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S
“ Accessing Angel & Venture Capital in Canada ”
Experience.
Governance - Financial Management - Strategy
Integrity. Trus...
2
Real World
Gerard Buckley
gerard@jaguarcapital.ca
@jaguarcapital
@gerardbuckley
Bus: 416-645-6695
Experience and Experti...
S What, Who, Why, When and How of
Angel Investing
S Selection Criteria
S Angel Network in Canada
S Canadian Angel Group Ac...
S Angel Investing is individuals investing their personal money in the equity or debt
of a Early or Growth Stage Company
S...
S Angels are investors who leave out control. They essentially bundle Advice & Money
S A High Net Worth person prepared to...
S Years investing 9
S Number of Investments 10
S Total Exits 2
S Years as a Entrepreneur 14.5
S Number of ventures founded...
S Qualified Opportunities
S Opportunity referral
S Increased Capital Diversification
S High Risk Asset Class …. Seeking Hi...
S Companies who are in seed and early stage.
S In technology, life sciences, ICT, health care devices, med tech, clean tec...
Equity Capital Life Cycle
S High anticipated growth rate –
Scalability
S Experienced management team
S Sustainable competitive advantage
S Barriers ...
S More hours of due diligence positively related to greater returns (> 40 hours)
S Experienced former entrepreneurs as ang...
S Pre-seed Investments up to $100k
which usually includes family and
friends
S Seed investment should be from $250k
to $50...
S NACO – National Angel Capital Organization is
the National Industry Association
S Canadian Angel Groups range in size fr...
S 283 Investments in 2015 totaling $133.6mm
up from 237 investments and $90.5mm in
2014
S Average investment is $1.16mm, s...
Angel Resource Institute – Halo Report 2015
S Median Angel Round Size trends up to $850k in 2015 from $510K in 2014. When
...
S Currently Southern Ontario Angel
Investment community has 13 Angel
groups
S Government programs ( IAF, MaRS,
OCE, IBI)
S...
S Angel List Canada announced as a Exempt Market Dealer by OSC on October 24
S Introduced to Ontario, Canada by Creative D...
What should you be doing to attract Capital
Investment Process
1. Pre-screening – Network Staff
2. Curbside Mentoring or Individual Member Mentoring
3. Present to Inv...
Investment Readiness Level
S Identify and Validate Metrics That Matter
S Validate Value Delivery
S Prototype High-Fidelity...
S Large capital source
S Broad pool of Knowledge & Contacts
S Efficient Process
S Capital Connections
S In many provinces ...
Entrepreneur Tips
S Find your lead investor early
S Investors don’t have to be in tech
S Have a good business plan and exe...
Super Hero of The Modern Start-up World
Venture Capital Investment Activity in Canada
S Cdn VC’s invested record high $1.5b (255) in H1‘16 is up from $1.1b (272) ...
Venture Capital Investment
S For entrepreneurs, choosing the best financing model for their start-up isn’t a
luxury – it i...
Venture Capital Pros
S Small piece of a big company is better than a large piece of a small company
S Their goal is to gro...
Venture Capital Cons
S You have to qualify
S Often looking for exit in short time frame
S Negotiations tend to be one side...
Pitfalls
S Complex covenants based on performance metrics
S Inordinately thick documents
S May replace management
S Liquid...
S Where does your deal flow come from?
S Do you charge for presentations? Or
charge for due-diligence? Or
Performance Fees...
Canadian SME Market Trends
S Nation of independent contractors
S The state of employment is
changing dramatically
S Canada...
Trends in Canadian Early Stage Investment
S There is a lot of attention being paid to Fin Tech especially in Toronto
S Med...
Do It Your Way –Parting Thoughts
S Over 90% of all businesses are started and grown with no equity financing
S VC is the O...
Mission
To be a Trusted Advisor and Visible
Expert to Companies for our Core
Competencies
Culture
Experience
Integrity
Tru...
Focused Industries
Energy, Digital Media
Technology, Healthcare
Manufacturing
Financial Services
Specialize In
Forming Adv...
1. We HELP Companies get Financed
2. We HELP Companies Increase Investors Confidence in their Investment
3. We HELP Compan...
“1/3 of all SME’s in Canada had
problems accessing additional
financing, let Jaguar Capital help you
attain the financing ...
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Accessing Angel and Venture Capital in Canada 2016

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To many, Angel Capital and Venture Capital are similar. To the entrepreneur accessing capital they are very different and complex. Gerard Buckley will attempt to give readers and participants an understanding of the differences in Canada and how to prepare CEO's and founders to understand which alternative may be best for your company.

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Accessing Angel and Venture Capital in Canada 2016

  1. 1. S “ Accessing Angel & Venture Capital in Canada ” Experience. Governance - Financial Management - Strategy Integrity. Trust.
  2. 2. 2 Real World Gerard Buckley gerard@jaguarcapital.ca @jaguarcapital @gerardbuckley Bus: 416-645-6695 Experience and Expertise S Founder & CEO of Jaguar Capital an Advisory Practice for Growth Companies in Governance, Financial Management & Strategy S Past - Chairperson of Board of Directors, Maple Leaf Angels Corporation & founder and Lead Director for Maple Leaf Angels Capital Corporation, the General Partner of MLA48LP1 a Pre-Seed Angel Fund. S Certified Corporate Director - The Institute of Corporate Directors and Certified Management Consultant – Canadian Association of Management Consultants S Past member of Small & Medium Enterprise Committee of The Ontario Securities Commission S Investment Committee of Mount Saint Vincent University, Halifax, NS S 32 yr. Career with Scotia Capital as a Financial Risk Management Advisor to Fortune 200 Companies: Rogers, Irving Group, Empire Co., Four Seasons, Bruce Power, OPG, Province of Ontario, Ford etc.
  3. 3. S What, Who, Why, When and How of Angel Investing S Selection Criteria S Angel Network in Canada S Canadian Angel Group Activity 2015 S Angel Resource Institute – Halo Report 2015 S Traditional Angel Network is changing S Angel List is now in Canada S Investment Process S The Benefits for Entrepreneurs S Venture Capital in Canada S Canadian SME Market Trends S Trends in Canadian Early Stage Investment S Parting Thoughts S Q & A Agenda
  4. 4. S Angel Investing is individuals investing their personal money in the equity or debt of a Early or Growth Stage Company S Often referred to as Smart Money, it is where individuals wish to invest their time or experience as well money in a start-up company. S People wishing to give back their experience so others may benefit which is often referred to as mentoring or serving on a company Advisory Board or Board of Directors S Angel Investing is Active Investing not Passive What is Angel Investing
  5. 5. S Angels are investors who leave out control. They essentially bundle Advice & Money S A High Net Worth person prepared to invest their personal or family money S A person who can add value to the company S An accredited investor as defined by OSC 45-106 S A member of an angel network S The majority of angel investment in Canada is completed by individuals >85% S There at least 10,000 to 15,000 angels belong to over 300 groups in the USA. S In Canada we have 1650 active angels in 32 groups. Who is an Angel Investor
  6. 6. S Years investing 9 S Number of Investments 10 S Total Exits 2 S Years as a Entrepreneur 14.5 S Number of ventures founded 2.7 S Age 57 S Percent of net worth 10% S Education Masters Degree Profile of an Angel Investor - Median Wiltbank Study 2007
  7. 7. S Qualified Opportunities S Opportunity referral S Increased Capital Diversification S High Risk Asset Class …. Seeking High Returns S Favourable Valuation and Terms in comparison to VCs S Networking S Portfolio company mentoring or engagement S Shared Due-Diligence S Advisory Board and Board of Director Roles Why would someone be an Angel Investor
  8. 8. S Companies who are in seed and early stage. S In technology, life sciences, ICT, health care devices, med tech, clean tech, power solutions, fin tech, ….. S Solve a Problem, Secret Sauce or technology ....... S USP, validated business model S Great management team What Type of Companies do Angel Investors Invest In
  9. 9. Equity Capital Life Cycle
  10. 10. S High anticipated growth rate – Scalability S Experienced management team S Sustainable competitive advantage S Barriers to entry ie. Exclusive IP S Clear strategy for commercialization S Proof of concept or enterprise level validation S Business model anchored in Reality S Investor exit strategy in 5 to 8 years S Investing in what you know – vertical expertise S Coach ability of the entrepreneur S Amount of dilutive capital required What Angels Look For
  11. 11. S More hours of due diligence positively related to greater returns (> 40 hours) S Experienced former entrepreneurs as angel investors S An angel investor's expertise in the industry of the venture being invested S Angel Investors that interacted with their portfolio companies at least a couple of times per month mentoring, coaching, providing leads and monitoring performance experienced greater returns. S Training, mentoring and coaching for new angel investors S Portfolio investing S Not withstanding there is no silver bullet to a successful outcome Factors That Appear To Affect Investor Outcome
  12. 12. S Pre-seed Investments up to $100k which usually includes family and friends S Seed investment should be from $250k to $500K S Early stage investments should be from $350k to $1,500K S Valuation 1.5 to 4.5 million S The stage, quality of the management team, valuation and technology of companies are more important than the sector criteria S Quality is more important than quantity S In Canada 6% of companies get funded (94% don’t) S In Silicon Valley (1/300) get funded Selection Criteria
  13. 13. S NACO – National Angel Capital Organization is the National Industry Association S Canadian Angel Groups range in size from 10 to 100 members S 32 of 40 Angel Groups in Canada participated in NACO’s 2015 Survey with 90% on investment in their home province S They have collectively 1650 investors a decline of 2% from 2014 S 72% of groups established for five or more years. S 67% not-for-profit and 20% for profit S Majority do volunteer shared due-diligence S 13 Angel Groups in Ontario S Keiretsu Forum, Roadhouse Capital, Golden Horseshoe Venture Forum, etc. are Private For Profit Angel Groups S According to Invest Toronto, almost half (40%) of the top 250 technology companies in Canada are headquartered in Toronto which is 3rd only to Silicon Valley and New York in North America. Angel Networks in Canada
  14. 14. S 283 Investments in 2015 totaling $133.6mm up from 237 investments and $90.5mm in 2014 S Average investment is $1.16mm, stabilizing around 2014 figures & Median Value $635k S Of over 1650 Cdn investors in Cdn angel groups, 67% located in Central Cda, 28% West, 5% Eastern Cda. 79% of value of investments made in Central Canada S ICT (55%), Life Sci (8%), Clean Tech (5%) S Follow on investment increased ‘15 over ‘14 S Equity Investments dominate at 96% with Common Shares at 45%. Convertible Debentures at 28% and Preferred at 23% S 75% of transactions involve a co-investor. 57% with other angel investors and 9% with Venture Capital S Valuation – Median $2.5m, Mean 3.3m S Of 4,473 applications in Canada 6.3% get funded by networks S In 2015 there were 12 positive exits recorded. 6 were M&A, 2 IPOs and 4 were sales to new or existing shareholders Canadian Angel Group Activity - 2015
  15. 15. Angel Resource Institute – Halo Report 2015 S Median Angel Round Size trends up to $850k in 2015 from $510K in 2014. When invested with others 1.6mm S Pre-Money Valuations continue to climb at $4.6mm in 2015 a 53% increase from $3mm in 2014; however, top valuations increased from $13.5mm to $23.5mm S 70 to 80% of deals occur in angel groups’ home states S 73% of Angel Deals are Syndicated or Co-Invested S Only 20.9 % of angel deals are transacted in California S Share of Deals by Sector - Software 33.9%(-), Commercial Services 8.7%(-), Healthcare 14.1%(+), Media 3.8%(-), Consumer Goods & Recreation 2.4%(-), Pharma & Biotech 7.3%(+)
  16. 16. S Currently Southern Ontario Angel Investment community has 13 Angel groups S Government programs ( IAF, MaRS, OCE, IBI) S Online - Angel List, Syndicates, Funders Club, The Funded, Gust S Y Combinator, Tech Stars, 500 Start-ups, +110 Accelerators in Canada …. Consolidation occurring to access gov’t funding S Incubators & Accelerator funds S Crowd funding such as kickstarter.com and equity crowd funding S Introduction of OM - Offering Memorandum will have an impact S Super Angels & Micro-VC’s S “Future of Venture” – unbundling of advice, money and control Traditional Angel Network is Changing
  17. 17. S Angel List Canada announced as a Exempt Market Dealer by OSC on October 24 S Introduced to Ontario, Canada by Creative Destruction Lab and Next Canada (both related to UofT) S A Online Portal for Accredited Investors S AngelList USA raised $163mm from 3,379 investors on behalf of 441 start-up companies in 2015, up 56% over 2014 S There were 170 syndicates on AngelList in 2015 S 40% of the rounds were private and institutional money were in 40% of the deals S AngelList also matches potential hires. In 2015 with 250,000 candidates 548,000 matches were generated. Angel List is now in Canada
  18. 18. What should you be doing to attract Capital
  19. 19. Investment Process 1. Pre-screening – Network Staff 2. Curbside Mentoring or Individual Member Mentoring 3. Present to Investment Review Committee 4. Present at members meeting 5. Due-diligence Committee is formed and led by a member 6. Term Sheet is negotiated & agreed between parties 7. Investment is papered by lawyer 8. Member is appointed to board 9. Quarterly company reporting
  20. 20. Investment Readiness Level S Identify and Validate Metrics That Matter S Validate Value Delivery S Prototype High-Fidelity Min. Viable Product S Validate Revenue Model S Validate Product/Market Fit S Prototype Low-Fidelity Min. Viable Product S Problem/Solution Validation S Market Size/Competitive Analysis S Complete First-Pass Business Model Canvas IRL 9 IRL8 IRL 7 IRL 6 IRL 5 IRL 4 IRL 3 IRL 2 IRL 1 Created By Steve Blank
  21. 21. S Large capital source S Broad pool of Knowledge & Contacts S Efficient Process S Capital Connections S In many provinces there is investor tax credit S Leverage sources of funding (IAF, IBI, BDC etc.) S Focus on value-add and advice, not the biggest cheque Entrepreneur Benefits
  22. 22. Entrepreneur Tips S Find your lead investor early S Investors don’t have to be in tech S Have a good business plan and executive summary – Most investors tend to think of start-ups without a plan as expensive hobbies S Most Decks Suck – Make yours Good S Set a deadline S Develop a Funding Strategy S Put money in yourself, it goes a long way
  23. 23. Super Hero of The Modern Start-up World
  24. 24. Venture Capital Investment Activity in Canada S Cdn VC’s invested record high $1.5b (255) in H1‘16 is up from $1.1b (272) in H1’15. Ave. deal size has grown to $6.1 mm up from an ave. range of $4mm in 2015. S Regional breakdown for H1 is Ont 44%, BC 19%, Prairies 6%, Quebec 28% and Atlantic is 4%. In 2015 Ontario accounted for 38% of deals and 42% of disbursements. Quebec represented 31% of disbursements for the same period. S Information and Communications Technology (ICT) 67% is driving most of the growth followed by Health and Life Sciences 20% and Clean Tech 7%. S VC investment was up in 2015 with 536 deals for 2.3b an increase of 24% and 12% respectfully over 2014 S In 2015 there has been a shift by VC’s towards earlier stage deals (seed stage up 30% to 178 deals) at the expense of later stage deals which is down 12% in volume and 23% in amount invested. S Exits were also up in 2015 reaching a record 4.3b compared with 1.5 b in 2014 and 1.3b in 2013 S Of 1.5b invested in H1’16 644mm came from public pension plans and 534mm from government sponsored funds
  25. 25. Venture Capital Investment S For entrepreneurs, choosing the best financing model for their start-up isn’t a luxury – it is a necessity S The terms you will be offered will be commensurate with the value you have created. Sales = Higher Valuation S VC’s money comes from LP’s which is mostly institutional S Some VC firms walk and talk like groups on angels. See seed financing in the #’s.
  26. 26. Venture Capital Pros S Small piece of a big company is better than a large piece of a small company S Their goal is to grow the company quickly and exit. S Deep pockets for follow on financing S Allows you to focus on the business rather than constantly raising $ S VC firm name helps & signaling positive S It is their FT Job to help you succeed S Industry expertise
  27. 27. Venture Capital Cons S You have to qualify S Often looking for exit in short time frame S Negotiations tend to be one sided S Legal costs of documentation are high S Equity has a higher cost than debt +30% S Staff & time commitment for due- diligence S Reduced control or determination of business S VC’s ask for and get better terms than Angels S Your business is exposed to the VC’s funding cycle and market uncertainties S One author referred to VC’s as a last resort S May control board decisions S Follow on Financing requires higher valuations to support VC’s valuation S Funding is down and VC’s are taking less risk. S Series A crunch
  28. 28. Pitfalls S Complex covenants based on performance metrics S Inordinately thick documents S May replace management S Liquidation preference S Anti-dilution clauses S Loose control of the direction of your company S May hold veto rights or rights to sell company S Signaling effect (VC in seed round & passes next round)
  29. 29. S Where does your deal flow come from? S Do you charge for presentations? Or charge for due-diligence? Or Performance Fees? S How much management Fee do you charge? How much interest carry do you charge investors? S How often do you hold pitches? S Do you help prepare pitches? S Do you invest together or make a investment decision separately? S Do you have a fund or make pre-seed investments? S Do you disclose your investment process? S Who will your board nominee be? Questions Entrepreneurs Should Ask Angels or Venture Capitalists
  30. 30. Canadian SME Market Trends S Nation of independent contractors S The state of employment is changing dramatically S Canada is an Immigrant Nation S Productivity in Canada has not improved S USA advantage is the development of their risk Capital Markets S Cost of start-up in CDA is less that USA (especially Silicon Valley) S Seed and Pre-seed level is where VC money is going S Consolidation of Accelerators and Incubators S Angel Tax Credit provincially and is being lobbied federally S Valuations for public companies are high and is effecting private markets S Less exits
  31. 31. Trends in Canadian Early Stage Investment S There is a lot of attention being paid to Fin Tech especially in Toronto S Medical Technology has always and still is a focus of MaRS Innovation S Gaming has received a lot of attention in the entertainment space through Digital Media Fund and conferences such as Game on in Canada S Social Media applications are tougher due to freemium business models that are tough to validate S The collaborative or shared economy gets attention where the company has got traction, validated a product market fit and acquired customers such as Dozr, Waterloo and Share The Bus, Montreal S The auto industry is blistering hot in USA; however, large capital is required when we are speaking about such technologies as Autonomous Vehicles. Notwithstanding cities like Stratford are making themselves available for testing sites of such vehicles. To date no applications filed S Accelerators such as MaRS, Highline, Next Canada & Creative Destruction Lab in Toronto, Communitech in Waterloo and Founders Fuel in Montreal are getting a lot of attention.
  32. 32. Do It Your Way –Parting Thoughts S Over 90% of all businesses are started and grown with no equity financing S VC is the OPM (Other Peoples Money) drug of Start-ups S Oct’13 Profit Hot 50 - Seed Financing – 98% Founders own capital, Growth Capital – 62% Founders own Capital S Control your destiny until you create sales S Eyes Wide Open and be well researched S Send me a email and I will send you a recommended Due Diligence Checklist and/or a Sample One Page Executive Summary
  33. 33. Mission To be a Trusted Advisor and Visible Expert to Companies for our Core Competencies Culture Experience Integrity Trust Vision To Grow a Canadian Based Internationally Comprehensive Advisory Practise Focused on Growth Companies Who is Jaguar Capital Target Companies Growth Companies Where our Consultants Add Value
  34. 34. Focused Industries Energy, Digital Media Technology, Healthcare Manufacturing Financial Services Specialize In Forming Advisory Boards Board of Director Consultation Raising Alternative Financing Pre-Revenue Valuation Focus On Governance Financial Management Strategy What Jaguar Capital Does How We Do It Advisory Management Consulting Interim Executive
  35. 35. 1. We HELP Companies get Financed 2. We HELP Companies Increase Investors Confidence in their Investment 3. We HELP Companies Grow 4. We HELP Companies with Strategic Direction 5. We HELP Companies Manage Financial Risk 6. We Get a Company Positioned for IPO 7. We HELP Companies with Dysfunctional Boards of Directors, Advisors & Disruptive Directors Benefits of Working with Jaguar Capital
  36. 36. “1/3 of all SME’s in Canada had problems accessing additional financing, let Jaguar Capital help you attain the financing you deserve” – Gerard Buckley gerard@jaguarcapital.ca

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