$19.4 Million in TCA Investment in 2020 topped the record pace of 2019

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

From 2011-2020, total investment each year was between $10.0 - $19.4 million

Implementation of 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 hard to be the Best Place for the Best Companies to get funded

The mix into new companies shifted in 2020 to 75% of investment from 58% in 2019

With help from SBA’s PPP and EIDL grants and loans, and the resourcefulmess and resilience of our CEOs, we saw no significant increase in failure rates in 2020

TCA invested in 64 companies in 2020, including 42 new companies -- both measures setting all-time records

This total of 64 includes 24 companies in Life Sciences (a record), 14 in Consumer Internet, 11 in Software, 5 in Hardware, 4 in Cleantech/Industrials, 3 in Consumer Products, 2 in Business and 1 in Financial

New companies included 18 companies in Life Sciences, 7 in Software, 8 in Consumer Internet, 4 in Hardware and 2 in Cleantech/Industrials, 2 in Consumer Products, 1 in Business

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

A record $7.9 million from TCA’s three chapter funds fueled record total investment

44 of TCA’s 64 deals in 2020 received investment from at least one TCA 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 was $11.5 million - consistent with the average for the three years (2016 - 2018) before the advent of the chapter funds

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

2020 was a record year for Tech Coast Angels (TCA) in funding and member growth

TCA invested $19.4 million in a total of 64 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, Consumer Internet and Hardware

42 of these companies were new additions to the portfolio -- an all-time record and 75% of the dollar investment went to these new companies

Membership grew slightly from record-high 464 at the end of 2019 to a new record 469 in 2020, sustaining TCA’s leadership as one of the largest Angel Groups

Our 469 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 2020, Life Sciences, Software and Consumer Internet continue to lead

Life Sciences has grown to 38% of the companies and 45% of the dollars invested

TCA extended its Angel Syndication Network (ASN) to share best deals for deal syndication among 60+ 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 (totalling $10.3 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 coupled with virtual screening and remote due diligence has shifted the geographic mix to more companies based outside of Southern California for the first time

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, 25% in 2019 and 55% in 2020

Under Covid-19, shift to virtual screening and due diligence has allowed geographical diversification, with more than 50% of deals now outside SoCal

TCA had four exits in 2020 and a 5.3x return on all outcomes since 1997

Companion Medical (2015 investment) was acquired by Medtronics for a 58x return -- the fifth highest ever for TCA (the highest have been Mindbody (264x), GreenDot (235x), Sandpiper (149x) and Truecar (75x))

Beam Global (2017 investment) reached 10x on the NASDAQ in 2020

Zentalis (a spinout of 2015 investment in Kalyrya Pharmaceuticals) IPO’d at 8.2x in 2020 before reaching 16.5x in April 2021, with additional upside from Kalyrya

Paradigm Diagnostics was bought by Exact Sciences for 1.4x and a 40% IRR (1 year after TCA’s investment) This brings the total exits since TCA’s inception in 1997 to 86 exits, and 120 shutdowns. Of the 462 investments TCA has made since its founding, 256 (55%) are still active. At the highest price achieved after IPOs, TCA’s return (assuming equal weighting) has been 5.3X and the IRR has been 25.8%. This compares to 2.5x and 22% benchmarks for angels per ARI. Tax benefits from the write-offs are not included in TCA returns.

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

50% of investments in 2020 were in companies with revenue and those seeking expansion capital, down slightly from 67% 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

63% of deals and 65% of investments in 2020 were Seed -- compared to 71% of deals and 55% of investments in 2019

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 17% of deals and 14% of investments in 2020

Bridge investment declined significantly from levels in past years

Most investments in 2020 continue to be either Preferred Equity or Convertible Debt that converts into Preferred Equity

The 45% invested in Preferred Equity was an increase from 42% in 2019 and seems to be heading back towards the level of 54% in 2016

However, the prevalence of convertible notes (46% 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

No common equity investments in 2020

Valuations at time of TCA investment continue their climb to historically uncomfortable levels -- this may reverse in 2021

28% of TCA’s investments in 2020 were in companies with valuations below $6 million, compared to 15% in 2019, 45% in 2018, 43% in 2017 and 61% in 2016

The median valuation was $8.0 million in 2020, compared to $9.0 million in 2019, $6.0 million in 2018, and $4.5 million in 2016 and 2017

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

More on Valuation Trends ...

While median valuations for all deals declined in 2020 to $8.0 million from $9.0 million in 2019, they still rose slightly for new companies to $6.5 million from $6.0 million in 2019

Valuations for TCA financings have remained higher than ACA’s national average