Incubes presentation accessing capital from an angel investors 2013 07 31

Accessing Capital From an Angel Investor Network

Your First Professional InvestmentWho, What, When, Where and How?

Agenda

• 90 Second Company Elevator Pitch• Who is an Angel Investor• Angel Network in Canada• NACO 2012 Survey• Halo Report – Q 1 - 2013• Angel Investing is a changing• Maple Leaf Angels• The Benefits for Entrepreneurs• Q & A

MLA

Who is an Angel Investor

• A person prepared to invest money their money• A person who can add value to the company• An accredited investor as defined by OSC• 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

Angel Network’s in Canada

• NACO – National Angel Capital Organization• 32 Angel Groups in Canada• They have collectively about 1500 investors• Three large groups accounted for 58%• The majority have fewer than 50 members• 50% of groups set up since 2008• Vast majority do volunteer due diligence• 13 Angel Groups in Ontario

National Survey of Canadian Angel Groups Investment Activity 2012

• 139 Investments in 2012 totaling 40.5 million, an increase from 2011 of 134 investments and a decrease in investment from 82.4M

• Average investment is $314k down fr $614k• 50% of angel groups made over 6 investments in

2012, an increase of 20% over 2011• 82% - Ont & Que, 16% West, 2% Atlantic• ICT (54%), Life Sciences (23%), Clean Tech (10%)

Angel Resource Institute – Halo Report – Q1 - 2013

• Median Angel Round Size trends up to $680K from $650K• Early Stage Pre-Money Valuations remain stable at $2.5M• 81% of deals occur in angel groups’ home states• 75% of Angel Deals are Syndicated • Median Round Size $1.5M up from $1.44M when co-invested• Share of Deals by Sector - Internet 36.8%, Healthcare 18.7%,

Mobile & Telecom 16.6%, Software (non-Internet/mobile) 6.2%

Angel Group Benefits

• Qualified Opportunities• Opportunity referral• Increased Capital Diversification• Great Valuation and Favourable Terms• Networking• Portfolio company mentoring or engagement• Shared Due-Diligence• Advisory Board and BOD Roles

Traditional Angel Network is Changing

• Currently Southern Ontario Angel Investment community is fragmented with 13 groups

• Government programs ( IAF, MaRS, OCE, IBI)• Online - Angel List, The Funded, Gust• Y Combinator, Tech Stars, 500 Start-ups• Incubators & Accelerator funds • Crowd funding such as kickstarter.com and equity

crowd funding will follow • Super Angels & Micro-VC’s

Maple Leaf Angels Corporation

• Toronto Bay Street based and in existence since 2007• MLA has invested in 22 companies since inception in 2007 for

$9,600,000• Registered with the OSC as a Exempt Market Dealer• Currently 45 members• MLA conducted a strategic renewal in Nov 2011 with a new

business plan released in January 2012 and a new BOD elected March 2012

• I became Chairperson, Board of Directors, Jan 2013

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)

Equity Capital Life Cycle

Cash flow

Sale

s a

nd

p

rofi

t

I ntroduction Growth Maturity Decline

Time

R & D Pre-Seed & Seed

Start-Up

Sales

Round 1 Round 2

Grants / Love Money

$

Angel $

VC $ VC $

Exit

Angel $

Concept and product

development

Profit

What Angels Look For

• High anticipated growth rate• Experienced management team• Sustainable competitive advantage• Barriers to entry• Clear strategy for commercialization• Proof of concept or enterprise level validation• Business model anchored in Reality• Investor exit strategy

Five types of Angel Investors

1. The Coach Angel Investor2. The Do’er Angel Investor3. The CEO of a Public Company Angel Investor4. The Spectator Angel Investor5. The Boss Angel Investor

Three factors that appear to impact investor outcome

• Due diligence time: More hours of due diligence positively related to greater returns

• 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.

The Application Process

• Start with www.mapleleafangels.com• There is a full education section for

entrepreneurs• You apply using www.gust.com• Selection Committee• Monthly Member Meetings• Due Diligence• Term Sheet

Target Investee Companies

• Companies who are in seed and early stage, two for each meeting if the quality can be found

• In technology, provided they are backed by a member who is willing to sponsor

• Great management team, valuation, technology .......

Selection Criteria

• 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• The best of the best should only present and the

number of companies presenting should be limited to one or two, introduced by someone who is willing to sponsor or lead the investment and due diligence process

Selection Criteria

• Select the very best in seed and early stage• Seed investment amounts should be from $250k to

$500K and early stage investments should be from $350k to $1,500K

• Deal flow of members – both group investments and private or small group investments should be tracked and reported on, with clear communication on which investments went through MLA’s group due diligence

Future Topics

1. Bootstrapping a Company & Exec Summary2. Preparing a Pitch for Investors3. Terms to expect from an Investors Term

Sheet4. Accessing Capital from a Angel Network5. Forming an Advisory Board6. Pros of Cons of accessing Venture Capital too

early & some of the pitfalls to avoid

Gerard Buckley, BBA, FICB, ICD.DPresident and CEO Jaguar Capital Inc.(C) 416-884-9522(W) [email protected]

www.jaguarcapital.ca

@jaguarcapital @gerardbuckley