UPDATE: 2019 Investment by Members of All Five Tech Coast Angels Groups Was Highest Since Network Started in 1997. SoCal Chapters Invested More Than $19 Million Last Year…
The individual members of the five Tech Coast Angels’ (TCA) chapters in SoCal invested more than $19 million in 52 companies last year, according to its 2019 annual report.
The total investment was the highest since the angel network’s inception in 1997, and 91% above the 2018 total — according to the report, which was released on May 7.
For the first time, there were six companies receiving $1 million or more from TCA members.
The network’s total investments have exceeded $10 million in each of the past nine years (from 2011 – 2019), making this period the longest sustained level of high investment activity in TCA’s history.
TCA posted five exits in 2019: three acquisitions, one merger into a public company, and one secondary offering; three of those provided returns of 31x, 19x and 6.5x.
TCA also increased portfolio diversification opportunities to its accredited investor members by launching chapter funds, including a new one in OC, that will potentially provide approximately $6 million in capital in 2020 to promising startups.
See releted article on the new fund here.
In 2019, the existing chapter funds contributed $3 million, which was up from $1.5 million in 2018, so the role of funds is increasing.
Membership grew 15% to 458 at year-end, which TCA claims establishes it as the largest angel group focused on a single geography (SoCal).
The diverse expertise in this large base of active and engaged members is one of the core strengths of TCA – helping it to complete quality due diligence, providing its portfolio companies with expert mentorship, and assisting in leveraging its members’ network of relationships to open doors for other investment and operations opportunities.
Diversity within TCA’s membership also increased, including an increase in women angels, most especially noticed in its SD chapter: Caitlin Wege was elected as TCA’s first female chapter president, and women hold five of the 12 seats on TCA-SD’s board of directors.
55% of the angel network’s 2019 investments were seed rounds — down from 76% in 2018. While early-stage investments were high, 67% of the companies receiving investment were already in revenue and seeking expansion capital.
2019 investments spanned a range of industries, but most active were life sciences (19 companies), consumer internet (12), and software (11).
Of the 52 companies in which TCA members invested, 32 of the companies were new companies; key industries were life sciences (13 new companies), consumer internet (7), and software (7)
Twenty of the companies were follow-on rounds for companies already in TCA’s portfolio.
Valuations at time of TCA investment continued their climb to “historically uncomfortable” levels. Only 15% of TCA’s investments in 2019 were in companies with valuations below $6 million, compared to 41% in 2018, 43% in 2017 and 61% in 2016. The median valuation was $9.0 million in 2019, compared to $6.0 million in 2018, and $4.5 million in 2016 and 2017.
“We expect this trend to reverse dramatically in 2020 due to the current economic crisis and downward pressure on valuations of public companies as well as M&A transactions,” Sergio Gurrieri, TCA Chairman, said in the press release.
“While 2019 was a record year for TCA in many ways, we recognize that 2020 is bringing massive challenges on a global scale,” Gurrieri said. “We recommend that entrepreneurs be realistic, wise, and well prepared. Manage your finances wisely and seek investors who can guide you through this uncertain time; really good companies may fail over the next few years for lack of financing than for any other reason. Now is not the time to overvalue, and the old saying ‘cash is king’ will certainly prove true. And for angels and investors, look to increase your portfolio by accelerating funding for companies with realistic valuations rather than pie-in-the-sky optimism.”