My favourite book on this topic is Lean Analytics: Use Data to Build a Better Startup Faster (Croll & Yoskovitz). These key metrics will vary from company to company and from stage to stage. The vast majority of Angel investments will be in the customer-discovery and validation stages, when the company is iterating product development and conducting market testing until it achieves a key validation milestone (see section 3.3.2). These milestones, in turn, drive company valuation, getting acquired, or raising the next round of financing. The NACO workshops call these “The Main Bet” and provide various examples and case studies. 5.3 Money High-growth companies can consume significant amounts of money in their quest for rapid global market domination. Angels should ensure that their equity capital is leveraged to obtain additional money from the many government programs available. Most Canadian government programs will only cover up to 50% of the cost of a given project. These government grants and financings can normally be stacked up to 75% of a small Canadian company’s expenses, allowing a company to turn your $100,000 investment into $400,000. “One of the primary roles we play at Flow Ventures,” says Bryan Watson, “is helping companies and investors navigate the ‘acronym soup’ of government-funding programs that are available to support their companies. There are significant resources available for companies to support things like research and development (R&D), technology development with universities and colleges, export development, co-investment, hiring young talent, hiring experienced talent, and engaging service providers to help advance the companies! The best way to help your companies approach programs that leverage your investment is to develop your budget or use of proceeds, and then look for funding that can reduce these expenses.” To get the most out of leverage, be active in the process of securing public funding with your investees. Your vote of confidence in them, demonstrated by your investment, carries a great deal of weight. Remember, this funding is often non-dilutive and helps your investments bridge the funding gap. Angels can often add value because they have better connections and greater money- raising expertise than their investee entrepreneurs. Since the Angels are often bridging the company until the next round of financing, it is essential that they are involved in the use of their money and in determining where the next money is coming from. Until or unless some other investors take over stewardship of the company by replacing the Angels on the board, the Angels must ensure that the money requirements of the company are being met.
76 A Practical Guide to Angel Investing: How to Achieve Good Returns
Powered by FlippingBook