The First Angel Network, or FAN, goes where other investors fear to tread. Since 2005, it has directed more than $9 million to business startups in Atlantic Canada.
As co-founders of Atlantic-based FAN, we are proud of the performance of the companies our angels have supported. Since 2005, we have invested in 22 early-stage companies. Only two have failed, while two FAN-supported firms have successfully exited – one after being sold for 1.5 times the organization’s investment.
Overall, FAN’s $9-million has leveraged more than $60 million in additional investment in firms that have employed more than 250 people in the region.
This success is not ours alone to claim. It is also a result of partnerships with entrepreneurs and angels, and with organizations like the Atlantic Canada Opportunities Agency, which, over seven-plus years has contributed $1.1 million to our organization.
Our track record results from the rigorous business model we have developed in Atlantic Canada. Unfortunately, recent media coverage suggests this model is poorly understood.
We fulfill our mission of driving business growth in the Atlantic provinces by making disciplined investments and providing ongoing support to entrepreneurial startup companies in the IT, life sciences and other sectors. We educate, network, mentor and invest.
To succeed, we choose our clients carefully. About 500 companies have approached FAN for support; we have provided funding to 22. We begin the selection process by reviewing business ideas and business plans presented to us by entrepreneurs.
Every quarter, we select one venture to present to our large group of angel investors. Entrepreneurs get an hour or so to pitch their company, and then enjoy a working dinner with some of the most successful business leaders and angel investors in the region.
FAN charges a $3,000 fee to each company that enjoys this opportunity. We are clear from the outset that the fee will apply, and common sense suggests it is fair to entrepreneurs. Every one of FAN’s presenting companies has been supported by angel investment funding.
In addition, companies are charged a consulting fee on the money raised through FAN’s angel network. This fee ranges from 0 to 8 percent, depending on the individual firm’s need for investment readiness support and the complexity of the investment. A minimum of one-half of this fee is immediately re-invested in the company.
In brief, the fee covers the costs to perform due diligence on the investment opportunity, on behalf of both our angel investors and entrepreneurs.
Our critics have deliberately misrepresented this fee, which is paid to a consulting firm we jointly own. The fee is drawn not from the companies FAN supports, but from the angels’ contribution to those firms. Our angels view the fee as payment for our ongoing role as consultants. It is seen as an effective way to protect their investment.
As members of both Canada’s National Angel Capital Organization (NACO) and the U.S.-based Angel Capital Association, we stay abreast of trends and strive to adopt “best practices” as they emerge.
We also welcome constructive criticism and a healthy public debate about angel investing. If our critics have solid ideas about how we can better achieve our mission, based in a fair-minded understanding of how we now operate, we want to hear from them.
We also think fair observers will conclude that our track record speaks for itself. All’s well with the angels, then, as long as we are working together to foster an entrepreneurial culture that drives economic growth in Atlantic Canada.