Angel investors go virtual during pandemic
Angel investors taking pitches in online meetings during pandemic
Mark Dobbin misses seeing entrepreneurs share their visions and ideas in-person. Taking pitches over a Zoom call doesn’t really replace that face-to-face connection for him.
“It’s workarounds, really, is what you have,” the president and founder of Killick Capital Inc. told The Telegram. “As good as the technology is, I don’t believe it replaces faceto-face. Particularly when you’re meeting someone and building a relationship. It’s one thing to have a Zoom call with a company executive that we’ve known for years, but when you’re building a relationship — being able to read the body language, go have a meal together, do a facilities tour if that’s appropriate — you learn a lot from these real-world interactions.
“The various online technologies are helpful — they don’t fully replace.”
That said, Dobbin and other angel investors are still taking meetings with startups hoping to turn pitches into businesses that can contribute significantly to local economies.
In the early stages of the COVID-19 pandemic last year, Killick went into cash conservation mode like a lot of other businesses. It made sure the existing portfolio of companies were looked after while figuring out what government programs might apply to them. As people became more familiar with the new business environment, Killick resumed looking into investment opportunities.
HESITATION, OPPORTUNITIES
Claudio Rojas, CEO of the National Angel Capital Organization (NACO), said there’s a fair amount of hesitation among angel investors right now.
“Investing in startups is the highest risk of virtually any portfolio,” he said. “When the markets did what they did in March, we saw an immediate pause, or immediate hesitation.”
Traditionally an investor focused group, NACO is doing more work lately to support entrepreneurs, helping them become better equipped to appeal to angel investors. A recently launched investor readiness program was initially piloted in Atlantic Canada through the regional tech startup accelerator Propel ICT.
Rojas noted, too, that angel investors are growing more accustomed to the digital environment for connecting with people.
“We’re working very hard to leverage the digital opportunity for entrepreneurs that have been historically underrepresented by either geography or in terms of their background,” Rojas said. “We do think it’s an opportunity.”
NACO also repurposed its curriculum for helping angels invest prudently in order to train entrepreneurs on how to prepare their business for the scrutiny of due diligence. That includes a mentorship opportunity with an angel-in-residence. Rojas said this will help entrepreneurs get acquainted with the angel-entrepreneur dynamic and give them an advocate for opportunities down the road.
EMERGING TRENDS
Killick has been a major investor in Newfoundland and Labrador’s technology sector. It played a pivotal role in the development of Verafin, a company Nasdaq acquired last year for US$2.75 billion. Its portfolio includes growing companies like Sequence Bio, Mysa, Celtx and radient360 solutions. There’s more friction in the investment market, but Dobbin does not see any problems on the horizon for the province’s technology sector when it comes to attracting funds.
“I see that the tech sector was better able to deal with the restrictions and work-from-home requirements,” he said. “They are by definition more comfortable with technology and were much more versed with the digital tools of business that other businesses outside that sector are having to learn.”
Dobbin — NACO’S 2020 Angel of the Year — expects the tech sector’s talent pool will grow because of other sectors forced to shed jobs due the pandemic. The cost of commercial office space is also declining and Dobbin believes this will also encourage new startups to get off the ground.
“The last oil downturn in the province, we saw an increase in the formation of new businesses, and some of those are continuing to hire and build value for Newfoundland and Labrador. We’ve got a long way to go to fully diversify our economy away from particularly oil and gas and other resource sectors — and I don’t mean to imply I want to see those (sectors) decline. I want to see the others grow to balance them off.”
NEW DEALS
Rojas anticipates the pandemic will further accelerate interprovincial deals.
“Because digital is so powerful at creating relationships beyond provincial or regional borders, what we expect to see in the data we’re currently collecting and synthesizing is a significant increase in deal syndication ... and we think this is something that will continue.”
With interprovincial connectivity in mind, NACO hosted an Atlantic summit virtually last fall, and attendance shot up significantly from about 100 to more than 600 attendees from across Canada. NACO expects to hire its first managing director for Atlantic Canada in 2021.
“We think this will play a significant role in helping us to mobilize angel investors off the sidelines and into local startups in order to contribute to the early stage of the scaleup pipeline, and over time create more Verafin success stores. More made in Atlantic Canada success stories.”
As more people receive COVID-19 vaccine doses, Dobbin expects companies like Killick will be able to step up investment activity. Killick has a significant stake in the aviation sector through Killick Aerospace.
“Those types of investments are still a long way from recovery,” he noted. “Once you have visibility on the recovery of those, in our case anyway, that will allow us to be a little more active in both bricks and mortars investment, as well as digital companies such as the Colab Softwares and Heyorcas and the Sequence Bios of the world.”