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Archive for the ‘Angels’ Category

By David Crow

The Federal Economic Development Agency for Southern Ontario announced a new Investing in Business Innovation program. The program offers matching grants for early-stage venture funding. This is a $190 Million  program running from 2010-2014.

There are provisions for startups and angel networks. Since we’re StartupNorth, let’s try to deal with the startup side first.

  • Startups who receive a term sheet from a qualified angel investor (as defined by the Ontario Securities Commission) or venture capital firm (registered with the Canadian Venture Capital association) are eligible to apply for up $1 Million in loan from the federal government.
  • Restrictions:
    • Start-up businesses will be eligible for repayable contributions up to $1 million for no more than one-third (33⅓ percent) of total eligible and supported project costs.
    • An angel and/or venture capital investor(s) must be committed to provide at least two-thirds (66⅔ percent) of the cash contribution toward eligible and supported project costs.
    • In-kind contributions related to mentoring, networking, and other business skills cannot be considered as part of the angel or venture capital investor’s cash contribution.
    • A maximum of one project per eligible start-up SME can be funded under the initiative.
    • Direct eligible costs for start-up businesses may include:
      • Labour, capital and operating expenditures;
      • Materials and supplies;
      • Consulting and/or professional fees (limited to market rate); and,
      • Minor and non-capital acquisitions (e.g., software).
    • All project activities must be completed by March 31, 2014;

Basically there is federal government matching loans up to $1 Million for startups that are raising angel or venture funding in Southern Ontario. This is a fantastic start.

It’s great for startups in Southern Ontario, it’s curious that the program is only available in Southern Ontario. Why not all of Canada? How are the repayment terms set? Is this a zero percent interest loan from the Federal Government? Does the term sheet have to be equity investment? Is convertible debt eligible? How do startups “demonstrate they are using business mentoring, counseling, or related services”?

Reposted from StartUp North

David Crow is an emerging technology and start-up advocate/evangelist. David blogs at http://davidcrow.ca/ and http://startupnorth.ca/ or follow him on Twitter @davidcrow.


The RIC blog is designed as a showcase for entrepreneurs and innovation. Our guest bloggers pro vide a wealth of information based on their personal experiences. Visit RIC Centre for more information on how RIC can accelerate your ideas to market.

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By Bryan Watson

As Executive Director of the National Angel Capital Organization, I am constantly asked what business angel investors are looking for by entrepreneurs.

There is no one-size-fits-all answer. Entrepreneurs must always remember that angels, acting alone or in groups, are all individuals, with their own motivations for and interests in investing.

Some angels will only invest in one industry. Some angels will invest in many industries. Some angels will be extremely hands on – even taking senior roles within their investee company – mentoring the company and leveraging their network and expertise to help ensure its success. Some angels will invest in a company and leave it to other investors to help ensure the company’s success. No one size or set of motivations describes all angels.

That said, there are a few things that all investors will look for in their potential investments; or at least should be looking for. I usually sum these things up as the “3 T’s” – being Team, Traction and Technology (Read more about the 3 T’s and their relationship to the failure modes of investee companies here).

The Wall Street Journal in an interview with Susan Preston on April 25th, How to Win Angel Funding, did an excellent job of rounding out the investment criteria of angels. Every entrepreneur seeking capital should review this article to ensure their opportunity, at the very least, meets all of the criteria set out in the article. These include:

  • A solid potential for return
  • A good plan for he cash
  • A winning attitude
  • A seasoned team
  • A competitive edge
  • A well-defined exit strategy

With a market for private investment capital characterised by extreme scarcity, demand far exceeding supply, an entrepreneur cannot afford to approach investors without having satisfied all of these criteria. If you have not met these, I would suggest that you will have an exceptionally hard time securing capital as, in a market such as ours today, even companies that have met and far exceeded these base criteria are having a difficult time securing capital.

Reposted from EP Enterprises

Throughout his career, both in Canada and the UK, Bryan J. Watson has been a champion of entrepreneurship as a vector for the commercialization of advanced technologies. Upon his return to Canada in 2004, Bryan established his venture development consulting practice to help emerging-growth companies overcome the barriers to success they face in the Canadian commercialization ecosystem.  Visit Bryan’s blog and the National Angel Capital Organization.


The RIC blog is designed as a showcase for entrepreneurs and innovation. Our guest bloggers pro vide a wealth of information based on their personal experiences. Visit RIC Centre for more information on how RIC can accelerate your ideas to market.

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By Baris Akyurek,  Guest Blogger

The other day I was thinking about why I haven’t seen as many female Angels at events. I know many Canadian women who are entrepreneurs but for some reason they do not seem to invest in early-stage companies as often as men.

About 20% of the students in my finance and accounting classes in business school were women. The figure shrank to 5% in my Private Equity and Venture Capital class.  The reason? I am not too sure (I sense a good research opportunity).  There are many successful female entrepreneurs, there are many successful women in the capital markets, but there seem not to be many female Angels, at least in Canada.

Countering this trend is Ms. Anna Sofat, who founded the first female-backed angel investor group in the U.K., called Addidi.  According to the website, Addidi is dedicated to finding wealth management solutions that suit women – and their partners and families.

NACO would love to see more women follow in her footsteps and attend our events as well.  We run ahead of the curve (established in 2009 US statistics from the Center for Venture Research where 11.3% of Angels are women) in having three fine women Angels on our board.  Also, in our draft renewal of our Best Practices, we note that the participation of women in the process of due diligence is essential for a true evaluation.

If you are a female investor and are interested in Angel Investing in Canada, please do not hesitate to contact us… we would love to hear from you! After all, wouldn’t you want to found the first female-backed Angel Investing fund in Canada, akin to Golden Seeds in the United States?

Reposted from National Angel Capital Organization. Baris Akyurek is a  NACO associate.

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By David Crow

Is there any questions that the Canadian venture capital industry is in turmoil? There is a change that is happening, it might just not be happening as fast as it could. Mark McQueen talks about  the creative destruction of the VC industry in Canada.

“There’s no robust “new class” of VC firms coming in behind the current oligarchy, with a similar amount of capital to deploy as those they are planning to replace. We are witnessing the destruction piece of the equation, for sure, but not the rebirth that is the essence of “creative destruction” if it is to succeed.” – Mark McQueen, Wellington Fund

While there are a few new players entering the market (I’m looking at you ExtremeVP and Mantella VP), we’re seeing a lot of roadkill. There are firms that are not able to raise their next fund, partners that are on life support, startups that are left to wonder what happened to their partners in raising additional capital. However, many that remain are digging in and fighting for their way of life. They are lobbying for support to “manufacture an environment that is hospitable to their investment style”. Adam Adamou at Caseridge Capital Corporation argues that the existing venture players, the Canadian VC oligarchy, have successfully lobbied for restrictions that have kept out new players including the public/private venture capital that was used to fund RIM.

“The traditional venture capitalists see themselves as the founders of a “Silicon Valley North” and they follow the US trends, which unfortunately do not apply to our Canadian market. They seem to see themselves as avant-garde investors in tomorrow’s technology companies, however, they behave more like bankers[sic] – preferring security and downside protection over opportunity”

Yikes, that’s a damning review of the Canadian venture industry. However, I’m not sure that the suggested alternatives including Capital Pool Companies and the TSX-V are really better choices for Canadian entrepreneurs (or investors). (I’m not an expert on CPCs or TSX-V but when my friends and trusted advisors like Mark McLeod provide commentary, I listen). What I took away from The Adamou Rant is that many of the funds have a vested interest in the maintaining something akin to the current system. Governments should look critically at the numbers being presented and who is presenting them.

The State of a Nation

Is the sky falling? What is the state of venture capital in Canada? Is it really this bad? And why does it matter to early-stage entrepreneurs? Should we all just move to Silicon Valley, New York City, Boston or somewhere else?

The Canadian VC environment has been challenging for a lot of entrepreneurs. As entrepreneurs, you need to understand the environment that you will start, fund, and grow your company. Canada has a strong track record of access to capital, a stable economic policy and should be a great spot for entrepreneurs. It’s also unique. Canadian companies tend to be at a later stage of corporate development and raise less money than their US counterparts. I’ve written about the impact of the state of the funding environment has on startups. And what entrepreneurs can continue to expect to see, includes:

  • The number of investors will continue to decrease
  • Valuations will continue to decrease
  • Customer uptake will be slower
  • Need to become cash flow positive
  • Acquiring entities will favour profitable companies

Mark McQueen provides the best summary of state of the Canadian Venture Capital landscape I’ve seen in a while:

  • VC investments in Canadian firms hit a 14 year low in 2009
  • US venture market saw US$18 billion invested in 2009, Canada saw only $1 billion (5.5%) our economy is approximately 12.5% the size of the US economy
  • Up to half of current Canadian VC funds will not be able to raise their next fund
  • Ontario government has sunset the $1 billion Retail Venture Capital Industry
  • “Section 116″ was fixed in the 2010 Federal Budget, however, this is not a silver bullet
  • 117 disclosed cross board investments since January 2008 (this includes Canadian investments in US companies)
  • Canadian Fund of Funds have lots of capital to invest in foreign led funds: EDC ($1.2 billion); Teralys ($700 million); OVCF ($205 million)

A New Hope

We need to hope that from out of the ashes will emerge a better funding environment for Canadian entrepreneurs. Whether this is led by new funds, angel investors, US funds, or the existing players learning from their mistakes, it doesn’t matter.

We’re starting to see a strong set of the big players making acquisitions across Canada:

Our startups need real capital to continue to compete on the world stage. But they can’t survive on SR&ED credits alone. We need to hope that this creative destruction happens quickly, so that something can rise from the ashes and we can witness the rebirth of the Canadian tech startup.

Reposted from StartUp North

David Crow is an emerging technology and start-up advocate/evangelist. At Microsoft Canada, he is responsible for helping Canadian start-ups gain access to software, support and visibility in the Microsoft ecosystem through programs like BizSpark (details at microsoft.com/bizspark). David blogs at http://davidcrow.ca/ and http://startupnorth.ca/ or follow him on Twitter @davidcrow

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Rob Koturbash of the Maple Leaf Angels and Bryan Watson of the National Angel Capital Organization (NACO) were recently featured on the ‘In Business’ show on Rogers TV.

Rob and Bryan talked about who angel investors are, what businesses they invest in and what are some of the important differences between Angels and VCs. They also talked about the upcoming co-investment summit on June 8th and the importance of organizations such as the RIC Centre to help innovative companies on the path of commercialization.

Check it out here.

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By Andrew Maxwell

All entrepreneurs need to form a network of informal and formal relationships in order to be successful. The entrepreneur’s desire to be opportunistic and act quickly can sometimes cause them to make mistakes in their partner selection that can prove damaging and/or expensive to the business in the longer term.  I hope that by sharing a few of these negative experiences, entrepreneurs might gain some ideas and insights into how to improve the quality of their decision-making about partner selection.

First, I will recount some of my experiences with partnership formation between founding entrepreneurs. All too often, I have had to spend time, several years after a venture has formed, unraveling the partnership and clarifying original intentions and commitments. More than one person starts most companies, consequently the relationship between founders is critical to long-term venture success. Co-founders can provide complementary perspectives on decisions to be made, and improve the speed and quality of decision-making. All too often the selection of partners is based on friendship or other similarities that may not be the best basis for the decision. While friendship or similar backgrounds might be important, for instance in the alignment of core values or creating a pleasant work environment, individuals who are too similar can have the same blind spots or limited experience base. This can reduce the quality of decision-making.

Partners need to enjoy working with each other, but not necessarily be friends. They should take the time to get to know each other, and only then formalize their relationship. Importantly, while flexibility and adaptability are critical to the early stage of a venture, there is a need to document the relationship through a formal agreement. This agreement is usually in the form of a contract that outlines expectations about business objectives, how partners will make decisions, and what happens if one of them wants to leave the venture. Some formal ideas about each partner’s roles and responsibilities can also be useful.

Other strategic relationships are critical to venture success, as an example I will discuss the relationship between entrepreneur and investor. Many of the comments made about the relationship between entrepreneur and investor can be applied to other strategic relationships. It is important to understand what an investor can bring to the table, and what help the venture needs. In general, the right investor brings a good deal more than money to the venture, based on their experience, and existing relationships.  While this may seem obvious, it is surprising how many times an entrepreneur takes money from an investor who is unable to add much additional value, rather than waiting for a strategic investor. Often, entrepreneurs who are action orientated, make the choice of an investor with limited ability to add value, because attracting the strategic investor is harder or involves a lower valuation. In general, this is because the entrepreneur really does not understand the true value of the right investor.

I met with an entrepreneur this week, who rather than accepting an investment from a VC, had taken an initial investment from Business Angels who had limited ability to help him with his business. He chose the VC when he needed a second round of finance, because the VC team had in-depth experience in the area and could actively help grow his business. In addition, the investment from the VC gave the company a level of credibility that allowed them to attract customers and strategic partners. Finally, the VC also was well positioned to attract further rounds of finance from other VCs.

Clearly, it is important to be strategic in your choice of partners, investors and customers. While the attraction of a concluding a short-term agreement and taking advantage of an opportunity maybe too much to resist, there maybe a good strategic reason to search for a partner who can provide many levels of benefit. Having a contract with a market leader might be challenging and take time to consummate, but it says a great deal about the company to other potential partners. 

Andy is currently working at the Canadian Innovation Centre and pursuing a Ph.D. in the area of new venture creation at the University of Waterloo. In his spare time, he enjoys teaching technology entrepreneurship at UTM and the University of Waterloo.

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By Bryan Watson

Capital for early-stage companies around the world has become much more scarce than it was a few years ago. To any entrepreneur looking for investment, this is absolutely no surprise and there are plenty of articles that speak of this. When investments from venture capital firms into companies in Q3 of 2009 in provinces like Ontario drop 87% to $24 million it is hard to miss the fact that the market for money for a start-up, or for growth-oriented companies, has become extremely difficult.

There is a growing ray of hope in Ontario, however. Angels. During 2009, the Angel community continued to invest. There were many investments completed by Angel groups in Ontario (e.g.: Well.ca) and even new Angel groups formed to meet the demand such as the Maple Leaf Angels – West Chapter formed in partnership with the RIC Centre.

Given that Angels represent one of the last sources of capital for start-ups and growth-oriented companies (with notable exceptions in the VC world that co-invest with Angels) another source for hope is the fact that the Office of the Leader of the Opposition (Federal) recently added the Innovation and Productivity Tax Credit (IPTC) to their platform.

The IPTC is a credit that companies would apply for. Once a company has been approved as being eligible and allocated a specific tax credit allotment, individual investors could invest up to that amount in the eligible company. Upon making their investments, investors would apply for a suggested 30% refundable tax credit. (More information can be found here.)

A tax credit of this form has shown to stimulate significant Angel investment into companies in many jurisdictions such as BC, Manitoba, the UK, and others. Similar programs have also been adopted by many other countries, including, most recently, Singapore.

So, though we do not have this Tax Credit yet in Ontario, should the Federal Government adopt it Ontario-based companies can look forward to a significantly increased supply of Angel capital looking for strong opportunities in which to invest.

To learn more about and show your support for the IPTC, please click here.

Throughout his career, both in Canada and the UK, Bryan J. Watson has been a champion of entrepreneurship as a vector for the commercialization of advanced technologies. Upon his return to Canada in 2004, Bryan established his venture development consulting practice to help emerging-growth companies overcome the barriers to success they face in the Canadian commercialization ecosystem.  Visit Bryan’s blog and the National Angel Capital Organization.

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