Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

Accessing Capital From an Angel Investor Network
Your First Professional Investment – Who, What, When, Why, Where and How?

2
Agenda
• What is Angel Investing
• Who is an Angel Investor
• Why Invest in Early Stage Companies
• The Benefits for Entrepreneurs
• Angel Network in Canada
• NACO 2013 Survey
• Angel Investment in Ontario
• Halo Report – 2013
• Angel Investing is a changing
• Q & A
www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels

3
Who Am I
• I am Gerard Buckley
– Founder & CEO of Jaguar Capital an Advisory Practice for Growth
Companies in Governance, Financial Management & Funding Strategies
– Chairperson of Board of Directors, Maple Leaf Angels Corporation &
Investor in eight early stage companies
– Nominated & Finalist for National Angel Capital’s Angel of The Year in 2014
– Certified Corporate Director of the Institute of Corporate Directors
– Previously Entrepreneur in Residence with Incubes (An Internet Company
Accelerator)
– Past member of Small & Medium Enterprise Committee of The Ontario
Securities Commission
– Investment Committee of MSV University, Halifax, NS
– 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.

What is Angel Investing
• Angel Investing is individuals investing their personal
money in the equity or debt of a Early or Growth Stage
Company
• 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.
• 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
• Angel Investing is Active Investing not Passive

Who is an Angel Investor
• A person prepared to invest their personal or
family money
• A person who can add value to the company
• An accredited investor as defined by OSC 45-106
• A member of an angel network
• The majority of angel investment in Canada is
completed by individuals >85%
• Estimate of Cdn Angel Investment is 916mm in
approx 1500 companies (VC about 2b)

Profile of an Angel - Median
Years investing 9
Number of Investments 10
Total Exits 2
Years as a Entrepreneur 14.5
Number of ventures founded 2.7
Age 57
Percent of net worth 10%
Education Masters Degree
Angel Resource Institute Source: Wiltbank Study 2007

Why Would Someone be an Angel
Investor
• Qualified Opportunities
• Opportunity referral
• Increased Capital Diversification
• High Risk Asset Class …. Seeking High Returns
• Favourable Valuation and Terms in comparison to VCs
• Networking
• Portfolio company mentoring or engagement
• Shared Due-Diligence
• Advisory Board and Board of Director Roles

What Type of Companies Do Angels
Invest In?
• Companies who are in seed and early stage.
• In technology, life sciences, ict, health care
devices, med tech, clean tech, power
solutions, fin tech, …..
• Solve a Problem, Secret Sauce or technology
....... USP, validated business model, Great
management team

Equity Capital Life Cycle

Factors that appear to impact investor
outcome
• Due diligence time: More hours of due diligence
positively related to greater returns (> 40 hours)
• Experience: An angel investor's expertise in the
industry of the venture being invested
• Participation: 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.

Solo Angel Investing
• Process is time-consuming
– Deal sourcing
– Reading plans (MLA sees 250 Business Plans a year)
– Meeting with entrepreneurs
• Due Diligence is difficult
– Finding Vertical experience
– May require using outside experts
• Legal Support is Expensive
• Most have Family Offices – Super Angels
Angel Resource Institute

12

13
Entrepreneur Benefits
• Large capital source
• Broad pool of Knowledge & Contacts
• Efficient Process
• Capital Connections
• In many provinces there is investor tax credit
• Leverage sources of funding (IAF, IBI, BDC etc.)
• Focus on value-add and advice, not the biggest
cheque

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Entrepreneur Tips
• Find your lead investor early
• Investors don’t have to be in tech
• Most Decks Suck – Make yours Good
• Set a deadline
• Put money in yourself, it goes a long way
Michael Katchen - Wealthsimple

Selection Criteria
• Pre-seed Investments up to $200k
• Seed investment should be from $250k to $500K
• Early stage investments should be from $350k to $1,500K
• Valuation 1 to 3.5 million (Halo 2013 median 2.5m)
• The stage, quality of the management team, valuation
and technology of companies are more important than
the sector criteria
• Quality is more important than quantity
• In Canada 5% of companies get funded (95% don’t)
• In Silicon Valley (1/300) get funded

Investment Process
1. Pre-screening – MLA 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
Outlined on MLA Website

What Angels Look For
• High anticipated growth rate – Scalability
• Experienced management team
• Sustainable competitive advantage
• Barriers to entry ie. Exclusive IP
• Clear strategy for commercialization
• Proof of concept or enterprise level validation
• Business model anchored in Reality
• Investor exit strategy in 5 to 8 years
• Investing in what you know – vertical expertise
• Coach ability of the entrepreneur
• Amount of dilutive capital required

Angel Network’s in Canada
• NACO – National Angel Capital Organization
• 33 Angel Groups in Canada
• They have collectively over 2100 investors
• Three large groups accounted for 58%
• The majority have fewer than 50 members
• 75% of groups set up since 2007
• 68% not-for-profit, 14% for profit & 18% not incorporated
• Vast majority do volunteer shared due diligence
• 12 Angel Groups in Ontario
• Keiretsu Forum & Golden Horseshoe Venture Forum are Private
For Profit Angel Groups

Canadian Angel Group Investment
Activity 2013
• 199 Investments in 2013 totaling $89 million, an increase
from 2012 of 13 investments and a increase in
investment from 40.5 million
• Average investment is $504k up fr $314k 2012
• 50% of angel groups made over 6 investments in 2012,
an increase of 20% over 2011
• Of over 2100 investors 55% - Ont & Que, 40% West, 5%
Atlantic
• ICT (32%), Life Sciences (23%), Clean Tech (9%)
• Valuation – Median $5.0m, Mean 2.06m
• 55% of transactions involved a co-investor

Angel Network’s in Ontario
• Network of Angel Organizations - Ontario Funds 12 Angel Groups
• They have collectively over 679 investors
• Have completed 328 investment rounds since 2007 for $102 million
• There are 14 Investment Clubs in Ontario that don’t receive funding
• They have collectively over 192 members
• Have completed 62 investment rounds since 2007 for $33 million
• Many of the clubs are Boutique Investment Dealers and VCs who take
a interest carry and management fees on their investments
• Three large groups accounted for 58%
• The majority have fewer than 50 members
• 75% of groups set up since 2007
• Vast majority do volunteer due diligence
• Keiretsu Forum & Golden Horseshoe Venture Forum are examples of
Private For Profit Angel Groups

Angel Resource Institute – Halo Report – 2013
• Median Angel Round Size $600K in ‘13 and Q2 ‘14 similar to ‘12
• Pre-Money Valuations continue to climb at $3M in Q2/14;
however, top valuations increased from $6.6M to $9.3M
• 72% of deals occur in angel groups’ home states
• 73% of Angel Deals are Syndicated or Co-Invested
• Median Round Size $2M in Q2 ‘14 from $1.5M in 2012 when
co-invested
• Share of Deals by Sector - Internet 38.5%(+), Healthcare
19.6%(-), Mobile & Telecom 16.2%(+), Software (non-
Internet/mobile) 4.0%(-)
• Interesting that the top US angel group in 2013 is Golden Seeds
with 300+ members invests predominately in women led &
controlled companies

Traditional Angel Network is Changing
• Currently Southern Ontario Angel Investment community has 12
Angel groups
• Government programs ( IAF, MaRS, OCE, IBI)
• Online - Angel List, Syndicates, Funders Club, The Funded, Gust
• Y Combinator, Tech Stars, 500 Start-ups, +110 Accelerators in Canada
…. Consolidation occurring to access gov’t funding
• Incubators & Accelerator funds
• Crowd funding such as kickstarter.com and equity crowd funding will
follow
• Introduction of OM - Offering Memorandum will have an impact
• Super Angels & Micro-VC’s
• “Future of Venture” – unbundling of advice, money and control

Angel Investment vs. Venture Capital
“Venture Capital, at the
time, was a bundle of three
things – Advice, Control,
and Money.”
Naval Ravikant, Co-Founder AngelList @naval
http://bit.ly/navalunbundling

Angel Investment vs. Venture Capital
“Angels are investors who
leave out the control. They
essentially bundle just
Advice and Money.”
Naval Ravikant, Co-Founder AngelList @naval
http://bit.ly/navalunbundling

Questions Entrepreneurs Should Ask
Angels or Venture Capitalists
• Where does your deal flow come from?
• Do you charge for presentations? Or charge for due-diligence?
Or Performance Fees?
• How much management Fee do you charge? How much
interest carry do you charge investors?
• How often do you hold pitches?
• Do you help prepare pitches?
• Do you invest together or make a investment decision
separately?
• Do you have a fund or make pre-seed investments?
• Do you disclose your investment process?
• Who will your board nominee be?

Maple Leaf Angels Corporation
• Toronto based and in existence since 2007
• MLA has invested in 24 companies since inception in 2007
for $12,000,000 +
• Registered with the OSC as a Exempt Market Dealer
• Currently 55 members
• Open and transparent – published funding process
• Six exits since 2007 ( most recent Monday)
• Continual Entrepreneur support: Curb Side Mentoring,
Volunteer Mentoring, Entrepreneur Workshops etc.

27
Contact Information
Gerard Buckley, BBA, FICB, ICD.D
President and CEO
Jaguar Capital Inc.
(C) 416-884-9522
(W) 416-646-6789
g.buckley@jaguarcapital.ca
www.jaguarcapital.ca
Twitter: @jaguarcapital
Twitter: @gerardbuckley
Slideshare: Jaguar Capital

Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"

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Presentation to Interactive Ontario on "Accessing Angel Capital from an Angel Investor Network"