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The Financing Funnel 3.2
A ngel investors invest in only a small proportion of the companies that approach them for funding. Early-stage startup financing can be characterized as a financing funnel. A large number of companies ap- proach angel organizations to seek funding. The major- ity of these are rejected by the organization’s manage- ment at the initial screening stage, being considered as not suitable to be assessed by angel organization mem- bers. Some will be deemed to be un-investable, oth- ers do not fit with the organization’s investment focus, and others will be judged not to be investment-ready.
However, this is not necessarily a negative outcome. These entrepreneurs may receive valuable feedback to help them become investment-ready in the future or be directed to more appropriate sources of financing. Of those invited to present to members, only a minority will be of potential interest to investors. Many of the pitches will not attract interest from angels. Of those that do at- tract the initial interest of angels, some will be rejected following a more detailed assessment of their own due diligence.
202 1 ANNUAL REPORT ON ANGEL I NVEST I NG I N CANADA The Chang i ng Landscape
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