Tech Coast Angels invested nearly $14 million in 28 deals in Southern California through June, its highest first half-year commitment ever and including 17 new companies funded.
TCA is a cohort of some 400 members, accredited investors—a Securities and Exchange Commission term validating their ability to back higher-risk, higher-reward ventures—across five chapters from San Diego to Santa Barbara.
The OC group, led by President Hicham Semaan is based at The Cove in Irvine; TCA’s Chairman Grant Van Cleve, an investor and entrepreneur, is also here (see Startups & Innovations, page 12).
TCA was founded in 1997 and has several notable exits including San Luis Obispo-based wellness services software maker MindBody; Pasadena fintech Green Dot Corp. (NYSE: GDOT) and this past spring’s sale of Irvine-based Parcel Pending, which installs lockers for secure package delivery at apartments.
Van Cleve said Parcel Pending “produced a 20 times return” for investors when it was bought by Neopost, Paris-based and with operations in 90 countries, for more than $100 million.
Metric System
The first six months of the year set several records for how TCA charts its work.
The $13.7 million invested was more than twice the $6.4 million TCA members committed in the same period last year, nearly triple the $4.8 million in the first half of 2017 and larger than 16 of the group’s 21 full-years.
TCA invested $10.8 million last year.
“I don’t think there’s more capital to be invested,” Van Cleve told the Business Journal, but members are more active and TCA is “more sophisticated” in considering companies, whether an investment comes of it or not.
Exit interviews of prospective investments, for instance, showed their desire for faster answers, even if a pitch fails and, “if it’s a yes, ‘please cut the check faster.’”
For the 28 companies (see item below), the median valuation of $10 million was two-thirds higher than a $6 million median last year and more than twice as high as 2017’s $4.5 million.
Average company valuation, meanwhile, was $14.3 million, higher than any past year, which the group said could be a “warning signal” of a slowdown since valuations peak prior to a downshift in investing.
Summer Heat
For now, TCA continues to build on its first-half performance.
July activity included participation in a follow-on “bridge” round for Irvine-based Mobilize, which is developing enhancements for smartphone cameras that overlay content on user photos based on location, event, and when an image is created.
Depending on those factors “there are millions of options,” said Mobilize founder Aaron Horvath. A photograph taken on OC’s coast would have relevant material users can choose—beach-related imagery, for instance. “Like a sticker or scrapbook, only you can move them around on the photo” and then, naturally, share them online.
Mobilize makes money from sponsorship of the images—Oakley sunglasses, for instance, and the importance of areas or events generate more options. A person’s backyard might have nothing available while “the Super Bowl could map out a whole city” with photo choices.
Mobilize has raised about $5 million to date with Tech Coast Angels kicking in a bit under 20% of that.
Extend Influence
TCA’s 400-plus members represent growth of one-third over last year. OC has about a hundred of that total.
“Members are recruiting their peers,” Van Cleve said.
Group-wide, TCA investors range in age from their late-20s to 90 years old, pay $1,800 a year to join the nonprofit, and possess “the capacity and intention” to commit $50,000 annually.
“It’s not a social club and you can’t be a vendor looking for gigs,” he said.
In March, the group passed another “400” milestone: it’s invested in more than that many companies in its 21 years.
TCA deals have earned an average 27% annual internal rate of return over that period.
“Not every member is in every deal and not every year is like that,” he said. “But a couple hit it out of the park.”
They’re hitting it farther, too.
TCA called out “a small but noticeable shift to more geographic diversity” in their deals this year.
The Syndicate
Nine of 28 investments through June were in out-of-state firms; the nearly one-third total almost double the group’s historical rate of about 17% invested in outside firms.
“It could be a blip,” Van Cleve said, but monthly meetings via video conference at The Cove with 20 other investor groups in an “angel syndication network” have yielded stakes this year in data, healthcare, and hospitality firms as far afield as Seattle, Chicago, and Boston.
“Cross-pollination is on the rise,” Van Cleve said.
TCA members are also using technology more often within the group to increase member interaction, including a collaboration and messaging product called Flock, to talk about deals.
“It’s not rocket science stuff,” he said. “We’re taking a more disciplined approach.”
