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Introduction Executive Summary
T he financing needs of innovative startups, partic- ularly in technology sectors, typically exceed their capability to generate funds internally, while their ability to attract bank loans (debt finance) is restricted by their lack of collateral and negative cash flows. In order to win markets, these firms have to grow and scale their businesses quickly. However, the faster a firm grows, the higher its requirement for cash to invest in research and development (R&D), product development and test- ing, recruitment of key team members, premises, spe- cialized equipment, marketing, sales and distribution capability, and inventories.
Firms utilize various sources of funding at different points in their development to finance their growth. Angel investors, defined as high-net-worth individuals, usually with entrepreneurial or senior corporate back- grounds, who are investing their own money along with their expertise either on their own or, increasingly, as a member of organized angel organizations, are typically the first external investors in such businesses. Angels are the biggest investors at the seed and start- up stages, both in terms of amounts invested and the number of investments. It has been estimated that an-
2023 ANNUAL REPORT ON ANGEL INVESTING IN CANADA
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