Canadian Angel Investments Soar to Record Levels [New Research]

An interview with NACO CEO, Yuri Navarro.

Toronto-based Yuri Navarro is the CEO of the National Angel Capital Organization (NACO), the only national non-profit association for Angel investors in Canada. The organization currently represents over 40 Angel groups, comprised of more than 3,000 Angels, who have provided Canadian companies with over $560 million of direct financing since 2010.

NACO recently released its 2016 annual report, which highlighted another banner year for Angel investing — its data showed a 15% increase in Angel investments.

We sat down with Yuri to talk about the report and the positive benefits its data has on Canada’s Angel ecosystem.

1. What are the key takeaways from the 2016 report?

2016 was a big year for Angel investing. The 35 Angel groups surveyed reported making 418 investments amounting to $157.2 million, a $23.6 million increase from 2015 and the largest investment amount ever recorded.

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While the majority of investments have been made in Central Canada for several years, this report found that on a per capita basis, Western Canada had the most Angel investment activity. That was very exciting to see as it indicates that funding programs like Western Canadian Angel Network (WCAN) are working.

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The majority of Angels (80%) are located in Central Canada, with 17.3% in the Western region and 2.7% in the Eastern region.

The report also found that investments shifted from a focus on deals within an Angel’s home city to investments within the same province. At NACO, we believe that this shows a trend towards greater collaboration between Angel groups and other partners.

The final trend I found considerably noteworthy was that the average deal size in 2016 was $1.7 million. That’s 49% higher than the 2015 figure. Those numbers show that Angels are helping startups grow from the seed stage into mature, scalable ventures. It’s not just about first or small cheques anymore.

2. There was almost a 50% increase in the number of investments made between 2015 (N=283) and 2016 (N=418). What do you think is at the heart of this growth?

Angel investing has long been an important source of financial support and mentoring for new and growing businesses, bridging the gap between friends and family and VC financing. Over the past several years, we’ve seen tremendous growth in the Angel ecosystem due to a couple factors.

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The first being a widening “capital gap” between individual and institutional VC investors, which has created a need and opportunity for Angel investments. The second being an increase in the number of self-made, high net worth individuals who want to be more involved in alternative asset management.

NACO has also been diligently developing educational programs and events outside of Ontario the last couple of years. Our efforts have come a long way and I believe the increase in syndication deals reported, which also contributed to this year’s numbers, are a result of the development of a cross-Canada Angel network.

3. To continue this growth, what are you seeing as a need for enhancing Angel investing practices?

A very common practice in the investment world is syndication. Syndication allows multiple investors — whether they be individuals, Angel groups, VC funds, etc. — to join together and provide the funding needed for one company. Syndication has been a common practice amongst VC firms for decades, but it’s only recently become popular with Canada’s Angel community.

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Of the reported syndicated investments, 58% involved a combination of syndicate partners which include individual Angel investors, Angel groups, venture capital, government and strategic partners (buyer, supplier, competition).

That’s why we need to support the development of syndication best practices for the Angel community.

It allows investors to build strong portfolios. Rather than having an individual put $1 million into a company themselves, they are able to spread that funding across a variety of companies, building a more balanced portfolio.

4. What impact do you hope this data will have on Canada’s Angel ecosystem?

NACO’s mandate is to grow and professionalize Canada’s Angel investing ecosystem. The more data we have, the better we can tell their story. The impact is also felt in our reports, publications, conferences and connections. The data is key.

The more data we have the better our analysis can be, and the more insights we can derive for our members and the rest of Canada. That also means Angels will be better equipped to make the best possible investment decisions.

5. From your perspective, what are the most important things that Angel investors can do individually to help raise the perception of the ‘smart’ Angel investor?

A key point the author of our report tried to make specifically targeted the misconception that Angel money is just money. Nothing could be further from the truth.

Most Angel investors are previous business owners or entrepreneurs, too. A lot of them have gone through one or multiple exits and are committed to helping their investments grow by opening up their wallets and rolodexes.

I’ve seen Canadian Angels tackle this problem by getting involved in their communities; going to conferences, speaking on panels and talking to the media. When you take the time to get to know your community, in return the community develops trust in you and that’s when perceptions change.

6. What is one piece of advice you would give to a high net-worth individual interested in becoming an Angel investor?

To learn as much as you can before writing your first cheque.

As Angel investing has become more well-known and popular, highly experienced Angels with good returns have produced a growing wealth of materials to help others develop and grow their Angel skills. Visit NACO and other sites with links to videos, books, articles and blogs. Consider attending workshops and events where you can meet entrepreneurs, watch pitches and get a sense of your interests and the questions investors ask to assess a deal.

I’d recommend joining an Angel group or network whose members have expertise in your areas of investment interest. Trying to be a lone Angel tends to further increase the risk of Angel investing. Having multiple opinions and insights from others with varied and relevant experience can lead to higher probabilities of success.

One cool thing about Angel investing is that there is always something more to learn or improve on after every investment.

Hockeystick is proud to be the official data platform for NACO and all of its members. The data presented in the 2016 Angel Activity Report was collected through our platform.

For more information about NACO, please visit their website.

In his role as CEO, Yuri Navarro brings his unique mixture of public and private sector experience to help expand NACO’s role as the leading organization representing Canadian Angel Investors with industry and government. At NACO, Yuri oversee the entire organization’s strategic and operational objectives. Since 2012, Yuri has presided over the renewal and growth of the Canada’s National Angel Capital Organization with a mission to support the growth and professionalization of Canada’s Angel asset-class through valuable connections, resources, best practices and research. Yuri has also supported the development of Canadian small businesses through his work in the Ontario Government, where he served as a Policy Advisor, then Chief of Staff, to the Minister of Economic Development and Trade, and as a Policy Advisor to the Minister of Energy and Infrastructure. A graduate of Ryerson University’s Commerce program and George Brown College’s Financial Planning program, Yuri holds a number of designations with the Canadian Securities Institute.

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