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GOVERNMENT SUPPORT FOR ANGEL INVESTING
operate on a passive basis, with investors investing in a managed fund. Some have hybrid models, including an- gel sidecar funds, in which the fund invests in the deals that their active members have selected to personally invest in. There is a strong case for supporting the operational costs of those angel organizations that are organized on a not-for-profit basis. First, as already emphasized, the contribution of angels goes beyond the capital that they invest. Angels contribute their expertise, provide sup- port to entrepreneurs and put governance structures in place, all of which require a significant time commit- ment for which they do not bill their investee companies. Second, the investments that angels make contribute to the development of talent that gets recycled in the eco- system. Third, the education and learning, as well as, investment tools that both angel organizations and indi- vidual angels provide help to create an investment cul-
which in turn is critical for the success of its innovation economy. The risk for Canada is that entrepreneurs will move to the United States to raise risk capital if they cannot access it in Canada, resulting in the country losing out on the technology, talent, intellectual prop- erty, jobs and financial returns that will be generated by these companies. These factors build a strong case for government support of the structured angel ecosystem. Angel organizations exhibit considerable heterogene- ity. There are two key sources of differentiation. First, is their legal structure, with a majority operating on a not-for-profit basis, but a growing proportion operating on a for-profit and, less commonly, a limited partner- ship model (see Chapter 2). Second, is their investment model. Some organizations operate on an active basis in which their members make their own investment de- cisions concerning the investment opportunities that are typically pre-screened by the management. Others
2023 ANNUAL REPORT ON ANGEL INVESTING IN CANADA
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