When the Atlantic Angels hold their first meeting on Oct. 22, it will represent a huge opportunity to usher new blood into the investment community.
That much we know.
But as I spoke to a few entrepreneurs last week, it became apparent that there are still lots of questions about what the creation of a new investment body will mean for Atlantic Canada’s burgeoning start-up community.
A group comprising investors such as Permjot Valia and Milan Vrekic, the executive director of the Volta start-up house in Halifax, said last week they are setting up the Atlantic Angels, which would herd together wealthy individuals to invest in start-ups. The group guarantees it will be “founder friendly” and says it won’t charge investors to join or charge entrepreneurs to pitch to its members.
While Atlantic Angels didn’t say so in their statement, they are obviously positioning themselves as an alternative to the First Angel Network, which requires annual membership dues and charges companies that are chosen to pitch to their members. So it looks like there will soon be two angel groups based in Halifax, complemented by East Valley Ventures in Saint John and Newfoundland and Labrador Angel Network in St. John’s.
Though the dynamics of each group is different, the common element is that they both gather angels to invest in start-ups. They mirror the work of angel groups around the world that strive to work with wealthy individuals so they feel comfortable channelling their money into productive companies. Angel networks thrive, first, because they offer in theory the chance to invest in the next big thing. But they also give people who have had success in business the chance to give back to society by helping young entrepreneurs. They are in equal measures enlightened and self-interested.
These networks, FAN included, have done tremendous work over the years creating an investment culture and teaching people how to invest in promising companies. But there has always been a weak link with angel networks. Their members tend to be those who have made their money through a profession like medicine or law, or who have operated a traditional business. Most are of an age that they, like me, didn’t grow up with a computer in the house. A large percentage of them struggle to understand technology.
This is a problem, because by and large the biggest opportunities in angel investing (the chance to make the most money in the least time) are in digital technologies. I realize this is a generalization, but often there is a disconnect because the people with money don’t understand the business of the people who need money. It’s like the Flintstones encountering the Jetsons.
Atlantic Angels may help solve that problem. Those involved in that group have tremendous contacts in the tech community, many of them successful enough that they fit the financial profile of angels. I think Atlantic Angels’ greatest contribution will be to attract more tech-savvy investors.
The challenge with the new group is that the region’s network of individual investors may be divided into two camps. There may be more deals sanctioned by these organizations. It may prove more difficult for good companies to find enough backers to provide meaningful funding. Already people are wondering if Atlantic Angels will be the funding body of choice for tech companies and FAN for all others.
How will this turn out? Hell if I know. Deals will be done, and I assume both of these groups will invest alongside other investment groups, just as FAN has been doing. It will bear watching in the next year or two.