Angel investors are wealthy people who provide financial support to entrepreneurs with lucrative business ideas or promising startup companies. In exchange, angel investors receive part of the profits and often equity in the business as well. Also known as private investors or seed investors, angel investors are in many cases personally acquainted with the business owners they support. Their investment may be in the form of a single payment or multiple cash infusions over time.
Angel investors know that investing in small companies is very risky but can yield phenomenally high returns when done smartly. Only half of Canada’s small business are likely to survive for 5 years or more, but angel investors can improve the chances of success by providing access to financing, high-level expertise, logistical support and a huge network of buyers.
Among other qualities such as profitability, angel investors look for companies run by owners who are dedicated, passionate and committed to selling their product.
Finding an angel investor in Canada can be difficult, and competition for their attention can be fierce. There are, however, some ways to get their attention. Angels can be both individuals and groups, but both can be found in similar ways.
There are a number of different angel business groups in Canada. These are networks of individuals that pool funds together to invest in promising companies, and they’re one of your most promising options for locating an angel. There are both nonprofit and for-profit angel groups, and many have different focuses. Pitching your business to an angel network is a good way of speaking to many individual investors at once. Below is a list of some angel investor groups in Canada:
Building business networks and having someone put in a good word for you can help immensely. Having a business with potential, and then knowing someone who can personally recommend it to an investor is significant advantage. A good way to start is to attend local networking and Meetup events.
What you see on Shark Tank is broadly similar to what you get in typical investor pitches, and the publicity alone can help a growing company. Crowdfunding can raise a lot of money, especially if you have a good product idea that people really need. Popular crowdfunding websites include Kickstarter and Indiegogo.
Business in the any of the industries below have a higher chance of attracting angel investors in Canada, but it’s not impossible for other businesses to get investment. The key is to promote the growth potential of your business including how appealing your goods or services are and how smoothly you can transition into larger markets.
Businesses that develop software as a solution (SaaS) and other proprietary software are often scalable and have high growth potential, making these companies popular with investors.
Companies that focus on IT, FinTech, biotechnology and networking systems are particularly attractive to investors.
Early-stage financing can be a massive boost for companies with a viable product that have the potential to become a common household item.
Improving on existing versions of specialized equipment can be a relatively safe way for angel investors to get a return on their capital.
Before you go about attracting investors, make sure you’re ready to put your best foot forward. Just like going on a first date, making a bad impression means you probably won’t get a second chance. Before you even start soliciting investors, make sure you’ve done the following:
You will need to convince angel investors in Canada that you can turn their money into even more money. To do this you need to convince them that the product or service offered by your company is able to make it happen. It must not only be profitable, but also in demand.
Can your brand go worldwide, or will it always be focused in Canada? Will you have repeat customers, or will they only ever buy from you once? An angel investor will want to know about this before deciding whether or not to get involved.
The facts and figures are the evidence you need to convince angel investors to jump aboard. Investors are keen on seeing determination and passion, but only if it comes with the right numbers.
When an angel investor offers you money they’re offering you a deal. Remember that you are under no obligation to accept it, and that not every deal will be right for your company. They will typically want equity in exchange for financing, and/or may include repayable debt schemes or similar.
If your company ticks these 5 boxes, then it’s a good candidate for angel investors. It has…
Jennifer Holland’s 15-month-old baby had a sore throat when she visited her doctor. With a light in one hand and a tongue depressor in the other, the doctor asked Jennifer to restrain her child while they took a look. Holland wondered why they didn’t simply use light-up tongue depressors.
A quick Google search revealed that such a thing didn’t yet exist in a cost-effective package. Throat Scope was born a month later, becoming the world’s newest manufacturer of cost effective, patented light-up tongue depressors with disposable wooden blades.
Not long after that Holland found herself on the hit TV show, Shark Tank, asking several angel investors to back her product. Throat Scope was a unique product that had global potential and was produced by a well-managed company with a clear vision for growth.
Holland walked out of Shark Tank with a $76,000 investment from an angel investor who got a 30% stake in the company and a 5% royalty deal until the initial investment was repaid. Holland’s investor urged her to hire more people. She did so with her investment money, bringing on a corporate director and a commercialization director, who raised even more capital and helped Throat Scope go global with a number of worldwide distribution deals.
With much-needed financing and professional advice from her backer, Holland’s business grew astronomically. Although she had to give up 30% equity, in the end, everyone was a winner.
If you’re not ready to give up equity in your business or cede any control to an angel investor, you might want to explore other ways of getting financing. Such options could include startup business loans, which are specifically designed to fund newer businesses but require strong personal credit and an equally strong business plan to get approved. The Business Development Bank of Canada (BDC) is a well-known source of startup funding.
The federal government offers financing for small- and medium-sized businesses in the form of a Canada Small Business Financing Program (CSBFP) Loan. The Canada Small Business Financing Program (CSBFP) Loan offers loans of up to $1 million to startups and small businesses that gross $1,000,000 or less per year.
You could also look into getting business loans that don’t require collateral. However, you’ll need to be operating long enough to meet minimum revenue requirements, so this option may be better for business that are growing rather than just starting out.
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