Angel Investing 101

By: Dennis Ensing

Member Survey

Angel investing is a vital component of the financing ecosystem for small and medium enterprises. For entrepreneurs it is the opportunity to get an experienced successful professional to help fuel their business’ growth aspirations with both the investor’s financial commitment and expertise at the table – including management advice and valuable contacts. For the investor it brings the prospect of above-average returns to a segment of their portfolio and also the satisfaction of helping to make good ideas into great businesses.

Financially, while this is a high-risk investment class, an angel investor’s goal is to achieve higher returns than the public markets typically provide, and so they are prepared to accept the higher risk involved.

Yes, this is an active investment class in Canada. NACO Canada (Canada’s National Angel Capital Organization) annual publishes their Angel Activity Report that identifies key statistics and trends in the Canadian angel capital market measured through prominent angel groups across the country. They highlighted the following for 2016 :

  • 35 angel groups across Canada, representing 3300 active angels, made 418 investments amounting to $157.2 million
  • The average deal size was $1.7 million, 49% more than the 2015 figure
  • 71% of funding falls within 2 sectors: Life Sciences (health related companies) and ICT (information and communications technology)
  • Central Canada continues to be the hotspot for Angel investment activity with 61% of investments made in the region

SWO Angels is a member-based not-for-profit organization for accredited investors who live and work in London, Ontario. The group brings many advantages to someone who is considering becoming an angel investor:

  • Scheduled opportunities to assess quality, pre-screened, early-stage companies that are seeking capital;
  • The ability to pool their funds with other angels and spread their investments among several opportunities;
  • A structured investment process called due diligence;
  • Tools to support the investment process;
  • A community of fellow investors with complementary skills and/or expertise; and
  • Social and educational opportunities.

SWO Angels had an exceptional year in 2016 as well. We screened more than 135 opportunities and had 18 of them present at 9 Investor Meetings, generally held monthly. 21 of our members invested over $5.5 million into 8 companies. This investment helped these ventures attract an additional $9.4 million in leveraged funding. Our typical first-round investment is a company looking for $500-750,000. Individual investments start at $25,000 each and go up from there. In 2016 half of the companies had previously received investment, so there were some larger follow-on rounds closed.

Intrigued or have more questions? Contact me for a copy of SWO Angels’ membership package or call 519-858-5043.

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