Total investment for the year reflects the longest sustained level of activity since TCA was founded in 1997 -- nine years at $10 million or more

From 2011-2019, total investment each year was between $10.0 - $19.1 million

Investment surged 81% from $10.9 to $19.1 million in 2019, driven by strong membership growth of 51% to 458 members coupled with strategic changes including the implementation of the first chapter fund in San Diego and the promise of a decision from the fund within 30 days of screening. TCA is working hard to be the Best Place for the Best Companies to get funded in Southern California

The mix into new companies shifted in 2019 to 57% of investment from 76% in 2018

TCA invested in 52 companies in 2019, including 32 new companies which approached the all-time record of 37 in 2017

This total of 52 includes 19 companies in Life Sciences, 11 in Software, 12 in Consumer Internet, 4 in Cleantech/Industrials, 2 in Consumer Products, 3 in Hardware and 1 in Business

New companies included 13 companies in Life Sciences, 7 in Software, 7 in Consumer Internet, 3 in Hardware and 2 in Cleantech/Industrials

2019 was a pivotal year for TCA with the advent of annual chapter funds to invest alongside members

TCA-San Diego launched ACE-SD19 in which $2.2 million was invested in the first 10 months of 2019. ACE-SD20 raised another $3.7 million intended for deals in 2020

TCA-Orange County followed suit with $1.4 million in ACE-OC20 and TCA-Los Angeles with $1.2 million in ACE-LA20 both for deals in 2020

TCA now targets completing due diligence and making fund decision within 30 days, after which individual members invest alongside the funds

For 2019, the funds contributed $3 million towards the record $19.1 million total investment by TCA, and in 2020 the investment by the funds should exceed $6 million (if the opportunties are there)

2019 was a record year for Tech Coast Angels (TCA) in funding and member growth

TCA invested $19.1 million in a total of 52 companies across a diverse mix of industries -- showing that TCA continues to invest in both tech and non-tech companies

Life Sciences was the largest sector, followed by Software, Hardware and Consumer Internet. Hardware received a higher portion of dollars invested in 2019 vs 2018 due to one large funding

32 of these companies were new additions to the portfolio -- a number that was second only to the all-time record number of 37 in 2016

57% of the dollar investment went to these new companies

Membership grew from 398 at the end of 2018 to 458 at year end 2019

Our 458 members, with their extensive and broad industry experience, help us invest with confidence in this diverse range of industries, which has always been part of TCA’s DNA

Of new companies added to the portfolio in 2019, Life Sciences, Software and Consumer Internet continue to lead

Life Sciences has grown to 37% of the companies and 44% of the dollars invested

TCA extended its Angel Syndication Network (ASN) to share best deals for deal syndication among 50+ prominent angel groups across the US

These angel groups nominate their best deals to share with other angel groups for syndication

ASN hosts a monthly “virtual” web presentation based on a live meeting occuring within a state-of-the-art facility (UCI Applied Innovation’s The Cove facility) with multiple cameras and microphones recording attendee interaction and deal deliberation. The purpose of these meetings is to help fill a round, expedite a closing, and save the CEO from extended road shows. The screening sessions are open and viewed by accredited investors from these respective groups. So far, roughly half of those presenting have received additional funding from these investors (totaling $7.5 million)

Collectively, the angel groups participating in ASN represent over 1,500 angels, and over $1 billion in direct investment

This greater syndication activity through ASN has shifted the geographic mix to more based outside of Southern California

Traditionally, the mix has been 85% - 90% in Southern California -- with the assumption that companies do better when TCA’s members can be actively involved in mentoring and governing

With ASN, TCA is seeing more good deals that have strong support and local involvement by other prominent angel groups. Thus new investments outside Southern California rose to 36% in 2016, 28% in 2017, 24% in 2018 and 25% in 2019

This also has been influenced by the investments of TCA’s ACE (Angel Capital for Entrepre neurs) Funds which have had a larger percentage of investments outside Southern California

TCA had five exits in 2019 and a 4.8x return on all outcomes since 1997

1 secondary offering in Leaselock (2014 investment) for a 31x return

3 acquisitions (all 2014 investments): Parcel Pending to Neopost for $100 million and a 19x return, Portfolium to Instructure for $40 million and a 6.5x return, and Ushr (a spinout of Geodigital) to Dynamic Map Platform for $181 million

1 merger into public company: Salarius Pharmaceuticals into Flex Pharma (NASDAQ: SLRX) (2018 investment) This brings the total exits since TCA’s inception in 1997 to 82 exits, and 110 shutdowns. Of the 417 investments TCA has made since its founding, 225 (54%) are still active. At the highest price achieved after IPOs, TCA’s return has been 4.8X and the IRR has been 23.1%. This compares to a 2.5x benchmark for angels per ARI. Tax benefits from the write-offs are not included.

TCA funding is more likely when initial products/services are already developed and there is evidence of customer traction

67% of investments in 2019 were in companies with revenue and those seeking expansion capital, up slightly from 65% in 2018. This is driven by:

-- Companies are launching products/services earlier with MVPs (Minimum Viable

Products) before seeking investment

-- Investors at this later stage of the investment cycle expect companies to be closer to breakeven in order to survive the anticipated downturn

TCA’s investment focus continues to be on early stage “seed” deals

71% of deals and 55% of investments in 2019 were Seed -- both higher than the average for the previous two years

Some of this bias to early stage deals has been pursuit of lower valuations asssociated with seed activity, since later rounds have been increasingly at less attractive valuations

Bridge investment declined significantly in the past two years from 42% in 2017 and 12% in 2018 to 2% in 2019

Most investments in 2019 continue to be either Preferred Equity or Con vertible Debt that converts into Preferred Equity

The 41% invested in Preferred Equity was an increase from 2018 and heading back towards the level of 50% in 2016

However, the prevalence of convertible notes (43% of the investment total) remains concerning to some because it limits long-term returns due to 1) less initial lift in valuation before Series A and 2) fewer deals will realize Section 1202/Section 1244 favorable tax treatment

Common equity investment increased to 14% due to one large deal

Valuations at time of TCA investment continue their climb to historically uncomfortable levels -- this should reverse in 2020

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

The long-term “sweet spot” for angel investing are deals valued at $1-3 million --- this declined to 1% of investment from 5% in 2018, 14% in 2017, and 18% in 2016