UPDATE: Angel Investing Group Releases Numbers for 2018. Decrease in Amount of Investments. Increase in Membership…
An angel investing group, with HQ in Irvine, released stats Tuesday that showed it invested $10.8 million in 53 companies in 2018. That was a decrease in investment dollars from recent years.
Tech Coast Angels, known as TCA, has five chapters ranging geographically from Santa Barbara to San Diego.
Valuations are climbing to “historically uncomfortable levels,” which points to the main reason why less money was invested in 2019, TCA Chairman Grant Van Cleve said in a May 7 press release.
The largest realms that received investment from TCA last year were lifesciences and software. That was followed by internet/apps, cleantech/industrial, hardware, financial, consumer and business.
76% of 2018’s investment were first-time investments.
One of those turned out to be the largest deal — Tourmaline Labs, with an investment of $1.6 million.
Tourmaline developed smartphone-based tech for large enterprise fleets. See related story on that investment here.
TCA saw six exits last year:
– One Stop Systems, with HQ in Escondido, exited via an IPO in early 2018, at $5 per share, which was below its expected price range, according to news reports. But it did sell more shares than projected, offering 3.8 million compared with the 2.9 million targeted in the prospectus, according to those reports. Roth Capital Partners in Newport Beach was the lead underwriter on the deal. One Stop System’s stock is currently trading around $2.30.
– Envision Solar exited as a private placement in an early-stage public company
– Three acquisitions led to exits: CaseStack, Ondax, and Ring Router.
– Investors in What Pumpkin Games were bought out by another shareholder.
One Stop Systems’ 12-times return, from an initial TCA investment in 2000, and CaseStack’s 15-times return, from an original TCA investment in 2002, illustrate the patience of these angel investors.
TCA’s ACE Fund saw 19% of its investment outside SoCal in the most recent fund.
TCA increased its syndication activity through the Angel Syndication Network.
89% of TCA’s 2018 investments were seed or pre-Series A rounds, including bridge funding.
This is a higher mix than recent years, which the group’s leaders attribute partially to their interest in pursuing lower valuations in seed rounds. Later rounds are offering less attractive valuations these days, they said.
38% of TCA’s 2018 investments were in companies with valuations below $6 million – compared to 69% in 2017.
Its investment in deals with companies valued between $6 million to $10 million grew from 29% in 2017 to 46% in 2018.
The median valuation was $6 million, compared to $4.5 million in 2016 and 2017.
“2018 shows us that there is a strong pipeline of new companies and new ideas seeking angel investment,” Van Cleve said in the release. “We recognize that we could well be facing an investment cycle nearing its end. So we advise entrepreneurs to seek investors with experience and contacts who can help you navigate challenges, and to raise as much as you can in a current round without worrying about dilution.”
A bright spot: TCA’s membership grew to an all-time high of more than 400.
Other observations for entrepreneurs and investors include:
– Don’t cling to a higher expectation based on valuation averages of the last several years. Doing so may leave you accepting a down round during the coming down cycle, being underfunded or even un-funded and out of business.
– In changing markets, VCs focus on existing portfolio companies, so have back-up plans to self-sustain your business without further investment should funding not materialize.
– Stay focused. Spend wisely and frugally. If the next dollar you spend doesn’t make for a better product or better customer experience, don’t spend it.
– Angels may want to consider selling public company stocks now to be able to take advantage of down-cycle new investments, without selling those public stocks at lower prices in a downturn
Access TCA’s full 2018 year-end report here for more details.
More About TCA
Tech Coast Angels is one of the largest and most active angel investor networks in the nation, and a leading source of funding for seed-stage and early-stage companies across all innovation industries in SoCal.
TCA members are accredited investors who individually invest in startup companies.
Companies go through extensive screening and due diligence.
As founders and executive-level business leaders, TCA members provide companies with more than just capital; they also contribute counsel, mentoring and access to an extensive network of investors, customers, strategic partners and management.
Since its founding in 1997, TCA has invested more than $218 million in close to 400 companies and has helped attract more than $1.6 billion in additional capital/follow-on rounds, mostly from VC firms.