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ANGEL ORGANIZATION CHALLENGES
E ntrepreneurs play a critical role in the Canadian economy as a source of innovation, exports and job creation. However, they need access to capital to commercialize their ideas, achieve market traction, access global markets and scale- up. Angel organizations play a key role in overcoming inefficiencies and frictions in the early-stage en- trepreneurial finance market, and thereby enhance the ability of en- trepreneurs to raise the investment capital that they require. First, Angel organizations attract private investors who often lack the networks to source deals, lack the time for engagement or evaluation
or simply lack the expertise in ear- ly-stage investing on their own. An- gel organizations mobilize capital to invest in entrepreneurial companies that would otherwise be invested in other asset classes. Second, unlike angels who invest informally and hence are difficult for entrepreneurs to access, angel organizations have a public profile and so make the angel market more visible and hence more efficient. Many organizations use online plat- forms to manage the investment process, enabling entrepreneurs to take the initiative to approach them. This, in turn, enhances the flow of investment opportunities that their
members have access to.
Third, angel organizations are man- aged and professionalized in their operation (albeit to varying de- grees), with established routines for accessing deals, screening deals, undertaking due diligence, negoti- ating and investing, resulting in the professionalization of this segment of the entrepreneurial finance mar- ket. Fourth, by aggregating the invest- ment capacity of individual angels to invest in entrepreneurial businesses they contribute to filling what has been termed the ‘second equity gap’ – investments that are too big
BY PROFESSOR COLIN MASON
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