The survey, released in September, looked at investment activity in 2012 by 20 angel groups—around two-thirds of identifiable angel groups in Canada. Those groups made a combined 139 investments last year, a 96% increase over the 71 reported investments in 2011. Of those deals, 102 were new.
Despite the steep increase in deal volume, however, the total dollar value of these was only up 13%. According to the survey, that’s due to a decline in the average investment: from $506,679 in 2012 to $313,935.
Tech companies received the overwhelming share of angel investment, and most are startups, with more than half having five or fewer employees and just 6% having more than 25 employees.
"The Canadian angel ecosystem is still relatively nascent by comparison with our American cousins to the south," admits Yuri Navarro, the executive director of NACO. "However, we are seeing that the tremendous growth of angel groups and funds has increased the visibility of our investors and helped create a network of angels that is more connected into the overall ecosystem."
Navarro acknowledges that it's difficult to tell truly whether the ecosystem itself is growing overall, but told Techvibes that "we [NACO] have definitely seen an increase in the amount of visible investors and this has definitely lead to more deal syndication through the standardization of terms and the development of best practices," which he believes is an indicator of quality.
Regardless of the state of our angel ecosystem today, there's a lot to look forward to down the road.
"The growth and professionalization of our angel ecosystem is going to continue into the foreseeable future," Navarro affirms. "We also believe that deal syndication will become an increasingly common trend among our members. Ultimately, I think that this will lead to angels doing bigger rounds and supporting companies further along the funding life-cycle."
This sentiment is echoed by Dominique Bélanger, BDC Venture Capital's vice president of strategic investments and initiatives, who told Techvibes that there are many reasons to be optimistic about our nation's angel ecosystem moving forward.
"I see angels getting more organized and leading more deals; I see more connectivity between angels groups and cross-border co-investments with US angels," he says, a trend that is being experienced in the venture capital space, too.
Of course, it's important to remember that angels are not the only source of early-stage funding. When startups go through recognized Canadian accelerators, such as FounderFuel in Montreal and GrowLab in Vancouver, they qualify for consideration from BDC Venture Capital's convertible notes program, which can supply them with $150,000 upon graduation.
As of July, BDC VC—which is a strong supporter and financial backer of NACO and regularly co-invests in startups with angels—has invested a total of $7.35 million in 49 different startups through the convertible notes program alone, which was launched in mid-2011. And those with a BDC VC note in their pocket also enjoy connections to more angels and venture capitalists for further funding.
"Making first-time investments in such promising startups is part of our strategy to build a healthy Canadian ecosystem," a BDC executive explained to Techvibes. "We also look at connecting these entrepreneurs with angel and venture capital as well as providing them with other forms of non-financial support."
As the angel ecosystem in Canada expands, don't be surprised to see BDC VC's convertible notes program expand parallel, supporting more accelerators and, in turn, more Canadian tech startups.