Business people in the Miramichi Valley are hoping to put together an inaugural equity investment deal in the next three months involving two imaginative funding bodies – The Frank McKenna Technology Fund and Miramichi’s own angel network.

Brian Donovan,  Executive Director of Enterprise Miramichi and the brains behind  the Miramichi Angel Network, said the McKenna Fund and angel network are examining opportunities and hope – if due diligence is successful – to make their joint investment this year.

Assuming they do sign the deal, it will be the fruition of innovative thinking and superb execution by a number of people determined to ignite entrepreneurship in an area that has its share of economic challenges. Former Premier Frank McKenna deserves kudos for putting up $1 million for his fund, as does the Wallace McCain Institute for providing administrative support. But the really intriguing aspect of what is happening in the Miramichi is that a public servant like Donovan took the initiative to organize wealthy individuals into the region’s angel network.

With an MBA in finance and experience in backing young companies, Donovan understood economic development would be best served if the Miramichi’s most successful businessmen channeled money into growing enterprises. So, he assembled business leaders in the region and they came up with an ingenious structure for their fund.

All members were asked to put $5,000 into the fund, which would accept applications for financing from entrepreneurs, the best of whom could pitch their proposals to the members. These angels would be welcome to increase their investment as individual backers as much as they want. (Members do not receive equity tax credits for the money they put in the pool, but they do get ETCs for their direct investment in companies.)  The low initial payment into the fund allows a wide membership; and the topping-up feature maximizes the angel network’s ability to channel money into a company.

By luck, the angel network was getting off the ground just as McKenna, now the Deputy Chair of TD Bank, announced in May he would set up a $1 million tech fund for the region that first elected him to the New Brunswick Legislative Assembly. Thor Olesen, investment fund manager with the McCain Institute and the administrator of the McKenna Fund, said the fund will work with a range of companies, including some it will not give money to.

“Because of the community-backed nature of the fund, it doesn’t act like a VC,” he said in an interview. “Even if we don’t invest in a company, we will still work with the entrepreneur.’’

After McKenna announced the fund in May, he met with business leaders in the Miramichi on the deck of his summer house, and they discussed the new fund before enjoying a lobster dinner together. The meeting exemplified the community nature of the fund, and co-investments between the McKenna Fund and the angel network will further highlight the civic component of this funding vehicle. Olesen said he expects the fund’s sweet spot for investments will be about $25,000 to $100,000 and that it will be fully deployed in about three to four years.

By co-investing, the two funds hope to reduce the cost of and improve due diligence, and also to attract other investors, such as the New Brunswick Innovation Foundation. Not all of the McKenna Fund and angel network actions will be co-investments as the angels have a mandate to invest in a range of companies, not just tech startups.

Donovan is not resting on his laurels with the angel network as he is also working on what he calls a “Back Home Program”. He plans to reach out to Miramichi-born people who left the valley, succeeded elsewhere and would like to invest in the community. It’s similar to a plan that the Newfoundland and Labrador Angel Network is working on.

Entrevestor’s Take on This: There are 52 regional development agencies in Atlantic Canada, one for every 42,000 people. It’s generally acknowledged we don’t need that many, and that having so many competing groups is often counterproductive. Yet we can’t help but be impressed with Enterprise Miramichi’s innovative and forward-looking approach to drawing capital out of the community and using it to back young companies. It’s a shining example for its 51 peers.