Money and men­tor­ship

An­gel in­vestors pro­vide cap­i­tal and ex­per­tise to early stage busi­nesses

The Labradorian - - EDITORIAL - BY KENN OLIVER

For early stage busi­nesses, there are count­less av­enues of fi­nan­cial sup­port avail­able to sup­port in­vest­ment in the prod­uct or ser­vice be­ing sold or de­vel­oped.

Some are eas­ier to come by, like friends and fam­ily, while oth­ers, like loans from fi­nan­cial in­sti­tu­tions or in­vest­ment from ven­ture cap­i­tal­ists, re­quire a lit­tle more fi­nagling.

Bridg­ing that gap and pro­vid­ing cap­i­tal in ex­change for con­vert­ible debt or equity in a com­pany are what’s called an­gel in­vestors.

While they’ve tra­di­tion­ally been wealthy in­di­vid­u­als mak­ing solo in­vest­ments, there’s a grow­ing trend among An­gel in­vestors or­ga­niz­ing them­selves into net­works as a means to share re­search on a com­pany and pool cap­i­tal to­wards a greater in­vest­ment.

“Ev­ery­body’s look­ing for a home run, ev­ery­body’s look­ing to make money, ev­ery­body’s look­ing to cre­ate jobs, they’re want­ing to be on the front end of in­no­va­tion and that’s what it’s about,” says Paul An­tle, chair­man for the 2017 In­ves­tat­lantic con­fer­ence and pres­i­dent and CEO of Pluto In­vest­ments Inc.

It’s es­ti­mated there are only about 30 such net­works across Canada, in­vest­ing in a va­ri­ety of sec­tors. In­clud­ing him­self, An­tle fig­ures there are prob­a­bly 50 or so op­er­at­ing in New­found­land.

Un­like ven­ture cap­i­tal­ists (VC) that man­age a fund of money be­long­ing to other peo­ple, an­gels are typ­i­cally dip­ping into their own money to fund high-risk in­vest­ments that they hope will re­sult in a higher re­turn on in­vest­ment.

That makes for a dif­fer­ent dy­namic be­tween the an­gel in­vestor and the in­vestee than would ex­ist with a bank or VC.

For An­tle, as long as the idea is solid and a mar­ket ex­ists for the prod­uct or ser­vice, the qual­i­ties of the in­di­vid­ual mak­ing the pitch for back­ing and how he in­ter­acts with them ac­counts for the bulk of the for­mula for suc­cess.

“I’m not in­vest­ing my money in a tech­nol­ogy, I’m not in­vest­ing my money in a cor­po­ra­tion or a busi­ness, I’m in­vest­ing it in you, the per­son. You’re go­ing to make all this hap­pen, your team is go­ing to make all this hap­pen.

“I’m jump­ing into your dream, so you bet­ter con­vince me that you’re pas­sion­ate about your dream and be­lieve there’s a fu­ture in order for me to help you get there.”

An in­te­gral com­po­nent to the dy­namic is trust built on hon­esty.

“It’s re­ally im­por­tant they’re aligned with their ex­pec­ta­tions in re­gard to the time frame that it might take to grow a busi­ness,” says First An­gel Net­work (FAN) co-founder and di­rec­tor Brian E. Lowe, who views an in­vest­ment as a part­ner­ship.

“If you’re not aligned and not hon­est on all fronts with one an­other, then you’re not go­ing to have as good a part­ner­ship.”

An­other as­pect to the re­la­tion­ship that sets an­gels apart in the in­vest­ment world is that their in­volve­ment is just as much about men­tor­ship as it is about money.

“The value they bring in their men­tor­ship is prob­a­bly worth as much or more than their money,” says Craig Rowe, CEO and founder of St. John’s-based soft­ware com­pany Clear­risk, which ex­ists in part be­cause of in­vest­ment from FAN.

“If ev­ery sin­gle busi­ness started off by fig­ur­ing out ev­ery­thing on their own, you’d never get there and you’d fall into all the traps that ev­ery­one else falls into.”

Rowe’s ad­vice to star­tups and en­trepreneurs look­ing for cap­i­tal and men­tor­ship is to look for it long be­fore it’s re­quired and, once ac­quired, take the steps to en­sure the re­la­tion­ship re­mains strong. “Nur­ture those re­la­tion­ships early and keep good re­la­tion­ships with your men­tors and your back­ers be­cause you’re al­ways go­ing to need fol­low on cap­i­tal, you’re al­ways go­ing to need ad­vice and you need that door to be open and then pay it for­ward.”

Both An­tle and Lowe say there’s a ro­bust ecosys­tem in New­found­land and Labrador that has been al­low­ing for more suc­cess in in­no­va­tion and tech­nol­ogy. One of the cen­ter­pieces of that ecosys­tem is the Ge­n­e­sis Cen­tre, Me­mo­rial Univer­sity’s busi­ness in­cu­ba­tor.

“We need or­ga­ni­za­tions like that to get these groups’ in­vest­ment ready be­cause we want to put our money into what they’re do­ing as a busi­ness and not try­ing to help them un­der­stand how to op­er­ate a busi­ness,” says An­tle, point­ing to Me­mo­rial’s Cen­tre for En­trepreneur­ship and Pro­pel ICT as two other valu­able sup­port mech­a­nisms.

Ge­n­e­sis CEO Michelle Simms says the or­ga­ni­za­tion has had long­stand­ing re­la­tion­ships with an­gel in­vestors in this prov­ince and through­out Canada, and is al­ways seek­ing more.

“The nice thing about an an­gel in­vestor is that they are go­ing to tol­er­ate more risks,” Simms says. “They’re com­ing in at a very early stage so they un­der­stand the thing may fail.

“They don’t want your first­born and they don’t want those se­cu­ri­ties that come along with tra­di­tional banks and fi­nance in­stru­ments.”

New­found­land and Labrador, with a tech sec­tor grow­ing at light speed and now val­ued at an es­ti­mated $1.6 bil­lion, is in need of more an­gel in­vestors.

As such, FAN’S re­cent de­ci­sion to es­tab­lish roots in the prov­ince with the ad­di­tion of M3 Sonar Con­sult­ing owner and for­mer Pro­pel ICT CEO Gary Dinn as its pro­vin­cial di­rec­tor is ex­cit­ing news.

“Hav­ing them have an ac­tual per­son on the ground here now means a lot to us,” Simms says. “We’re go­ing to def­i­nitely try our best to fill their pipe­line.”

Lowe says they’re ac­tively seek­ing new an­gels to join the net­work.

“We’re out to do two things, re­ally: that is grow the an­gel ecosys­tem and do more deals go­ing for­ward as we in­crease our num­bers through ac­tive an­gels be­ing en­gaged.”

PHOTO BY KENN OLIVER

First An­gel Net­work (FAN) co-founder and di­rec­tor Brian E. Lowe was one of five panelists to take part in a re­cent an­gel in­vestors ses­sion. FAN wants to bring more ac­tive an­gels for­ward to ex­pand the prov­ince’s ecosys­tem in an ef­fort to sup­port good, early stage com­pa­nies and en­trepreneurs.

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