Angel investment in Canada fell dramatically in 2023 for the second straight year, threatening the country’s economic vitality, says a new report from the National Angel Capital Organization, or NACO. The report also found angel investment falling in Atlantic Canada, though not as much as the country overall.

The Annual Report on Angel Investing in Canada said the investment channeled through Canadian angel networks last year amounted to $114.9 million, a decline of 31 percent from the previous year. By way of comparison, the Canadian Venture Capital and Private Equity Association reported that VC investment in 2023 dropped 34 percent.

It was the second year in a row that NACO had reported a sharp drop in investment by its member organizations. In 2022, the national body reported a 37 percent reduction in investment to $166 million.

“Angel investment has dropped by 31 percent year-over-year, reflecting a similar decline in venture capital investment,” said the report. “This downward trend threatens not only our economic vitality but also our ability to lead on the global stage.”

The report says that investments in Atlantic Canada in 2023 amounted to $5.0 million, a drop of 18 percent from $6.1 million the previous year.

The NACO findings differ somewhat from the startup funding data reported by Entrevestor in our latest Atlantic Canada Startup Data report. NACO draws investment data from its member networks, which includes such organization as Saint John-based East Valley Ventures, Charlottetown-based Island Capital Partners and St. John’s-based Pelorus Ventures.

Entrevestor comes up with its data by surveying Atlantic Canadian startups and asking them how much investment they received from angel investors. The Entrevestor report says that angel investment in Atlantic Canada in 2023 dropped 19.8 percent to $18.7 million. It was the first time in at least seven years that angel investment in the region had fallen below $20 million.

The NACO report said that angel investors have invested a total of $1.66 billion since 2010 across Canada, including $49.5 million in Atlantic Canada.

For the national stats in 2023, the organization said 31 percent of the investment dollars went to information technology companies, and 24 percent to manufacturing. Its data also indicated that Canadian angels favoured companies they already knew in the risk-averse environment of 2023. Some 36 percent of the investment across Canada was follow-on funding, up from 32 percent in 2022 and 26 percent in 2021.

The NACO report was written by Colin Mason, Professor of Entrepreneurship at the University of Glasgow. Mason is a familiar face in Atlantic Canada as he’s done research projects with several universities in the region.