TCA VG Annual Report 2022

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TCA Venture Group 2022 Interactive Annual Report

TCA Venture Group / Tech Coast Angels

Annual Report2022

Explore the people, capital and companies behind 2022. An interactive edition of the original annual report.

Source: Tech Coast Angels annual report

$15.4Minvested during 2022
41companies funded
410members reported
13exits during 2022
Explore the year ↓

2022 / Year in review

The year at a glance

A year of investment, collaboration and company building. Swipe through the figures, then explore the story behind them.

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01 / 06$15.4M

Capital invested

41 companies received investment during 2022.

02 / 0641

Companies funded

21 new companies joined the portfolio.

03 / 06410

Member community

Experience, guidance and connections across the network.

04 / 0613

Exits during the year

Read the source-year outcomes and return context below.

05 / 0648%

New-company capital

Share of annual dollars invested in new companies.

06 / 066.4x

Cumulative return

Reported multiple on all outcomes, including exits and shutdowns. Reported IRR: 25.2%.

2022 / Capital

Capital in motion

Move through the reporting history. Select a year, switch measures, and inspect the underlying values.

Capital deployed

$15.4 million in TCA Investment in 2022 shows we continue to fund exciting companies

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

Combining TCA with Nufund Venture Group (formerly TCA-SD) was record funding

From 2011-2022, total TCA investment each year was between $10 - $20 million

Three chapter funds and the target of a decision from the funds within 30 days of screening helped drive the high level of investment. TCA is working diligently to be the Best Place for the Best Companies to get funded

48% of investment was into new companies in 2021 (vs 72% in 2022)

Source: PDF page 7

Capital deployed

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Companies funded

TCA invested in 41 companies in 2022, including 21 new companies

This total of 41 includes 11 companies in Medical Devices, 9 in Software, 5 in Digital Health, 3 in Medical Diagnostics, 3 in Pharma, 3 in Consumer Products/ Services, 2 in Other and 1 each in Energy & CleanTech, IT Hardware, Agriculture/ Food, Materials/Chemicals and Real Estate

New companies included 4 companies in Medical Devices, 4 in Software, 3 in Digital Health, 3 in Medical Diagnostics, 2 in Pharma, 1 in Consumer Products/ Services, 2 in Other and 1 each in Consumer Products, Agriculture/Food and Real Estate

Source: PDF page 8

Companies funded

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Network funds and member capital

Annual chapter funds brought significant incremental capital to entrepreneurs and diversification for members

$5.2 million from TCA’s four chapter funds supplemented $10.2 million in direct in vestment from members

26 of TCA’s 41 deals in 2022 received investment from at least one chapter fund

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

Direct TCA member investment has remained around $10 million during the fund era

The addition of the chapter funds has been a significant factor in bringing more capital to each company and more diversification to our members

Source: PDF page 20

Network funds and member capital

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Average investment per company

TCA’S 2022 Investment of $15.4 million was part of a total of $124 million into those 41 Companies

TCA funding for new companies in 2022 averaged $348k per company and 11% of the total round -- higher than the ACA benchmark of $298k

TCA funding for follow-on companies in 2022 averaged $403k per company and 9% of the total round -- higher than the ACA benchmark of $273k

Syndication was critical, and TCA helps with that through ASN and our relationships

The median total round size in 2022 for new was $1.8 million and $2.6 million for follow-on

Source: PDF page 29

2022 / Industry

A diverse portfolio

Turn the industry ring and explore how the portfolio evolved.

Industry allocation

TCA invested $15.4 million in a total of 41 companies in 2022

Investment was 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 (41% of amount), and within Life Sciences, Medical Devices was largest with 21%. Next largest was Software at 37% of the amount

21 of these companies were new additions to the portfolio and 48% of the dollar investment went to these new companies

Source: PDF page 5

Explore industry allocation

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First investments by industry

Our members, with their extensive and broad industry experience, helped TCA invest with confidence in this diverse range of industries, which has al ways been part of TCA’s DNA

Of new companies added to the portfolio in 2022, Life Sciences and Software continue to lead with 41% and 37% of the dollars invested

Within Life Sciences, the largest categories are Medical Devices (21% of the dollars), followed by Pharma (8%), Medical Diagnostics (6%) and Digital Health (6%)

Life Sciences has grown to 54% of the companies and software is 22% of the companies

Source: PDF page 6

First investments by industry

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2022 / Networks

Connected by opportunity

The network

3 TCA now has five chapters in our network:

Tech Coast Angels Los Angeles is our largest network, with about 150 members. TCA Los Angeles invests in a wide range of businesses in the US primarily with emphasis on technology, adtech, healthtech, media, entertainment, and SaaS. For leadership & member profiles, click here.

Tech Coast Angels Orange County is where TCA began in 1997 and is comprised of about 105 members. CA Orange County invests in a wide range of businesses in the US and Canada with an emphasis on technology, fintech, edtech, healthtech, software, cyber, SaaS, AI, iOT, and some CPG. For leadership & member profiles, click here.

Pasadena Angels is our third largest network, with about 100 members. Pasadena Angels invests at the seed to seed plus stage primarily in California and rest of the US and Canada with an emphasis on technology, fintech, edtech, entertainment, media, CPG and SaaS. For leadership & member profiles, click here.

Tech Coast Angels Inland Empire covers the area east of Los Angeles including Riverside and San Bernardino. Particular emphasis is on very early seed stage investing, with successful companies then exposed to the other networks within TCA. For leadership & member profiles, click here.

MEDA Angels is our newest chapter to join the TCA network, with about 50 members, most of whom are doctors, PhDs and healthcare executives with expertise in Life Sciences. MEDA Angels focuses on healthtech and invests broadly across the sector including digital health, SaaS, medical devices, robotics, diagnostics, wellness and therapeutics (limited to repurposed drugs and biosimilars). Emphasis is on mid-seed and A-Round and can be based anywhere in the US and even foreign-based. For leadership & member profiles, click here.

Source: PDF page 3

A year of change

TCA launched a new licensing initiative to allow other angel groups to benefit by being part of TCA and becoming separate chapters within TCA: On 4/1/22, TCA San Diego chapter spun out as a new independent entity, and re-branded itself NuFund Venture Group. While we will miss our former colleagues there, we look forward to continuing collaboration 2022 was a year of change at Tech Coast Angels

Sharing all deal flow

Sharing expertise of members

Collaborating on Due Diligence P d A l j i d TCA li PA

Source: PDF page 2

Angel Syndication Network

TCA’s Angel Syndication Network (ASN) covers 60+ angel groups

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

ASN hosts a monthly “virtual” web presentation. 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, almost half of those presenting have received additional funding from these investors (totalling $18.3 million)

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

Source: PDF page 16

Southern California and beyond

This greater syndication activity through ASN coupled with virtual screening and remote due diligence has shifted the geographic mix to more companies based outside of Southern California since 2020

Traditionally, the mix has been 85% - 90% in Southern California where 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.

Under Covid-19, the shift to virtual screening and due diligence, coupled with the addition of virtual members across the USA, has allowed geographical diversification, with more than 50% of TCA deals now outside SoCal

54% of all deals and 51% of all investment were outside SoCal in 2022

Source: PDF page 18

Southern California and beyond

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Geographic mix

Among geographies outside SoCal, New York was the largest in investment and NorCal in number of companies

Southern California represented 49% of the investment and 46% of the companies

New York was 22% of the investment and 7% of the companies

Northern California was 9% of the investment and 12% of the companies

Masssachusetts was 7% of the investment and 10% of the companies

International was 1% of the investment and 5% of the companies

Other states were 12% of the investment and 20% of the companies

Source: PDF page 19

Network leadership

The TCA Network’s five chapters combined to fund $15.4 million into 41 companies

TCA-OC led 32% of the deals, followed by MEDA Angels (20%), TCA-LA (19%) and Pasadena Angels (17%). TCA-SD led 12% before they spun out at the end of Q1

In terms of funding, Pasadena led deals accounted for 36% of the funding, followed by TCA-OC (30%), TCA-LA (18%), TCA-SD (9%) and MEDA Angels (7%)

Regardless of the chapter leading due diligence, all deals were available to all members for investment, and several deals received funding from more than one chapter fund

Source: PDF page 9

2022 / Returns

Patience and outcomes

Returns and exits

TCA had a record 13 exits (and 10 shutdowns) in 2022 for a cumulative 6.4x return on all outcomes since 1997

Findox (2016 TCA investment) was acquired by Reorg for a 34.2x return and 89% IRR

Annex Cloud (formerly Social Annex, Inc.) (2012 TCA investment) was acquired by OpenGate Capital for a 18x return and 34% IRR

EV Connect (2012 TCA investment) was acquired by Schneider Electric for a 12.2x return and 28% IRR

Basepaws (2019 PA Investment) was acquired by Zoetis for a 12x return and 129% IRR

Vydia (2014 PA Investment) was acquired by gamma for an 11x return and 35% IRR

Covetrus (formerly H3 Financial and ExtendCredit.com) (2011 TCA Investment) was acquired by VCP for a 4.7x return and 17% IRR

iKizmet (2015 PA Investment) was acquired by ClubReady for a 2.7x return and 15% IRR

Powur PBC (2016 TCA investment) had an optional buyout for a 2.4x return and 15% IRR

MOGL (Empyr) (2013 TCA investment) was acquired by Augeo for a 1.1x return and 1% IRR

Capillary Biomedical (2018 TCA & 2014 PA investment) was acquired by Tandem Diabetes Care for a 0.7x return and -10% IRR

BeTheBeast (2011 TCA & PA investment) was acquired by Livebarn for cash and equity for a 0.3x realized return so far (on the cash portion)

Whistle Messaging (2016 TCA investment) was acquired by Cloudbeds (also a TCA Portfolio company) for cash and equity for a 0.3x realized return so far (on the cash portion)

Aclarion (formerly Nocimed) (2016 TCA investment) IPO’d as ACON for a 0.2x return at the time of IPO and a -25% IRR This brings the total outcomes since TCA’s inception in 1997 to 106 exits, and 141 shutdowns. Of the 526 investments TCA has made since its founding, 279 (53%) are still active. At the highest price achieved after IPOs, TCA’s return (assuming equal weighting) has been 6.4x and the IRR has been 25.2%. This compares to 2.5x and 22% benchmarks for angels per Angel Resource Institute. Tax benefits from the write-offs are not included in TCA returns. 10

Source: PDF page 10

Portfolio outcomes

TCA’s results make it clear that patience is required -- with largest exits happening after 5 years or more, and most failures occurring in the “Valley of Death” 2 years to 5 years after investment

Source: PDF page 11

Portfolio outcomes

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Exits and shutdowns

Both the number of exits and shutdowns were high in 2022 and likely to shift towards more shutdowns in near future based on prior cycles

2022 had a record 13 exits and a near record 10 shutdowns (record was 13 in 2017)

Based on previous stock market peaks in 2000 and 2008, exit activity tends to surge just be fore peaking, followed by a surge in shutdowns just after the peak

If the stock market continues to be weak, we are likely to see less exits and more shutdowns in the next couple of years

Source: PDF page 12

2022 / Deal explorer

Inside the investment mix

Development stage

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

About half of investments in 2022 were in companies with revenue and those seeking expansion capital. 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

Source: PDF page 21

Development stage

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Company revenue

For companies where specific revenue numbers were available, 95% had less than $3 million in revenue

Those with $0 - $0.5 million in revenue were 12% of the $’s and 16% of the numbers

Those with $0.5 - $1 million in revenue were 10% of the $’s and 16% of the numbers

Those with $1 - $3 million in revenue were 15% of the $’s and 21% of the numbers

Those with $3 - $5 million in revenue were 5% of the $’s and 2% of the numbers

Those with no revenue were 58% of the $’s and 45% of the numbers

Source: PDF page 22

Stage of round

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

68% of deals and 76% of investments in 2022 were Seed -- compared to 58% of deals and 67% of investments in 2021

Some of this bias towards early stage deals has been the pursuit of lower valuations associated with Seed activity, since later rounds have been increasingly at less attractive valuations

Series A represented 22% of deals and 17% of investments in 2022

Series B & up represented 9% of deals and 7% of investments in 2022, a change from 6% of deals and 19% of investments in 2021

Source: PDF page 23

Stage of round

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Security used

Most investments in 2022 continue to be either Preferred Equity or Convertible Debt that converts into Preferred Equity

The 50% invested in Preferred Equity was more than the 43% in 2021 but not yet back to the level of 54% in 2016

SAFEs increased to 18% of deals and 32% of investments (due to one large SAFE deal) in 2022

However, the prevalence of SAFEs and convertible notes (a combined 45% 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 QSBS Section 1202/Section 1244 favorable tax treatment

Source: PDF page 24

Security used

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2022 / Leadership

People and governance

Board representation

TCA Members take an active role in governance of about a third of the investments in 2022

For 31% of TCA’s 2022 companies, there is a TCA member serving as either a Board Member or Observer

This is in line with ACA’s comparable benchmark of 32%

This percentage was higher in previous years before TCA increased its investments outside of Southern California and sourced more deals through syndication (which are often led by other local angel groups with one of their members on the Board)

Source: PDF page 25

CEO diversity

We are striving for greater diversity in our members and the background of our portfolio company CEOs

20% of the CEOs who received funding this year are women, up from 15% in 2021

Two of our five Chapter Presidents are women

29% of the CEOs receiving funding in 2022 are non-white ethnicity, up from 23% in 2021 ... we have an initiative underway to find and fund more women and minority investors and CEOs

Source: PDF page 15

2022 / Valuation

Price and potential

Valuation bands

Valuations at time of TCA investment continue to increase above historical levels -- this hopefully will reverse in 2023

19% of TCA’s investments in 2022 were in companies with valuations below $6 million, compared to 32% in 2021, 28% in 2020, 15% in 2019, 41% in 2018, 43% in 2017 and 61% in 2016

The median valuation rose to $10 million from $8.0 million in 2020 and 2021, com pared to $9.0 million in 2019, $6.0 million in 2018, and $4.5 million in 2017

The long-term “sweet spot” for angel investing has been deals valued at $1-3 million --- this declined to 6% of investment from 18% in 2016

Source: PDF page 26

Valuation bands

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Pre-money valuation trends

More on Valuation Trends ...

The spread in valuations is increasing -- the rise in median valuation for all deals is also evident in the 80th, 40th and 20th percentile deals

The median valuation for new deals moved above that for follow-ons, driven partly by flat or down rounds in some follow-ons as the external funding environment tightened, and partly because new deals had higher valuation due to more significant revenue

Source: PDF page 27

Pre-money valuation trends

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Valuation by stage

More on Valuation Trends ...

The increase in valuation was across all stages

Seed stage median valuation rose to $9 million in 2022 vs $7.5 million in 2021

Series A stage median valuation rose to $12.5 million in 2022 vs $10 million in 2021

Series B and up median valuation rose to $17 million in 2022 vs $15 million in 2021

This trend needs to reverse in 2023 given the dramatic drop in later stage and public market tech stock valuations

Source: PDF page 28

2022 / Companies

Meet the companies

Search the businesses listed in the source report and switch between its investment groups.

2022 / Looking ahead

Perspective for the next chapter

For entrepreneurs

Tips for Entrepreneurs Going Forward TCA’s record high investment in recent years reflects…

Tips for Entrepreneurs Going Forward TCA’s record high investment in recent years reflects a strong pipeline of opportunities. But dramatic decline in later stage exit values and public tech valuations translate into a difficult environment for funding in 2023 Our advice to smart entrepreneurs at this stage in the cycle is to be well prepared:

Get realistic about valuation and don’t look to last year’s averages. It’s a new world. An…

Get realistic about valuation and don’t look to last year’s averages. It’s a new world. Any investment will be hard, and overpricing can be fatal if it leaves you underfunded

Maintain a healthy runway. In the next two years, more good companies will likely fail for…

Maintain a healthy runway. In the next two years, more good companies will likely fail for lack of financing than for all other reasons combined

If you are lucky enough to attract funding, raise as much money as you can in the current…

If you are lucky enough to attract funding, raise as much money as you can in the current round and don’t be concerned about dilution. You won’t regret it later

Stay focused. Spend wisely and frugally. If the next dollar you spend doesn’t make for a b…

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

Seek investors who can provide you with experience, guidance and contacts that can help yo…

Seek investors who can provide you with experience, guidance and contacts that can help you navigate the challenges ahead (rather than those that are willing to offer the highest valuation), and listen to your advisers

Source: PDF page 30

For angels

. Tips for Angels Going Forward Our advice to smart angels at this stage in the cycle is t…

. Tips for Angels Going Forward Our advice to smart angels at this stage in the cycle is to be well prepared:

Accelerate funding of companies who embrace more realistic valuations -- particularly comp…

Accelerate funding of companies who embrace more realistic valuations -- particularly companies which can achieve breakeven with the funds raised in the current round

Be cautious about investing in companies that cannot achieve breakeven with funds from the…

Be cautious about investing in companies that cannot achieve breakeven with funds from the current round if future funding sources do not materialize

Invest in funds if you have a limited amount of capital to deploy -- giving you the benefi…

Invest in funds if you have a limited amount of capital to deploy -- giving you the benefits of diversification that is so important in this class of investment. Supplement the investment in funds with sidecars in areas/markets in which you have knowledge

Join a trusted angel group to access quality deal flow and the expertise of others in due…

Join a trusted angel group to access quality deal flow and the expertise of others in due diligence and mentorship of the companies moving forward

Learn from other experienced angels by participating in the Angel Capital Association’s An…

Learn from other experienced angels by participating in the Angel Capital Association’s Angel University, webinars and annual ACA Summit conference

Be patient -- you’ll likely have more failures than successes, and the successes will typi…

Be patient -- you’ll likely have more failures than successes, and the successes will typically come later. But a few of the successes should more than compensate for the shutdowns and yield an overall attractive portfolio return 31

Source: PDF page 31

2022 / Source notes

The source behind the figures

Figures and commentary reflect this year’s report. Chart-derived values are identified beside each chart.

Source: TCA-Annual-Report-2022-Final.pdf. PDF page references count the cover as page 1.

Narrative figures and printed chart labels are preserved. Values read from plotted geometry are approximate and rounded; use the included PDF for the original presentation.

Company directories reproduce the listings in this source. A company can appear in both the TCA portfolio and ASN lists; source listing counts can differ from headline totals.

The original historical report uses Tech Coast Angels branding. This edition follows the TCA VG interactive report design.

Open the original 2022 report