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Angel investors address the gap between love money and venture capital or more sophisticated sources of downstream capital. Generally considered the weakest segment of the financing services spectrum, angel investors must address higher risk, uncertain liquidity, long investment horizons, management gaps and a wide range of other industry-specific issues. Historically, angel investing has been carried out primarily by individual private investors; disciplined investment managers rarely invest at the angel level.

Relatively little has been known about angel practices and how they might be improved. Indeed, relatively little has been known generally about the angel investing “sector.” It is unclear, for example, how many angels there actually are in Canada. Oddly, many angels do not even recognize themselves as angel investors; they might not even be familiar with the term. Yet, the reality is that angels invest more than five times in early stage businesses as the entire venture capital industry combined.

Since 2000, more than 300 angels have participated in loosely organized grass roots events that have grown in sophistication and ambition. At the second Angel Investor Summit in October 2002, it was decided to create the National Angel Organization (NAO), a non-profit organization that would, among other goals, provide continuity for the enthusiasm and optimism that has characterized angel activities to date.


In the discussions leading to the creation of NATIONAL ANGEL ORGANIZATION, the participants articulated various challenges to be addressed by a national organization of angels, including the creation of distinct value propositions for a wide variety of angel needs and requirements. Specific needs were expressed based on geography, local clusters and maturity of existing angel organizations. Discussion also focussed on defining deliverables, benefits of membership, funding models, governance structure and organizational considerations. At the conclusion of the meeting, the group voted in favour of creating a Founding 100 Members group of the NAO in order to set the founding board, select an Executive Director,


incorporate the organization and set the agenda for Angel Investor Summit 2003 to be held in Montreal on October 30, 2003. The Founders are set to reconvene in Montreal for the AGM on the evening of October 29, 2003.


The NAO seeks to engender an environment of confidence and trust that will allow the angels to communicate openly with each other. By establishing and cultivating such an environment, many angels are willing to participate in broader research, particularly when they see the genuine interest of policymakers as well as educational benefits for themselves.

NAO has already performed pioneering research work with the Rotman School of Management and is in discussions to conduct broader based work with leading researchers at Queen’s Centre for Economic Development (QCED), the Richard Ivey School of Business and the Haskayne School of Business. By acting as an independent hub that respects the angels’ right to privacy, the NAO should be able to provide aggregate information that has been unavailable to date. The federal government through Industry Canada, as well as the provinces of Ontario, Manitoba, Alberta and PEI, have also expressed interests in working with the NAO to produce more effective public policy that will encourage economic growth. In the summer of 2003, the NAO will begin a cross-country fact-finding tour to discover the gaps and impediments to early-stage financing in Canada. The findings from this tour will be shared with angels, policymakers and other stakeholders.


Among its first priorities, the NAO is examining the nature of the venture capital gap and the determinants of success for angels seeking to fill it.

NAO research indicates that the venture capital gap is actually finite and methods exist to quantify the gap. Furthermore, the actual funding gap for quality projects represents an amount that is less than 2 per cent of the cumulative net worth of the high net worth individuals in the country. Critics of the VC gap notion often suggest that there actually is no funding gap, rather, there is a quality gap. The suggestion is that if the emerging companies were of high enough quality there would be more than sufficient money waiting to invest.

By any name, there is a gap that leaves junior companies seeking funds. There could also be cultural, structural and educational gaps that prevent much of the available wealth in the country from investing in early stage private equity.


The Angel Investor Summit 2001 co-chaired with Roger Martin, Dean of the Rotman School of Management, University of Toronto, concluded that there were both macroeconomic and microeconomic determinants for angel investing success. At the microeconomic level, angels can improve their returns on investment through networking, diversification, investing in groups and adopting best practices. Further, it was determined that there are many cluster specific barriers, practices and determinants that must be considered by angels. The NATIONAL ANGEL ORGANIZATION can help to build awareness, education and facilitate activities and programs addressing these microeconomic issues.

Furthermore, angels have never had a collective voice with respect to macroeconomic issues, let alone a mechanism to survey, study, analyze and make recommendations on larger policy issues affecting them. The NAO can and will facilitate the study of issues relevant to angel investor success.


The majority of angel investors among the early founders of NAO have invested in five or more angel investments, average 49 years of age and are very much interested in making more angel investments in their lifetime. Their typical deal size would be less than $1 million, with several angels grouping together to each invest $50,000 to $250,000.

To be an effective collective national voice for angels, the organization must represent and encourage membership of angels transcending considerations of geography, local clusters, age, investment type, size and angel investment styles. With this in mind, the Angel Summit in 2002 hosted participants from seven provinces, representing themselves or local angel groups. There were budding angels interested in building groups in communities of less than 50,000 as well as angels from the country’s major centers. The challenge for the NATIONAL ANGEL ORGANIZATION is to create a value proposition that is appealing to this wide cross-section of potential angel members.


Prior to the formation of NAO, angels were asked to assign preferences to the following list of services and potential NAO benefits: Angel Investor Summit, Angel Investor Charity Golf Tournament, What’s Hot Breakfast, Deal Flow, Confidential Angel Roster, Public Policy Advocacy, Angel Forum Groups, Industry Trends Information, Best Practices in Deal Structure and Angel Investment Fund. The top three deliverables desired by the survey population were access to the confidential angel roster, participation in the angel summit and current information regarding best practices. The potential bias of this sample was that many of the respondents had been to the previous year’s summit and may have been consequently predisposed to ranking the summit and roster access higher than items that had yet to be delivered.

Some of the younger or smaller angel groups were very interested in the potential educational benefits of NAO, and strongly supported the creation of an angel investor fundamentals curriculum. The junior groups were often less enthusiastic about sharing deal flow or their roster. The senior angels were excited about the prospects for exposing their regions and local deals to the rest of the country and other investors.

There was also strong support during discussions for public policy advocacy. Although there were differences in vision with respect to the most needed benefits by the various angels, the group was uniform in wanting to have a collective voice that might be heard on important topics relevant to economic development at all three levels of government.


The group has chosen a non-profit organization structure as a model. Angel investors must meet strict admission criteria. The members elect a board of directors and the board appoints an executive director and staff as needed.

The organization is structured as a hybrid of several models, thus allowing angels to interact and be represented in a way that is not available in other organizations and professional development groups. Many of the founding members also maintain relationships with other groups such as the Canadian Advanced Technology Association (CATA), Canadian Association of Family Enterprise (CAFE), Canadian Venture Capital Association (CVCA), Conference for Advanced Life Underwriting (CALU), World Economic Forum (WEF), Young Presidents’ Organization (YPO) and others. None of these groups represent the unique and important interests of angel investors. The NAO will seek to create alliances or relationships with these and other business, academic and government groups as appropriate.


Since NAO’s founding in October 2002, it has emerged as the voice of angel investors in Canada, with a mission to improve the success of angel investors through networking and education. Studies indicate that Canadian competitiveness and resultant standard of living has fallen in the last ten years. By improving the probability of success and returns of angel investments in Canada, benefits accrue to the economy and society in general. NAO is founded on the premise that angels fund innovation by investing in young companies and that innovation leads to improved productivity, prosperity and consequently a higher standard of living.