C HAPTER 8
S U M M A R Y Angels often invest as groups in order to access higher quality deal flow, share due diligence and diversify investments and reduce risk. This article profiles four Canadian angel groups - the Kingston Angel Network, the Vancouver Angel Network, Ottawa’s Band of Scoundrels and the London Angel Network. The practices of these four groups illustrate that there are common features to most angel groups as well as different ways in which angel
B UILDING A N A NGEL G ROUP by Brad Ross with input from Ian Campbell, Joe Dales, Tony Farrow, and Mike Volker
INTRODUCTION
Angel investors often work in groups for three key reasons: • To access more and higher quality deal flow than can be found by working alone. • To reduce individual effort by dividing up the work. • To reduce risk by tapping into the group’s varied experience.
groups approach the challenge of early-stage investing.
Group participation also allows individual investors to spread their capital across more deals, resulting in better diversification and reducing risk. Less than 20 local angel groups have been formally established in Canada, compared with more than 300 in the U.S. While each network is uniquely designed to serve the interests of its members, these groups have many characteristics in common, such as the investment screening process, and many that vary, such as organizational structure. Four groups are profiled in this chapter. KINGSTON ANGEL NETWORK The Kingston Angel Network was launched in November 2001 with an informal dinner hosted by the Kingston Economic Development Corporation (KEDCO). This was in response to interest expressed by recent arrivals to the community with angel investing experience. Using the personal networks of business people in the community, organizers invited approximately 20 people to discuss the need and opportunities for angel investing in Kingston. The guests identified a clear gap in the availability of seed capital below the thresholds of venture capitalists. Companies requiring investments of over $1 million were able to tap into venture capital funds to meet their needs. However, small businesses needing investments of less than $1 million had few sources of funding and there were very few deals. Consequently, many of the area’s prospective entrepreneurs were moving to larger centres such as Toronto, Montreal and Ottawa where they stood a better chance of attracting the financing needed to bring their ideas to fruition.
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