C ONC LU S I ON Imp l i ca t i ons fo r Po l i cy-Make r s
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layers feed into each other.” 21 An- gel investors need a steady flow of investment-ready companies. Key enablers are federal and provincial government non-dilutive finance programs which provide entrepre- neurs with the financial resources to go from idea to validation and accelerators and incubators that provide them with mentoring and education. Angels, in turn, benefit from the leverage effects of venture capital funds that co-invest along- side them. And angel-backed com- panies provide deal flow for venture capital funds as they seek capital to support growth and scale. Howev-
er, policy-makers do not appear to fully appreciate the critical role that angel organizations play in the en- trepreneurial ecosystem, providing not just capital but mentorship and network access. Nor do they appear to fully understand “that it takes an ecosystem to raise a successful startup.” Their narrative emphasiz- es the importance of scale-ups and the role of venture capital as the enabler of scaling. But this is mis- guided for three reasons. First, as noted earlier, venture capital funds do not invest at the startup stage where the risks are the greatest. It is angel investors that perform this
role. Second, although the dollar value that venture capital funds have been investing has grown sig- nificantly in recent years, so has the size of their investments, with mega deals accounting for a rising propor- tion of their investments. This has created a potential funding gap that angels have filled, both with larger investments and follow-on invest- ments. And third, the emphasis on scale-ups runs contrary to diversi- ty which is inherent in the ecosys- tem metaphor – a forest cannot only comprise large trees; indeed, by preventing sunlight and other nutrients from reaching other parts
21 Quoted in Betakit: Launch Academy downsizes physical space as the Vancouver incubator goes virtual, 26 May 2021. https://betakit.com/launch-academy-downsizes-physical-space-as-the-vancouver-incubator-goes-virtual
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