TCA VG Annual Report 2021
TCA Venture Group / Tech Coast Angels
Annual Report2021
Explore the people, capital and companies behind 2021. An interactive edition of the original annual report.
Source: Tech Coast Angels annual report
2021 / 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.
Capital invested
53 companies received investment during 2021.
Companies funded
40 new companies joined the portfolio.
Member community
Experience, guidance and connections across the network.
Exits during the year
Read the source-year outcomes and return context below.
New-company capital
Share of annual dollars invested in new companies.
Cumulative return
Reported multiple on all outcomes, including exits and shutdowns. Reported IRR: 26.1%.
2021 / Capital
Capital in motion
Move through the reporting history. Select a year, switch measures, and inspect the underlying values.
Capital deployed
$20.4 million in TCA Investment in 2021 topped the record pace of 2020
Total investment for the year reflects the longest sustained level of high investment activity since TCA was founded in 1997 -- eleven years at $10 million or more
From 2011-2021, total investment each year was between $10.0 - $20.4 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
72% of investment was into new companies in 2021 (vs 75% in 2020)
With SBA’s PPP and EIDL grants and loans no longer available, we saw no significant increase in failure rates (relative to the number of exits) in 2021
Source: PDF page 5
Capital deployed
Companies funded
TCA invested in 53 companies in 2021, including 40 new companies
This total of 53 includes 20 companies in Life Sciences, 13 in Software, 6 in Cleantech/Energy, 5 in Consumer Internet, 3 in IT Hardware, 2 in Financial, 2 in Food/Beverage/Agriculture, 1 in Consumer Products/Services, and 1 in Real Estate
New companies included 16 companies in Life Sciences, 12 in Software, 4 in Consumer Internet, 3 in Cleantech/Energy, 1 in Food/Beverage/Agriculture, 1 in Consumer Products/Services, 1 in Financial, 1 in IT Hardware, and 1 in Real Estate
Source: PDF page 6
Companies funded
Network funds and member capital
Annual chapter funds brought significant incremental capital to entrepreneurs and diversification for members
A record $9.7 million from TCA’s three chapter funds fueled record total investment
43 of TCA’s 53 deals in 2021 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 $10.8 million - consistent with the average for the three years (2016 - 2018) before the advent of the chapter funds in 2019
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 17
Network funds and member capital
2021 / Industry
A diverse portfolio
Turn the industry ring and explore how the portfolio evolved.
Industry allocation
2021 was a record year for Tech Coast Angels (TCA) in funding and member growth
TCA invested $21.4 million in a total of 53 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 (39% of amount), followed by Software (22%)
40 of these companies were new additions to the portfolio and 72% of the dollar investment went to these new companies
Membership grew modestly from record-high 469 at the end of 2020 to a new record 581 in 2021, sustaining TCA’s leadership as one of the largest Angel Groups
Source: PDF page 3
Explore industry allocation
Industry mix over time
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 2021, Life Sciences, Software and Consumer Internet continue to lead.
Life Sciences has grown to 38% of the companies and 39% of the dollars invested. Within Life Sciences, the largest categories are Medical Devices (18% of the dollars), Medical Diagnostics (10%) and Pharma (8%)
Source: PDF page 4
Industry mix over time
2021 / Networks
Connected by opportunity
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 ses sions 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 $13.1 million)
Collectively, the angel groups participating in ASN represent over 1,500 angels, and more than $1 billion in direct investment
Source: PDF page 14
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 in 2020 and 2021
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. Thus new investments outside Southern California rose to 53% in 2021 (from 36% in 2016, 28% in 2017, 24% in 2018, 25% in 2019, and 55% in 2020)
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 deals (including ones led by TCA) now outside SoCal
Source: PDF page 16
2021 / Returns
Patience and outcomes
Returns and exits
w TCA had a record 11 exits in 2021 and a 6.7x return on all outcomes since 1997
Procore Technologies (2006 investment) IPO’d (PCOR) for $10 billion and a 368x return -- the highest ever for TCA [the previous leaders have been Mindbody (264x), GreenDot (235x), Sandpiper (149x), Truecar (75x) and Companion Medical (58x)]
Findox (2016 investment) had an optional buyout at 12x and 64% IRR
Doctible (2015 investment) was acquired by PracticeTek and realized an 8x cash return plus a significant equity interest upside
Discover Echo (2016 investment) was acquired by Cellink for a 6x return and 33% IRR
Insight Medical (2020 investment) was acquired by Certara for a 4x return and 250% IRR
Cognition Therapeutics (2010 investment) completed an IPO (CGTX) yielding a 3x return
ControlTec (2001 investment) was acquired by Kindersystems for a 3x return
Habitu8 (2019 investment) was acquired by Arctic Wolf for a 2x return and 45% IRR
Spine Align (2020 investment) was acquired by a strategic for a 2x return and 100% IRR
Amplyx Pharmaceuticals (2008 investment) was acquired by Pfizer for about 1x
Haxiot (2018 investment) was acquired by Digi International for about 1x This brings the total outcomes since TCA’s inception in 1997 to 97 exits, and 128 shutdowns. Of the 502 investments TCA has made since its founding, 277 (55%) are still active. At the highest price achieved after IPOs, TCA’s return (assuming equal weighting) has been 6.7x and the IRR has been 26.1%. 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. 7
Source: PDF page 7
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 3 to 6 year “Valley of Death”
Source: PDF page 8
Exits and shutdowns
Both the number of exits and shutdowns were high in 2021, and likely to shift towards more shutdowns in near future based on prior cycles
2021 had a record 11 exits and a near record 11 shutdowns (record was 13 in 2017)
Based on previous stock market peaks in 2000 and 2008, exit activity tends to surge just before peaking, followed by a surge in shutdowns just after the peak
If the current volatility leads to a (long overdue) bear market, we are likely to see less exits and more shutdowns in the next couple of years
Source: PDF page 9
2021 / 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
58% of investments in 2021 were in companies with revenue and those seeking expansion capital, up slightly from 50% in 2020. 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 18
Development stage
Stage of round
TCA’s investment focus continues to be on “seed” deals
70% of deals and 64% of investments in 2021 were Seed -- compared to 63% of deals and 65% of investments in 2020
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 23% of deals and 19% of investments in 2021 (both up slightly)
In the past three years, there has been more follow-on investment in Series C & up
Source: PDF page 19
Security used
Most investments in 2021 continue to be either Preferred Equity or Convertible Debt that converts into Preferred Equity
The 43% invested in Preferred Equity was slightly less than the 45% in 2020 but not yet back to the level of 54% in 2016
However, the prevalence of convertible notes (42% 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
SAFE instruments rose to 12%, concerning since these are unfriendly to investors
Common equity investments remain rare in 2021, at 3% of the dollars invested
Source: PDF page 20
Stage of round
Security used
2021 / Leadership
People and governance
CEO diversity
We are striving for greater diversity in our members and the background of our portfolio company CEOs, but we need to make more progress
15% of the CEOs who received funding this year are women
Two of our four Chapter Presidents are women
23% of the CEOs receiving funding in 2021 are non-white ethnicity ... we have a DEI initiative underway to improve
Source: PDF page 13
CEO gender
2021 / Valuation
Price and potential
Valuation bands
Valuations at time of TCA investment remain at historically uncomfortable levels -- this may reverse in 2022
32% of TCA’s investments in 2021 were in companies with valuations below $6 million, compared to 28% in 2020, 15% in 2019, 45% in 2018, 43% in 2017 and 61% in 2016
The median valuation was $8.0 million in 2020 and 2021, 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
Source: PDF page 21
Valuation bands
Pre-money valuation trends
More on Valuation Trends ...
While median valuation for all deals was stable in 2021, it still rose slightly for new companies (and all seed companies) to $7.5 million from $6.5 million in 2020
Valuations for seed investments compressed at the top of the range (80th percentile) dropped from $11 million in 2020 to $10 million in 2021
Source: PDF page 22
2021 / Companies
Meet the companies
Search the businesses listed in the source report and switch between its investment groups.
2021 / Looking ahead
Perspective for the next chapter
For entrepreneurs
Tips for Entrepreneurs Going Forward TCA’s record high investment in the last three years…
Tips for Entrepreneurs Going Forward TCA’s record high investment in the last three years reflects a strong pipeline of opportunities. But excessive valuations in public and private markets signal a correction is likely coming during which financing will be a challenge. 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 23
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 com…
Accelerate funding of companies who embrace more realistic valuations -- particularly com panies which can achieve breakeven with the funds raised in the current round. Some of the most succesful companies today were started during downturns -- they navigate the higher hurdles and have less competition when funding gets tighter
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 whcih 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 24
Source: PDF page 24
2021 / 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-2021-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.
The highlights state $20.4M total investment, while the industry chart and member/fund breakdown use $21.4M. Each is identified in its original context.