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Your Start-Up Business: How to Find an Angel Investor

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It's a new year and a new chance to work towards your dreams. If your dream as an entrepreneur is to get funding from Angels, venture capitalists, or by other means, we're going to discuss how you can get closer to your dream this month.

This week, I spoke with Yasmine Kustec from the Network of Angel Organizations -- Ontario about early-stage funding for start-ups.

For many companies, the number one stumbling block to early growth can be lack of funding. Without connections, or a very supportive family (or very liberal bank manager,) many companies simply don't know where to start when it comes to finding a partner who believes in their idea enough to nurture it and help fund the initial stages of a company.

There is an overlooked group in this landscape waiting to be matched with interesting companies: Angel Investors.

Angel Investors can add valuable expertise and invest necessary seed capital for companies who are starting out and need guidance.

How do you find an Angel Investor? That's where the Network of Angel Organizations - Ontario comes in. the NAO-Ontario is a matchmaking service between companies in need of Angels, and Angels who are looking to expand their portfolio.

The NAO's goal is simple: to help build tomorrow's innovative companies by creating and growing non-profit Angel investor groups for all regions in Ontario.

Network of Angel Organizations - Ontario (NAO - Ontario) is the Administrator of Ontario's Angel Network Program (ANP) and helps spread the word among Angel investors and networks about funding that is available to them under the Federal Economic Development Agency for Southern Ontario's Investing in Business Innovation initiative.

Karen: Can you explain the impact of the programs NAO-Ontario administers?

Yasmine Kustec:
Since the start of both programs, the Angel community has grown significantly. As of October 2012, membership in our partnered networks has grown to over 600 in ANP-supported Angel investor groups and to 180 in other Angel networks listed for the IBI program. In total, members of these groups have invested in over 115 Ontario companies. We are happy to report that groups now operate across Ontario!

As a result of the ANP, Angel investment has been newly profiled in Ontario and validated as a source of finance and aspiration for early-stage entrepreneurs.

In addition, members of a partnered network qualify for the FedDev Ontario's IBI matching funds. This has helped attract potential Angels and Angels who invest outside of the network.

Karen: Have you had an increase in applications?
Yasmine Kustec: Yes. We reach out to entrepreneurs and help them become more aware of the Angel group in their community and the requirements needed to pursue Angels effectively.

Karen: What's the state of Angel funding in Ontario?
Yasmine Kustec: The ecosystem is growing; numbers of Angel investors are growing within our networks. More recently, networks are co-investing with each other, thus increasing the total amount invested in start-ups.

The networks working together not only helps ensure companies are not underfunded, but it also pools experiences and skillsets from a wide variety of backgrounds, which helps Angels invest outside of their comfort zones and increases managements' business acumen.

Karen: What's the number one stumbling block a company encounters when they embark on the money trail?
Yasmine Kustec: Entrepreneurs are in for a rude awakening when the fail to plan for capital from the start. Networking with Angels and advisors well before the company needs capital for growth, as well as ensuring documents are filed properly for due diligence play a vital role in their pursuit.
The pitch, identifying realistic valuations, and market traction are also weaknesses.

Karen: Describe the difference between Angel funding and traditional venture capital.
Yasmine Kustec: Angels invest their own money (accredited investors as defined by the Ontario Securities Commission's Rule 45-802 - National Instrument 45-106). They often take on a mentorship role and hands-on approach. Turning a profit is definitely at the top of their list for reasons they invest in start-ups, however most truly have a vested interest in entrepreneurship and the future of their community. Many of them are past and/or present entrepreneurs that have a few exits under their belt.

Karen: With sites like Kickstarter and indiegogo, has the landscape of Angel changed?
Yasmine Kustec: Angel investors provide more than just capital to start-ups. Mentorship, network (contacts) and experience they bring to the table are reasons entrepreneurs seek Angel capital. This value proposition..."smart money"

Karen: What do you need to have as a company (documentation, pitch deck, etc.) to be able to approach potential investors? Yasmine Kustec:
  • A well-vetted business plan
  • Financial Plan
  • Presentation
  • 1 page executive summary is essential
  • Video pitch is useful

Karen: How does NAO facilitate the relationship between start-ups and Angels?

Yasmine Kustec: We refer completed applications from our Gust account to Ontario Angel groups. We perform outreach activities - helping entrepreneurs become more aware of the networks in Ontario as viable sources of start-up financing.

Karen: What can entrepreneurs expect from the Angel-start-up relationship?  Yasmine Kustec:
  • A hands-on approach
  • Mentorship, guidance, etc.
  • Director position on the board
  • Capital
Karen: How can you find out which Angel investors are accepting pitches? Yasmine Kustec:They accept applications all the time. Investment meetings occur between September - June, usually once a month. It's a matter of involving them from inception. A company may not be "investment-ready", however it's never too early to network. Let them become familiar with your start-up from day one - before you need capital. Doing so increases your chances of receiving investment, builds trust, and invites in mentorship.Karen: What kinds of information are Angel Investors likely to want from a company? Yasmine Kustec:
  • Realistic valuations
  • Solid, credible plans for high growth (usually start-ups in the high tech sectors)
  • Early interest from or sales to customers
  • Credible, experienced management teams
  • Unique, defensible & saleable innovations
  • Significant yet reachable market
  • Investments of250,000 -750,000

For more information on the Network of Angel Organizations - Ontario, check out this video:

Angel Investing from NAO-Ontario on Vimeo.