2022 Angel Funders Report

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2022

TABLE OF CONTENTS

Letter From Our CEO . . . . . . . . . . . . . . . . 2

2022 Highlights . . . . . . . . . . . . . . . . . . . . 4

Introduction. . . . . . . . . . . . . . . . . . . . . . . . 6

Key Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Investing by the Numbers. . . . . . . . . . . . 10

Initial vs. Follow-on Deals. . . . . . . . . . . . . . . . . . 17

Valuation Trends. . . . . . . . . . . . . . . . . . . . . . . . . 21

Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Regional Performance . . . . . . . . . . . . . . . . . . . . 27

Desert Angels Spotlight. . . . . . . . . . . . . . . . . . . 28

Angel Group Dynamics . . . . . . . . . . . . . . 34

Gender Diversity. . . . . . . . . . . . . . . . . . . . . . . . . 37

The Faces Of Company CEOs . . . . . . . . . 37

Commune Angels Spotlight. . . . . . . . . . . . . . . . 38

Ethnic Diversity. . . . . . . . . . . . . . . . . . . . . . . . . . 41

Angel Paydays: Focusing on Exits. . . . . . 43

Fall 2022 Group Update . . . . . . . . . . . . . 47

What’s Next. . . . . . . . . . . . . . . . . . . . . . . 52

Appendices. . . . . . . . . . . . . . . . . . . . . . . 54

The ACA Methodology . . . . . . . . . . . . . . . . . . . 54

Participating ACA Member Groups. . . . . . . . . . 55

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

 : : Angel Funders Report 2022 | 1

2 | Angel Funders Report 2022 : : Letter From Our CEO

The Angel Capital Association publishes the Angel Funders Report annually

to increase awareness about angel investor activity and build a deeper

understanding of the investing environment. The report provides context

for seemingly disparate data points, identifies trends, and highlights

innovative ways that ACA members are working together to fuel the

entrepreneurial ecosystem.

Angel investors have proven their

resilience, enduring several years of

volatile markets driven by both the

COVID-19 pandemic and the end of the

great bull market where exits soared,

venture funds posted record returns, and

private company valuations exploded.

Investments made by individual angels and

angel groups continued to “fuel the tank”

for entrepreneurs and kept investment

pipelines flowing for venture capitalists.

Angels are patient with capital, and not

easily distracted by short-term market

trends, as proven in 2020 and 2021. ACA

predicts that this patience will continue

to pay off in the coming year. Market

volatility will likely lead to corrections in

areas like startup valuations, driving deal

terms that are more beneficial to investors,

and presenting a significant opportunity

for angels.

In recent years, the angel investor

community has been working aggressively

to emphasize the importance of

recruiting underrepresented founders

and investors. In 2021, data shows

that progress is erratic, and we must

continue to encourage progress in this

area. ACA wants and needs a broader

base of investors and entrepreneurs

as a permanent part of the ecosystem.

Our broad-based programs to increase

awareness and recruit new angel investors

working with communities and others

further these goals.

LETTER FROM OUR CEO

Insight into Angels and Their

Investments

Letter From Our CEO : : Angel Funders Report 2022 | 3

Angel investors play a unique role in

the investment and entrepreneurial

ecosystem that is not well understood by

many, including governments. The ACA

remains an active advocate in Washington

and beyond. We educate public policy

organizations about the value provided

by the angel ecosystems in the overall

economy. We advocate for the best

interests of investors and entrepreneurs

so that we can keep capital flowing

and live up to our unique ability to fuel

economic growth.

With members pumping over $1 billion

annually into start-ups, ACA is building

the entrepreneurial ecosystem and a new

community of leaders. We are committed

to increasing awareness of the importance

of angel investors to the overall economy.

A study conducted by Desert Angels

estimated that “For every $100,000 of

investment, these portfolio companies

1

Desert Angels Economic Impact Study September 2021

produce 5.8 direct jobs, $458,000 in

wages and $2.1 million in economic

output. In addition, their employees

generate an estimated $37,000 in state

and local revenues per $100,000

of investment.”1

We want to encourage many of the

millions of potential angels to join us.

If you are deploying capital to grow early

stage companies, you are part of this

critical ecosystem, and we invite you to

engage with us. Help us create a powerful

network of entrepreneurs, investors, and

community resources so that we can

continue to support economic growth.

Angel investing is a team sport, and ACA

welcomes you to join us as we strive to

make angel investing more accessible and

successful for all.

Patrick Gouhin

CEO, Angel Capital Association

Every $100,000

invested generated

5.8 direct jobs,

$458,000 in wages,

$2.1 million in

economic output and

$37,000 in state and

local revenue.

4 | Angel Funders Report 2022 : : 2022 Highlights

REPORT FEATURES

„ Data from

participating angel

groups, summarizing

the details behind

record-setting

investments across

North America

„ Regional data

showing how active

investors and

promising startups

are benefiting from

angel capital in every

state and region

„ Reports from key

group leaders on

surviving COVID-19

and beyond

„ Fall 2022 update

from major angel

groups regarding

current investing

environment

„ Expanded

information on exits

ACA Angel Groups Invested

$950M

Angel Portfolio Companies Leveraged

Their Investments to Raise More Than

$5B TOTAL

Leveraged Their

Initial Angel

Investments by

5X

The Median Exit

Multiple of Invested

Capital Increased to

2.7X

IN 2021…

2022 HIGHLIGHTS

2022 Highlights : : Angel Funders Report 2022 | 5

Each Angel Group Invests About

$5.3M per year

Top Industries for Angel Group Investments

Medical/

Health Care

Health

Technology

Biotechnology

Software

as a Service

Clean/Green

Technology

ON AVERAGE…

Women Raised $1.01 For Every

$1.00 Raised By Men In Initial Rounds

MORE DIVERSE

Women CEOs Raised Initial Investments on Par with Men

6 | Angel Funders Report 2022 : : Introduction

INTRODUCTION

2021 proved once again that angel investors combine both the vision to invest in an

inherently risky asset class and the fortitude to maintain a steady hand in rocky seas.

Angels invest not only their money but also their time and expertise (estimated at one

million mentoring hours annually) in helping start-ups weather unpredictable markets.

In 2021, angels maintained their investment momentum based on the number of deals.

Angels mitigate their risks by investing smaller amounts in multiple investments across a

variety of companies over time. Angel investors also balance risk by investing with other

angels. ACA works closely with angel groups, accredited platforms, and family offices to

provide syndication, professional development, and networking opportunities to facilitate

more successful investments.

As the largest association of angel investors in the world, ACA is committed to providing

thought leadership through essential data and analysis, in addition to professional

development and networking opportunities. Since angel investing often begins as an

informal relationship between entrepreneurs and angels, there is typically a data gap at

this important stage. Data collected and reported directly by angel investors provides

more accurate and deeper insights into early stage investments than other venture

focused reports. ACA’s yearly report represents the most comprehensive review of current

investments from the angel community available improving the overall quality of reporting

and analysis of this asset class.

ACA launched its data initiative in 2018 to help early stage investors make better

investment decisions, and to help the business community better understand angel

investing’s impact on new business formation, job growth, and economic prosperity. The

initiative also helps entrepreneurs gain a deeper understanding of how and why angels

invest, helping them prepare for raising capital and building strong investor relationships.

The Angel Funders Report is based on direct investment data solicited from ACA member

groups. We collect data from a broad spectrum of angel investors, including leading angel

groups across North America, so that we can provide powerful first-hand information on

the current state of early stage investing. Our angel investing experts analyze and enhance

the data with their knowledge of trends and best practices, developing a comprehensive

insider’s view to share with the broader investment community.

Introduction : : Angel Funders Report 2022 | 7

We estimate total angel investment levels and the total amount raised by our portfolio

companies using the actual data reported, supplemental information and industry reports

as the foundation. The ACA member organizations that provide the information for this

report take many forms —groups of ACA members, angel networks, angel funds, networks

with sidecar funds, and more.

2021 was an unusual year for angel investing, buffeted by many factors, including the

COVID-19 roller coaster, VCs aggressively going after angel deals, skyrocketing valuations,

and a SPAC IPO surge early in the year.

The decrease in VC activity in early stage deals with an

increase in later stage deals has been one of the most

notable and impactful trends in 2021. The best exit market

in years caused unprecedented returns to venture funds,

in turn leading fund investors to invest unprecedented

amounts of capital into new funds. The increased amount of

capital available to chase deals caused a dramatic increase

in valuations, especially in later rounds. The overall increase

in valuations place investors at great risk if or when markets

cool down and valuations are unsustainable. These high

valuations increase the probability of companies being

forced into down rounds (lower valuations) in subsequent

financings. In contrast, angels kept their heads while VCs

and others around them were losing theirs, maintaining

consistent valuation levels.

Angel investors continued to support early stage deals via initial and follow-on

investments, investing the highest dollar total since we began collecting this data.

This is seen in an increase in the amount each group invested in each deal.

The consistency of investing trends in 2021 in the face of overall market volatility

demonstrate angels’ critical role of supporting the creation and growth of early stage

companies. Angels continue to focus their greatest share of dollars on the earliest rounds,

Seed and Series A, investing fewer dollars in later stage rounds. Angels invested primarily

in preferred equity deals followed by convertible notes, with some regional use in SAFEs.

Overall, SAFEs remained outside the angel mainstream, accounting for only 9% of angel

deals, up only slightly from 2020.

The best exit market

in years caused

unprecedented

returns to venture

funds, in turn

leading fund

investors to invest

unprecedented

amounts of capital

into new funds.

8 | Angel Funders Report 2022 : : Introduction

Industry trends were relatively stable — life sciences and IT continued to lead the

industries in share of dollars and number of deals. Despite the risky aspects of early stage

investments, angels remain steadfast, with constant support of early stage entrepreneurs,

rather than simply following market trends. In fact, making initial investments during rough

times is often a secret to long-term success.

One area of divergent trends was in the support of diverse

entrepreneurs. Progress in this area was uneven – women

entrepreneurs were able to garner more investment dollars

per deal for the first time, but initial investments in companies

led by Black CEOs reverted to historical levels after a very

strong 2020 performance.

2021 was a strong year for exits, primarily via acquisitions,

with median returns increasing to 2.7X vs 1.6X for prior years

ACA experts predict additional shifts in 2022, including lower

valuations spreading across various rounds and industries in

response to market changes and inflation. Despite volatility,

recent feedback from ACA members indicates that their

appetite for early stage investing remains strong.

ACA experts

predict additional

shifts in 2022,

including lower

valuations

spreading across

various rounds

and industries in

response to market

changes and

inflation.

Introduction : : Angel Funders Report 2022 | 9

KEY FINDINGS

Key findings from ACA’s 2021 data collection and analysis include:

ACA member groups invested approximately $950 million in 2021 in more than

1,000 companies and even more deals.2

On average, angel groups invested a total of $5.3 million per group, an increase

of 15% from 2020. The total amount invested in 2021 represents the highest total

since we began tracking this data.

Angels invested more dollars per company than years prior, although the absolute

number of deals per group declined slightly.

Portfolio companies raised a total of more than $5 billion (est.), leveraging their

initial angel investments by 5X.

Angels continued to focus on investing in seed-stage deals in 2021, reducing

investments in later rounds. Angels invested more than 50% of their dollars in Series

Seed, which accounted for nearly 60% of deals, up from 50% in the prior two years.

The path to greater diversity in angel investing is proving uneven, with women

CEOs making gains in the level of investment, but declining in overall number of

CEOs landing deals in 2021. Asian or Asian American CEOs nearly doubled their

amount of investment, and Latinx CEOs increased by more than 100% -- but Black

CEOs tracked at about half of the amount invested in 2020.

Health and life sciences have increasingly displaced long time angel mainstays

like enterprise software, fintech, and hardware. In 2021, about 1/3 of all deals

were related to life sciences, and the remaining 2/3 of deals were spread among

other areas. Medical technology and health technology continued to lead among

verticals, although they have receded from their 2020 COVID-19 driven dominance.

Angels have made positive returns on their investments. In 2021, for companies still

operating at time of exit their median return was 2.7X.

2

A single company typically has more than one angel investor and has more than one round of investment. Each

investment made by an angel group counts as one deal. That is why numbers of companies invested in may be less

than the number of investments made.

10 | Angel Funders Report 2022 : : Investing By The Numbers

INVESTING BY THE NUMBERS

The Depth of the ACA Database of Angel Group Investments

Continued to Grow.

In 2021, 69 reporting groups invested in 951 companies for a total of $362M in investments,

representing the highest dollar amount since we started capturing data. Based on this

sample, it is estimated that ACA member groups invested over $950M in 2021. Overall, we

estimate that these portfolio companies raised a total around $5B in 2021.

Among the reporting groups, they invested in 951 companies and 1202 deals. Their average

total annual investment per group was $5.3M with over 17 deals per group (see Figure 1).

FIGURE 1. Angels Engaged in More Deals in 2020

Year

Average Group

Annual Investment

Median Group

Annual Investment

Average # deals

per group

2021

$5.3M

$3.0M

17.7

2020

$4.6M

$2.3M

19.5

2019

$4.0M

$1.5M

13.8

Investing By The Numbers : : Angel Funders Report 2022 | 11

Angels made their investments in many small deals, with 24% of deals invested in rounds

of less than $1M. In these small deals, the group’s individual investment was less than

$200K 62% of the time. This relatively small deal size was indicative of how early stage

these companies were, placing angels on the bleeding edge of capital formation and job

creation in this economy (see Figure 2).

FIGURE 2. Angels Make Many Small Investments

# OF ANGEL DEALS

$ INVESTED PER DEAL

100

200

300

400

$1M

$900K

$800K

$700K

$600K

$500K

$400K

$300K

$200K

$100K

62+%

11

17

21

31

57

60

86

163

300

413

The “sweet” spot for angel investing is seed stage, and 59% of all deals were in this

category in 2021 (see Figure 3). This was 9 percentage points higher than prior years

(see Figure 4). Angels play an essential role in providing the source of initial funding for

start-ups. Over 855 of all deals were Series A or earlier. This commitment to the earliest

deals has been consistent over time.

12 | Angel Funders Report 2022 : : Investing By The Numbers

FIGURE 3. Angels Focus on Seed Rounds

% DEALS

0%

10%

20%

30%

40%

50%

60%

Series C+

Series B

Series A

Seed

7%

13%

10%

28%

52%

$150K

$158K

$165K

$198K

59%

26%

4%

$0K

$40K

$80K

$120K

$160K

$200K

$240K

Series C+

Series B

Series A

Seed

2021 MEDIAN DEAL SIZE

COMPANY FUNDING ROUND

 % Deals  % $ Invested  2021 Median Deal Size

FIGURE 4. Seed and Series A Dominated Angel Investments

20

40

60

80

100

2021

2020

2019

52%

34%

43%

11%

12%

17%

15%

25%

43%

28%

13%

7%

 Seed

 Series A

 Series B

 Series C+

0%

20%

40%

60%

80%

100%

2021

2020

2019

59%

27%

10%

4%

7%

8%

35%

50%

50%

28%

8%

13%

% OF DEALS BY SERIES

% OF DOLLARS BY SERIES

Investing By The Numbers : : Angel Funders Report 2022 | 13

Angels continued to invest in smaller rounds (< $2.5M), although the overall investment

trend continued to move toward larger rounds. 54% of angel groups invested $2.5M

or more in 2021, compared to 45% in 2020 (see Figure 5). ACA experts believe this

was driven in part by investments being made in larger follow-on rounds, which will be

discussed in more detail later in the report.

FIGURE 5. Small Deals are Key; Larger Follow-on Rounds are Growing

 Under $1M

 $1M to $2.5M

 $2.5M to $5M

 $5M to $10M

 $10M+

0%

20%

40%

60%

80%

100%

2019

2020

2021

24%

27%

33%

32%

16%

7%

11%

28%

25%

9%

11%

22%

29%

10%

15%

% TOTAL GROUP INVESTMENT BY DEAL SIZE

TOTAL INVESTED BY ANGELS

54%

WERE OVER $2.5M

Angel dominance is also seen in their contribution percentage within each round, as

compared to venture capitalists and other groups. Angel groups contributed 32% of

the seed round capital versus having other groups fill their rounds (68%), a significantly

greater percentage than the prior years (see Figure 6). As venture capitalists and others

retreated to later stage rounds, angels held their focus and increased their participation.

Angels were also attracted to the more “reasonable” early stage valuations, covered in

more detail in the valuation section of the report. Angel investments tend to taper off as

companies mature, but smart angels were still making meaningful investments during

follow-on rounds for their most promising companies (see Figures 6 and 7).

14 | Angel Funders Report 2022 : : Investing By The Numbers

FIGURE 6. Angels Contribution to Seed Round Grew in 2021

0%

20%

40%

60%

80%

100%

2021

2020

2019

$ Invested by Angels

$ Invested by Other Investors (VCs, etc.)

32% OF THE SEED ROUND CAPITAL

CAME FROM ANGELS, AN INCREASE

FROM PREVIOUS YEARS

23%

19%

81%

68%

32%

71%

% TOTAL INVESTMENT

FIGURE 7. Angel Investments Taper in Later Rounds

0%

20%

40%

60%

80%

100%

Series B

Series A

Seed

Series B

Series A

Seed

Series B

Series A

Seed

% TOTAL INVESTMENT

% Invested by Angels  % Invested by VCs

2019

2020

2021

46%

54%

81%

19%

6%

94%

56%

44%

53%

47%

50%

50%

14%

86%

19%

81%

93%

7%

Investing By The Numbers : : Angel Funders Report 2022 | 15

Reflecting the early stages of many of these investments, about a quarter of the companies

reported no revenue at time of funding, with another 40% reporting less than $500K in

annual revenue. In 2020, about 1/3 of the companies were pre-revenue. The increase in

funded companies with revenue can be attributed to the increase in follow-on funding and

increased caution by investors, who wanted to see a track record before investing

(see Figure 8).

FIGURE 8. More Companies in 2021 Had Some Revenue at Funding

0%

20%

40%

60%

80%

100%

2019

2020

2021

 Pre-revenue

 Under $500K

 $500K to $1M

 $1M to $3M

 $3M+

22%

33%

24%

32%

13%

18%

13%

37%

11%

11%

8%

40%

13%

13%

12%

% TOTAL GROUP INVESTMENT BY DEAL SIZE

78%

The need to see a track record doesn’t necessarily extend to company leadership, as

Figure 9 shows, angels consistently backed new CEOs. 71% of investments featured

a first-time CEO, as compared to just 29% of the companies having an experienced

CEO at the helm.

16 | Angel Funders Report 2022 : : Investing By The Numbers

FIGURE 9. Angels Consistently Back First-Time CEOs

0%

20%

40%

60%

80%

100%

2021

2020

2019

% CEOs

 CEOs Without Previous Experience

 CEOs With Previous Experience

59%

62%

38%

29%

71%

41%

Impact investing, as defined by investing in B-corps, was still a small part of angel investing.

C-corps and LLCs made up the strongest percentage of investments (see Figure 10).

FIGURE 10. Most Investments are Made Into C-corps

% DEALS

0%

20%

40%

60%

80%

100%

S Corp

B Corp

Limited Liability Company

C-Corp

$128K

$213K

$60K

$366K

88%

11%

1%

1%

 % Deals  2021 Median Deal Size

$0K

$80K

$160K

$240K

$320K

$400K

MEDIAN INVESTMENT

TAX STRUCTURE OF FUNDED COMPANIES IN 2021

Investing By The Numbers : : Angel Funders Report 2022 | 17

INITIAL VS. FOLLOW-ON DEALS

As startups grow, they advance through multiple funding rounds; typically, a company

begins with a small seed (or a “pre-seed”) round and raises progressively larger Series A,

B, and C or even later funding rounds. As companies mature, they increase in value and

ambition, and need more funding as they address new markets an geographies. Initial vs.

follow-on funding types are defined by the action of the angel investor, rather than the

company’s investment round label. The first investment an angel makes in a company is

that angel’s “initial” investment. All subsequent investments made by that same investor

in the same company are called “follow-on” investments. Therefore, an initial investment

by one angel may be a follow-on investment for a different angel. Many groups tend to

make a smaller initial investment, investing again as the company makes progress against

its milestones and needs to raise additional funding to develop additional products or

expand operations into new markets.

Angels were active in both initial and follow-on rounds. Total investment dollars went up

in 2021, although total deal count went down. While there was an increase in dollars

invested in both initial and follow-on deals, follow-on dollars jumped over 25% from 2020

(see Figure 11). Overall, angels devoted more than half of their deals each year to “new”

companies and about 45% of their activity to following on with investment into companies

into which they had already invested (see Figure 12).

FIGURE 11. Initial and, Especially, Follow-on Investments Grew in 2021

AMOUNT INVESTED

 Initial

 Follow-on

INITIAL

FOLLOW-ON

$0K

$50K

$100K

$150K

$200K

$250K

$300K

$350K

2021

2020

2019

2021

2020

2019

$277K

$238K

$276K

$220K

$266K

$338K

18 | Angel Funders Report 2022 : : Investing By The Numbers

FIGURE 12. Initial Investments Remain Over 50% of All Deals

0%

20%

40%

60%

80%

100%

2021

2020

2019

Initial

Follow-on

51%

54%

46%

45%

55%

49%

% TOTAL DEALS

On a per group basis, the number of follow-on deals remained steady, although the

investment dollars increased. There was a slight increase in the number of new deals,

again demonstrating angels’ commitment to funding new investments (see Figure 13).

FIGURE 13. Number of Initial Deals Per Group Increased in 2021

10

15

20

2021

2020

2019

Initial

Follow-on

5.7

8.1

6.9

6.9

8.4

5.5

AVERAGE # DEALS PER ANGEL GROUP

Investing By The Numbers : : Angel Funders Report 2022 | 19

Angels continued to focus mostly on the earlier stages of company development, with

correspondingly smaller rounds. There continued to be meaningful participation in

later rounds for successful portfolio companies. The preponderance of investing when

the round size is under $1 million is mainly initial funding. However, follow-on investing

typically was part of later, larger rounds as the companies grew and required more funding

(see Figure 14).

FIGURE 14. Initial Investments are Primarily Done in Smaller Rounds

0%

20%

40%

60%

80%

100%

2021

2020

2021

2020

2021

2020

2021

2020

2021

2020

% TOTAL INVESTMENT

 Initial

 Follow-on

UNDER $1M

$1M TO $2.5M

$2.5M TO $5M

TOTAL INVESTED AMOUNT IN INITIAL VS. FOLLOW-ON INVESTMENT

BY COMPANY FUNDING ROUND

$5M TO $10M

$10M+

52%

48%

63%

37%

64%

36%

68%

32%

45%

55%

58%

42%

30%

70%

47%

53%

36%

64%

32%

68%

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