#VSW2015: Trends in Angel Investing
Before I dive into things here, it’s worth noting that sometimes my posts will deviate from the general mandate of the Voices blogs (i.e. thought leadership and general discourse around worker payouts). The reason is simple: as the editor, well, I kinda get to call the shots. As such, don’t be surprised if I go off on a tangent and cover topics or events that I personally find interesting. Take the Unicorn or Bust investor forum I attended last night as part of Vancouver Startup Week. An hour long panel discussing trends in angel investing, this clearly had nothing to do with my day job. However, as someone who’s fumbled their way through early stage startup funding, I can assure you, you never stop finding this stuff fascinating. And, since the vast majority of the people reading this blog are involved in fast-scaling, funding-seeking on-demand economy companies, I figured it couldn’t hurt to pass on some of the juiciest insider investor tips.
Of course, I can stop if you’d prefer I keep that to myself…
No? Good. Here’s what I learned:
Angel Investing 101
The event, which was sponsored by Wealthbar, an online wealth management platform, and Fasken Martineau, a leading international business law and litigation firm, featured a stellar cast of investors:
- Boris Wertz (a.k.a. the Investment Whisperer of Vancouver) of Version One Ventures moderated the panel.
- Fraser Hall, Co-founder of Recon Instruments, Bryght.com, and Vancouver Founder Fund offered insights from both the entrepreneur’s and investor’s perspective.
- Jonathan Bixby, General Partner at Stanley Park Ventures offered a modern investing perspective based on his recent experience “hacking angel investing.”
- Ethan Sun, President & Founder at Istuary Innovation Group provided a global perspective, specifically in regards to foreign investment opportunities.
- Marianne Hudson, Executive Direct of the Angel Capital Association, grounded local trends in the larger tech ecosystem rhyming off investing stats straight from Silicon Valley.
Angel Investing Basics
While the panel provided amazing insight into investment trends and strategies, Marianne’s opening address on general angel investing activity was an unexpected but greatly appreciated introduction to the evening’s topic. Quoting the 2014 National Angel Association’s Report on Angel Investing Activity in Canada, Ms. Hudson managed to drop a number of significant knowledge bombs on those in attendance:
- The average deal size from angel groups in Canada is roughly $883 thousands dollars, an amount that “tracked well” with American angel counterparts.
- Pre-money valuations were roughly $4 million in Canada in 2014. This was significantly higher than in the U.S. during the same period (2014 pre-money valuations were roughly $3.3 million).
- U.S. and Canadian angels appear to invest in similar manners, with 18% of U.S. investors and 11% of Canadian investors opting for convertible debt.
- Similarly, investors expect to lose their money; of the money invested, just 8% show a return.
What Investors Want: Takeaways
Boris wasted no time getting into the weeds following Ms. Hudson’s introduction, asking each of the panel participants to provide a little insight on the types of deals they’d invested in over the past 12 months. While each participant had their own story (Jonathan Bixby discussed his stake in Koho’s mobile banking platform, while Ethan Sun discussed the merits of Istuary’s investment-prepping innovation labs), a common thread quickly emerged in relation to the importance of a platform’s founder(s): the person who heads your company matters, especially to investors. In fact, Fraser Hall noted that “funding the right founder” was what tipped him over the edge on his most recent investment, a sentiment that would be echoed by practically all of the panel participants throughout the night.“Funding the right founder” was what tipped @FraserHall over the edge on his most recent investment. Click To Tweet
From there, Boris went straight for the jugular: Where can entrepreneurs go to find money, both in Vancouver and in the broader North American tech ecosystem? Answers included:
- Jonathan Bixby advised attendees to search out anchor tenants in the local investor community. These are the five to ten investors that have a high profile and impressive portfolio (Bixby might have named dropped Lance Tracy as a local example, but you didn’t hear that from me…). Land an anchor tenant and you’ll be surprised how quickly additional backers appear. (Of course, this is easier said than done. But not to worry, Bixby expertly pitched Stanley Park Ventures as a great facilitator of anchor tenant access.)
- Fraser Hall stated the obvious: look for the guys with recent exits under their belts. These are the investors with money burning a hole in their pocket, after all.
The topic of investment platforms was next on the docket. While syndication options aren’t permitted in Canada, Marianne provided some interesting American insight into the world of Angel List, the defacto investor platform in Silicon Valley. While top tier deals don’t necessarily flow through Angel List, the platform offers startups an exceptional promotional vehicle to increase visibility and buzz around their fundraising efforts. What’s more, Angel List is becoming a hotbed for follow-on capital and deal-by-deal investment. Is someone going to step forward with a few million on Angel List? Probably not. But group a bunch of small investments into a syndicate (a trend that Marianne says is happening more and more on the platform) and you’ll be surprised at how quickly things add up.
As things began to wind down, Boris shifted the focus of the conversation to foreign investment opportunities. While it’s no secret that Vancouver has one of the hottest foreign investment markets thanks to strong relations with China, Ethan Sun was quick to note that most foreign investors approached tech opportunities with caution. Sun believes that the reason for this is one of presentation. While there are plenty of great ideas brewing in Vancouver, Sun felt that many companies still struggle to validate their innovations in the market, specifically in regards to projected growth. Sun was also quick to note that companies shouldn’t wait for foreign investors to come to them; Asia and Japan are markets familiar with (and hungry to fund) fast-growth early stage companies.China and Japan are markets familiar with (and hungry to fund) fast-growth companies #VSW2015 Click To Tweet
Failure: Is it the Kiss of Death?
As with any panel, Boris ended the evening by opening the floor up to questions. And, being the incessant Twitter-er that I am, I posted the following ask:
— ChantielleMacFarlane (@chantiellemac) September 23, 2015
Because let’s be honest: platforms fail. Money is lost and dreams are shattered every day in the tech industry—believe me. And yet, the more you get to know entrepreneurs, the quicker you’ll learn that failure doesn’t faze them. Sure, it hurts; it leaves a mark and it takes time to get over. But very rarely does a failure stop an entrepreneur from trying again. They simply put that disappointment on the shelf and start again, a little bruised, but never broken.
Which is a nice thought, but that doesn’t make the failure go away. Any investor will find it once they start digging. Is that something founders should be worried about?
The answer from the panel was a resounding “no.” In fact, all of the panel members felt that failure helped prepared entrepreneurs for success. All of them… except Boris. Always the voice of reason, Boris stated the obvious: you can’t learn what works from a failure, only what doesn’t work.
So pick yourself up, dust yourself off, and by all means, do it again. That’s the only way you’ll find your guardian angel (investor).