Canadian Angel and Investment Community – does it exist?

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I hear Angel Investors want to see revenue.  Is this a Canadian thing?  Twitter and Facebook received angel funding before making money.  What are your thoughts?

This was my question to my Twitter and Facebook communities about one month ago.  And it is interesting the answers I received.  I am going to share with you many of the responses and conversations that took place on Twitter and Facebook as a result of my question.

Here are some of my thoughts:

Who

Who the heck do people go to in the first place.  You have an idea.  You’ve even created a product and have started to gain a few customers.  But to grow your business you need someone to invest in your business and maybe mentor you along the way.  But you have no clue who to approach.

What

You finally find someone who may listen to you.  But you’re not sure what the criteria is.  What questions will they ask and what answers will you need to provide?  Maybe your company is not the right fit for this “serial investor”.  What sort of criteria, information and metrics will you need to provide?

The world of startups and the startup investment community seems fractured here in Canada.  Do you need to have a positive cash flow before seeking out investors?  Do you need to have a successful startup resume to capture the attention of potential investors?  Do you need to have one million subscribers before someone will answer your phone call?

In my opinion, its time for the angel and investment community in Canada to get together and make yourselves available to the startup community.  I believe there are many investors in Canada willing to mentor and pony up the financial resources to help a company flourish and grow.  And there is undoubtedly many smart people here in Canada working on new and cutting edge companies, ideas and technologies.

The conversation:

Dave Coleman: It’s actually an east coast thing … NY/Toronto for example are all about business models and showing revenue (not profit, but revenue) … West coast is all about building, generating users and then figuring it out from there.  It’s worthy of debate Karim. I do not think either are right or wrong. The chance of an east coast start-up succeeding is higher (IMHO), however the volume of startups out West is greater

Farhan Lalji:  Don’t think it’s just a Toronto/NY thing, it happens in London as well.  Angel investors want to see revenue here as well, though they say they will invest in an idea, rarely does it happen. Just look at Seedcamp in the EU – says it’s like Y Combinator but all of the companies had product and traction/customers if not revenue.   I think that’s what makes Silicon Valley unique; it has a culture of risk – trusting the team to take advantage of the market. It also has a culture of reinvestment, several people made money off companies like Yahoo!, Google, Microsoft, eBay, PayPal, Cisco etc and those new rich took flyers on the founders of Facebook, Twitter, Foursquare etc.

Rahim Adatia: There is a lot more to this than East coast vs West coast and business models vs no business model. New York is far more risk-taking than Toronto. In the US and more so in the Valley, smart money invests into teams not business models. Smart money knows that business models change in the early days and you need a team that has the brains, will, and experience to adapt quickly. There is also more maturity as an industry in the Valley in regards to tech investments. This is the 4th or 5th cycle here, while in most other areas, this is the 2nd. The first being the dot-com boom, and the current dot-com 2.0 boom. That has benefits in terms of banking, legal, business development, sales, etc.  The problem is that soon greed starts to set in, and in all areas dumb money floods in. For example, a person who normally invests into real estate, will throw money into the tech world trying to cash in quick and then bad teams get invested, or the teams in Toronto/London without biz-models get invested. That ends up temporary skewing everything. This is the premise I present at many of my talks.  General comment I get is that you can already start to see the dumb money (greed) coming into the Valley.

There were many more Facebook comments and Tweets that were shared regarding this question.  Thanks to everyone who participated and will continue to participate in the comments section below:

How would you improve the funding and startup disconnect in Canada?

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