B UILDING A N ATIONAL A NGEL O RGANIZATION by Henry Vehovec C HAPTER 9
S U M M A R Y The National Angel
Organization (NAO), formed in October 2002, is a non-profit group that represents angel investors in Canada. Its mission is to improve the success of angel investors through networking and education and by providing a collective voice. NAO has already performed pioneering research work with the Rotman School of Management, Industry Canada, and is in discussions to conduct broader-based work with other economic stakeholders. Among its first priorities, the NAO is examining the nature of the venture capital gap and the determinants of success for angels seeking to fill it. The article also focuses on the demographic compositon of angels in Canada and outlines the governance structure for the new NAO.
INTRODUCTION
Angel investors address the gap between love money and venture capital or more sophisticated sources of downstream capital. Generally considered the weakest segment of the financing services spectrum, angel investors must address higher risk, uncertain liquidity, long investment horizons, management gaps and a wide range of other industry-specific issues. Historically, angel investing has been carried out primarily by individual private investors; disciplined investment managers rarely invest at the angel level. Relatively little has been known about angel practices and how they might be improved. Indeed, relatively little has been known generally about the angel investing “sector.” It is unclear, for example, how many angels there actually are in Canada. Oddly, many angels do not even
recognize themselves as angel investors; they might not even be familiar with the term. Yet, the reality is that angels invest more than five times in early stage businesses as the entire venture capital industry combined. Since 2000, more than 300 angels have participated in loosely organized grass roots events that have grown in sophistication and ambition. At the second Angel Investor Summit in October 2002, it was decided to create the National Angel Organization (NAO), a non-profit organization that would, among other goals, provide continuity for the enthusiasm and optimism that has characterized angel activities to date. ISSUES AND CONSIDERATIONS IN CREATING NAO In the discussions leading to the creation of NAO, the participants articulated various challenges to be addressed by a national organization of angels, including the creation of distinct value propositions for a wide variety of angel needs and requirements. Specific needs were expressed based on geography, local clusters and maturity of existing angel organizations. Discussion also focussed on defining deliverables, benefits of membership, funding models, governance structure
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