Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

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Accessing Capital From an Angel Investor Network Your First Professional Investment – Who, What, When, Why, Where and How?

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Accessing Capital From an Angel Investor Network. Your First Professional Investment - Who, What, When, Why, Where and How?

Transcript of Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Page 1: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Accessing Capital From an Angel Investor NetworkYour First Professional Investment – Who, What, When, Why, Where and How?

Page 2: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

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• What is Angel Investing• Who is an Angel Investor• Why Invest in Early Stage Companies• The Benefits for Entrepreneurs• Angel Network in Canada• NACO 2013 Survey• Angel Investment in Ontario• Halo Report – 2013• Angel Investing is a changing• Q & A

Agenda

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

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• I am Gerard Buckley– Founder & CEO of Jaguar Capital an Advisory Practice for Growth

Companies in Governance, Financial Management & Funding Strategies– Chairperson of Board of Directors, Maple Leaf Angels Corporation &

Investor in eight early stage companies– Nominated & Finalist for National Angel Capital’s Angel of The Year in 2014– Certified Corporate Director of the Institute of Corporate Directors– Previously Entrepreneur in Residence with Incubes (An Internet Company

Accelerator)– Past member of Small & Medium Enterprise Committee of The Ontario

Securities Commission– Investment Committee of MSV University, Halifax, NS– 32 yr. Career with Scotia Capital as a Financial Risk Management Advisor to

Fortune 200 Companies: Rogers, Irving Group, Empire Co., Four Seasons, Bruce Power, OPG, Province of Ontario, Ford etc.

Who Am I

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 4: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

What is Angel Investing

• Angel Investing is individuals investing their personal money in the equity or debt of a Early or Growth Stage Company

• Often referred to as Smart Money, it is where individuals wish to invest their time or experience as well money in a start-up company.

• People wishing to give back their experience so others may benefit which is often referred to as mentoring or serving on a company Advisory Board or Board of Directors

• Angel Investing is Active Investing not Passive

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 5: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Who is an Angel Investor

• A person prepared to invest their personal or family money

• A person who can add value to the company• An accredited investor as defined by OSC 45-106• A member of an angel network• The majority of angel investment in Canada is

completed by individuals >85%• Estimate of Cdn Angel Investment is 916mm in

approx 1500 companies (VC about 2b)

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 6: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Profile of an Angel - Median

Years investing 9Number of Investments 10Total Exits 2Years as a Entrepreneur 14.5Number of ventures founded 2.7Age 57Percent of net worth 10%Education Masters Degree

Angel Resource Institute Source: Wiltbank Study 2007

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 7: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Why Would Someone be an Angel Investor

• Qualified Opportunities• Opportunity referral• Increased Capital Diversification• High Risk Asset Class …. Seeking High Returns• Favourable Valuation and Terms in comparison to VCs• Networking• Portfolio company mentoring or engagement• Shared Due-Diligence• Advisory Board and Board of Director Roles

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 8: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

What Type of Companies Do Angels Invest In?

• Companies who are in seed and early stage.• In technology, life sciences, ict, health care

devices, med tech, clean tech, power solutions, fin tech, …..

• Solve a Problem, Secret Sauce or technology ....... USP, validated business model, Great management team

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 9: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Equity Capital Life Cycle

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 10: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Factors that appear to impact investor outcome

• Due diligence time: More hours of due diligence positively related to greater returns (> 40 hours)

• Experience: An angel investor's expertise in the industry of the venture being invested

• Participation: Angel Investors that interacted with their portfolio companies at least a couple of times per month mentoring, coaching, providing leads and monitoring performance experienced greater returns.

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 11: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Solo Angel Investing

• Process is time-consuming– Deal sourcing– Reading plans (MLA sees 250 Business Plans a year)– Meeting with entrepreneurs

• Due Diligence is difficult– Finding Vertical experience– May require using outside experts

• Legal Support is Expensive• Most have Family Offices – Super Angels

Angel Resource Institute

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 12: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

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Entrepreneur Benefits

• Large capital source• Broad pool of Knowledge & Contacts• Efficient Process• Capital Connections• In many provinces there is investor tax credit• Leverage sources of funding (IAF, IBI, BDC etc.)• Focus on value-add and advice, not the biggest

cheque

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

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Entrepreneur Tips

• Find your lead investor early• Investors don’t have to be in tech• Most Decks Suck – Make yours Good• Set a deadline• Put money in yourself, it goes a long way

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Michael Katchen - Wealthsimple

Page 15: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Selection Criteria

• Pre-seed Investments up to $200k• Seed investment should be from $250k to $500K• Early stage investments should be from $350k to $1,500K• Valuation 1 to 3.5 million (Halo 2013 median 2.5m)• The stage, quality of the management team, valuation

and technology of companies are more important than the sector criteria

• Quality is more important than quantity• In Canada 5% of companies get funded (95% don’t)• In Silicon Valley (1/300) get funded

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 16: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Investment Process

1. Pre-screening – MLA Staff2. Curbside Mentoring or Individual Member Mentoring3. Present to Investment Review Committee4. Present at members meeting5. Due-diligence Committee is formed and led by a member6. Term Sheet is negotiated & agreed between parties7. Investment is papered by lawyer8. Member is appointed to board9. Quarterly company reporting

Outlined on MLA Website

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 17: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

What Angels Look For

• High anticipated growth rate – Scalability • Experienced management team• Sustainable competitive advantage• Barriers to entry ie. Exclusive IP• Clear strategy for commercialization• Proof of concept or enterprise level validation• Business model anchored in Reality• Investor exit strategy in 5 to 8 years• Investing in what you know – vertical expertise• Coach ability of the entrepreneur• Amount of dilutive capital required

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 18: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Angel Network’s in Canada

• NACO – National Angel Capital Organization• 33 Angel Groups in Canada• They have collectively over 2100 investors• Three large groups accounted for 58%• The majority have fewer than 50 members• 75% of groups set up since 2007• 68% not-for-profit, 14% for profit & 18% not incorporated• Vast majority do volunteer shared due diligence• 12 Angel Groups in Ontario• Keiretsu Forum & Golden Horseshoe Venture Forum are Private

For Profit Angel Groups

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 19: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Canadian Angel Group Investment Activity 2013

• 199 Investments in 2013 totaling $89 million, an increase from 2012 of 13 investments and a increase in investment from 40.5 million

• Average investment is $504k up fr $314k 2012• 50% of angel groups made over 6 investments in 2012, an

increase of 20% over 2011• Of over 2100 investors 55% - Ont & Que, 40% West, 5% Atlantic• ICT (32%), Life Sciences (23%), Clean Tech (9%)• Valuation – Median $5.0m, Mean 2.06m • 55% of transactions involved a co-investor

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 20: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Angel Network’s in Ontario• Network of Angel Organizations - Ontario Funds 12 Angel Groups• They have collectively over 679 investors• Have completed 328 investment rounds since 2007 for $102 million• There are 14 Investment Clubs in Ontario that don’t receive funding• They have collectively over 192 members• Have completed 62 investment rounds since 2007 for $33 million• Many of the clubs are Boutique Investment Dealers and VCs who

take a interest carry and management fees on their investments• Three large groups accounted for 58%• The majority have fewer than 50 members• 75% of groups set up since 2007• Vast majority do volunteer due diligence• Keiretsu Forum & Golden Horseshoe Venture Forum are examples

of Private For Profit Angel Groups

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 21: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Angel Resource Institute – Halo Report – 2013

• Median Angel Round Size $600K in ‘13 and Q2 ‘14 similar to ‘12• Pre-Money Valuations continue to climb at $3M in Q2/14;

however, top valuations increased from $6.6M to $9.3M• 72% of deals occur in angel groups’ home states• 73% of Angel Deals are Syndicated or Co-Invested• Median Round Size $2M in Q2 ‘14 from $1.5M in 2012 when co-

invested• Share of Deals by Sector - Internet 38.5%(+), Healthcare 19.6%(-),

Mobile & Telecom 16.2%(+), Software (non-Internet/mobile) 4.0%(-)

• Interesting that the top US angel group in 2013 is Golden Seeds with 300+ members invests predominately in women led & controlled companies

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 22: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Traditional Angel Network is Changing

• Currently Southern Ontario Angel Investment community has 12 Angel groups

• Government programs ( IAF, MaRS, OCE, IBI)• Online - Angel List, Syndicates, Funders Club, The Funded, Gust• Y Combinator, Tech Stars, 500 Start-ups, +110 Accelerators in Canada ….

Consolidation occurring to access gov’t funding• Incubators & Accelerator funds • Crowd funding such as kickstarter.com and equity crowd funding will

follow• Introduction of OM - Offering Memorandum will have an impact• Super Angels & Micro-VC’s• “Future of Venture” – unbundling of advice, money and control

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 23: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Angel Investment vs. Venture Capital

“Venture Capital, at thetime, was a bundle of three

things – Advice, Control,and Money.”

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Naval Ravikant, Co-Founder AngelList @navalhttp://bit.ly/navalunbundling

Page 24: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Angel Investment vs. Venture Capital

“Angels are investors wholeave out the control. They

essentially bundle justAdvice and Money.”

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Naval Ravikant, Co-Founder AngelList @navalhttp://bit.ly/navalunbundling

Page 25: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Questions Entrepreneurs Should Ask Angels or Venture Capitalists

• Where does your deal flow come from?• Do you charge for presentations? Or charge for due-diligence? Or

Performance Fees?• How much management Fee do you charge? How much interest

carry do you charge investors? • How often do you hold pitches?• Do you help prepare pitches?• Do you invest together or make a investment decision separately?• Do you have a fund or make pre-seed investments?• Do you disclose your investment process?• Who will your board nominee be?

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 26: Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Maple Leaf Angels Corporation

• Toronto based and in existence since 2007• MLA has invested in 24 companies since inception in 2007

for $12,000,000 +• Registered with the OSC as a Exempt Market Dealer• Currently 55 members• Open and transparent – published funding process• Six exits since 2007 ( most recent Monday)• Continual Entrepreneur support: Curb Side Mentoring,

Volunteer Mentoring, Entrepreneur Workshops etc.

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

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Gerard Buckley, BBA, FICB, ICD.DPresident and CEO Jaguar Capital Inc.(C) 416-884-9522(W) 416-646-6789

[email protected]

www.jaguarcapital.ca

Twitter: @jaguarcapital Twitter: @gerardbuckleySlideshare: Jaguar Capital

Contact Information

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels