“ANGEL INVESTORS” entrepreneurs have heard tossed around,but it’s not always fully understood. That’s where we come in. We spoke to the National Angel Capital Organization,Angel Investors Ontario and Durham Region and Northumberland County’s Spark Angels to get the goods. Who are these investors and what are they looking for? Read on and find out everything you need to know, from Angels to Z.
What is it?
Who are they?
Angels in the Ecosystem
Entrepreneurs lean heavily on angels and angel networks, and for good reason — these are often the first people to offer support. “Providing this initial funding and guidance is what makes angels so crucial to both the entrepreneurial ecosystem and the Canadian economy,” says Rojas. (Investments traditionally range from $150,000 to $1 million, though some angels start out investing less, depending on the deal.) “This is an inherently risky asset class, as angels support companies before banks and more traditional venture capital investors.” Steiner points to the “funding gap” that’s filled. “These courageous and experienced angels spend a lot of their time evaluating candidate companies, and even more time giving freely of their knowledge and contacts to help entrepreneurs succeed.”
“At the end of the day, it’s about commercializing new technologies and creating jobs, but angels also use their experiences and contacts to help, coach and guide entrepreneurs.”
What are they looking for?
NACO has been around for 20 years and has offered the country’s entrepreneurial and innovation community a national platform. “We represent a growing membership of more than 4,000 angel investors, incubators and accelerators as they help Canadian entrepreneurs turn good ideas into great businesses. Over the last nine years, our members have made investments in 1,472 companies, totalling more than $853 million of direct investments. This has resulted in the creation of 7,700 jobs across the country. As a national platform, NACO enables collaboration, partnership opportunities and faster access to Canada’s innovation ecosystem.
ACCELERATOR: Publicly or privately funded initiatives that support start-ups by helping them develop their business for a predetermined period of time (usually a few months). This can include coaching or boot-camp events that help entrepreneurs scale their business.
ACCREDITED INVESTOR: An individual who (alone or jointly with his or her spouse) owns financial assets having an aggregate realizable value that exceeds $1 million (before taxes). Accredited investors have net incomes more than $200,000 (before taxes) in the last two years (or whose net income combined with his or her spouse exceeds $300,000). They also have knowledge and experience in business and finances, and can evaluate the merits and risks of investments.
BUSINESS PLAN: The document that describes the entrepreneur’s idea, an executive summary, the market problem, solution, business models, technology, marketing strategy, competitors and forecasted financial data.
CORPORATION: A legal entity that’s chartered by the federal or provincial government. Owned by stockholders.
DUE DILIGENCE: The process angel investors undertake to analyze and assess the value and potential of an investment opportunity. (Typically takes 60 to 90 days.)
ELEVATOR PITCH: A super-concise spiel or presentation of an entrepreneur’s idea and business model, as well as marketing strategy and
competition. It shouldn’t be longer than an average elevator ride and is most effective when kept quick and to the point.
EQUITY: Shares that represent an ownership interest in a company.
EXIT STRATEGY: The company’s plan to liquidate the company’s stock in the form of an acquisition by a publicly traded company or a public offering.
INCUBATOR: An organization that supports a start-up within their first few years. These can provide offices, lab space, meeting facilities, resources and mentoring programs. They are different from accelerators because they focus on developing the company over a longer period of time.
NET INCOME: The net earnings of a company after deducting all costs, including taxes.
SCALABILITY: The ability for a company’s product or service to grow very big, very quickly.
SEED MONEY: A start-up’s first round of capital, which is often either a loan or investment in stocks. This money (often provided by angel investors) provides start-ups with the capital they need to really start developing and growing.