Like other investor groups, Canadian angels felt the burn of the market downturn last year, according to data from a forthcoming National Angel Capital Organization (NACO) annual report.
According to NACO, despite record demand, total angel investment in Canada during 2022 fell 37 percent year-over-year to $166 million CAD. Last year, angel organizations facilitated 653 investments in 379 companies. While deal count rose slightly in 2022 compared to 2021, NACO noted a trend towards follow-on angel investments.
“What we see is a risk-averse environment,” NACO CEO Claudio Rojas told BetaKit in an interview.
“Now’s the time to be doubling down, not pulling back.”
-Claudio Rojas, NACO
While this $166 million figure from 2022 represents a significant drop compared to the $262 million invested by Canadian angels during a record-breaking 2021, it remains a sizeable improvement next to 2020, when the pandemic fuelled a steep fall in angel investment activity.
Rojas noted that in some ways, these 2022 results mark “a return to pre-COVID numbers,” as total angel investment last year closely aligns with 2019, when angels invested $164 million.
To a certain degree, this Canadian angel activity mirrors what has happened on the VC side of the startup investment equation. VC investment in Canada declined by nearly 30 percent year-over-year in 2022 amid the market downturn, but still remained high compared to years prior to 2021.
“What’s happening in the macro economy is impacting the private markets, both venture and angel, in a sense that there’s a shift to risk aversion, but there’s also alternative asset classes that have become appealing to investors,” said Rojas.
Total angel dollars invested and deal volume per quarter fell steadily as the year progressed and economic conditions deteriorated. Amid this environment, NACO reported that angels disproportionately favoured existing portfolio companies, as nearly a third of deals were follow-on investments.
To help ensure the long-term health of Canada’s tech ecosystem, NACO has recommended that the Government of Canada help build angel investment capacity by providing matching funds, as it has previously done through FedDev Ontario’s Investing in Business Innovation program, and launching a national angel-stage fund-of-funds program similar to what the Venture Capital Catalyst Initiative is for the VC industry.
Asked why NACO believes such measures are needed now when angel investment still remains relatively strong overall, Rojas cited the disproportionate growth of VC funding relative to angel investment over the past 12 years. Per NACO, from 2010 to 2022, annual VC investment grew by 10x, while angel funding only quintupled.
While the pipeline of firms graduating from angel funding to VC remains strong despite current economic conditions, Rojas said it is not proportionate to the amount of capital flowing towards VC, which he argued hurts early-stage entrepreneurs seeking angel capital and VC investors alike.
“You need proportionate growth, otherwise, the venture capital ecosystem can’t generate the returns that it needs to be self-sustaining,” said Rojas.
For his part, Rojas believes that the more is invested now, the better off Canada’s innovation economy will be over the long run, noting that some of the country’s best tech companies have been launched or built during economic downturns. “Now’s the time to be doubling down, not pulling back—that applies not just to government, but also to the investor community.”
Despite the drop in total angel funding last year as investors became more risk-averse, there were still some bright spots, including the continued rise of women angel investors and an increase in cleantech angel funding as a proportion of overall investment.
In 2022, 37 percent of Canadian angel organization members were women, up from 27 percent in 2021. Sector-wise, the largest shift came in the form of cleantech’s share of investment, which more than doubled from 2.6 percent in 2021 to 5.6 percent in 2022.
NACO plans to publish its full 2022 report at the end of June.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
