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The Role of Angel Investors in the Entrepreneurial Ecosystem 1.1
A ngel investors play a critical role in the entre- preneurial ecosystem. They are the ecosystem’s main source of seed capital, investing relatively small amounts in companies at the start-up and early growth stages. While angel investments are characterized by considerable heterogeneity, angel investors typical- ly invest in businesses that have demonstrated some customer traction and are seeking investment to grow their revenue, although some angels invest at earlier, pre-revenue or pre-traction stages. As such, angel in- vestors play a complementary role to that of the venture
capital industry. Angel investors are often the first in- vestors in businesses that go on to raise larger amounts from venture capital funds to finance their scale-up. This funding model can be seen as analogous to a relay race: “angel investors run the critical first leg of the re- lay race, passing the baton to venture capital only after a company has begun to fund its stride. Venture capital- ists focus... on expansion and later stages of develop- ment, when their contribution is most effective.” 1 Prom- inent Canadian entrepreneurial successes that have followed this funding pattern include Shopify in Ottawa,
1 Benjamin, G. A. and Margulis, J. B. (2000) Angel Financing: How to Find and Invest in Private Equity. Wiley, New York.
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