The National Angel Capital Organization (NACO) was founded in 2002, and has since become Canada’s national champion of the Canadian angel investing community with now more than 2000 members. With the sheer size of Canada there are over 30 Angel groups/networks, of which the majority of them are members of NACO. KITE Invest spoke with Yuri Navarro the Executive Director of NACO to discuss the layout of the Canadian Angel Investor community.
KITE Invest: In your estimation are there many differences amongst the numerous angel communities across Canada? And if so, how does NACO embrace their differences and unite them under one umbrella?
Yuri Navarro: We are the broad-based angel investor industry association of Canada, and yes, there is a ton of diversity in terms of angel investment.
Angel investing is very personal and people often angel invest individually, which leads to a ton of diversity in the investment strategies, the investment structures, the best practices followed, how deal flow is sourced and even in terms of arranging themselves within groups of investors. We have members that are for-profit, not-for-profit, formal entities, informal email lists, online etc.
In terms of brining them together, starting two years we began rebuilding the mandate of the Organization, in order to ensure that we were addressing the market that we were intending to address. From there it has grown quite organically.
We focus the Organization in three areas. The first is connecting the angel investing ecosystem across the country; relying on a peer-to-peer type of network. Additionally we identify industry partners: accelerators, incubators, venture capitals, etc. These are an important part of the ecosystem, because angels have shown to be more successful when they have a strong ecosystem built around them. To this end, we have become a hub that brings angels together, while simultaneously protecting their privacy and integrity.
The second component is conducting research on the community such as their activity and best practices, generating reports, holding workshops and educational seminars. And lastly, the third aspect is being the ‘champion of the asset class’ as we refer to ourselves, which means that we raise awareness with the general public, policy makers and with those who might not even know that they are an angel investor.
KITE: In terms of numbers, NACO’s report (2013) highlighted that 29 Angel groups made 199 investments totaling $89 million. Additionally, the OECD estimates that overall Angels invest between $500 million and $1 billion annually into Canadian growth-oriented companies.What is the breakdown of where the majority of angel investments are taking place in Canada?
YN: The vast majority of the investments that our members make have been in Central Canada, where you would find Toronto, Montreal, and Waterloo. While not all investments take place in these cities, Central Canada is a bit of a hub for angel activity and companies that are in this space. Western Canada is strong and growing, especially Vancouver and emerging Alberta.
Part of the reason why Central Canada is the most active is due to the focus by the private sector and the support of early stage companies by the public sector. I really think that policy focus matched with funding support serves to grow the ecosystem in Central Canada in a way that it hasn’t really grown in comparison in Eastern or Western Canada.
KITE: What would you estimate are the biggest similarities and differences between the Canadian Angel ecosystem and the US Angel ecosystem or even smaller European Angel ecosystems?
YR: Angel investing is a contact sport and it is a local sport. To this I am referring to how each community is different and stands on its own. While we do have an interconnected network of investors who are increasingly syndicating deals together and doing cross border investing, when you look at the ecosystems specifically, they all have their unique attributes. Therefore, when comparing ecosystems I think comparisons should be done at the city level rather than at the national level.
If you were to compare Canada nationally speaking, it would be in the top 5 in countrywide ecosystems supporting angel investments, and this is taking into consideration that Canada’s angel investor ecosystems have only been developing for 10 to 15 to 20 years depending on the region. Silicon Valley began 40 to 50 years ago.
KITE: In terms of the NACO, what have been some of the Organization’s milestones, accomplishments, as well as, challenges since being founding in 2002?
YR: When NACO came together it was a collection of about 100 super angels who decided to come together once a year, reconnect, talk shop, and share ideas and experiences. In the 2002, NACO was more like a club at its inception. Since then it has developed into the broad-based industry association that it is today, which in of itself is a sign of the changing times.
Additionally as the space has evolved, people have come to see the value of the asset class and early stage companies. Moreover, as the media has started to profile these stories, more and more people are gaining interest in wanting to invest and / or taking the entrepreneurial leap. Nowadays, angel investing has been occurring in a more deliberate, professional way. This has been a huge change for Canada in just the past five years.
Due to this increased activity and interest of new people wanting to invest, the other phenomenon we have seen is the growth of angel groups. These groups bring together seasoned angels and the novice angels who then pool together resources, money and expertise to initiate a more formal process to angel investing, resulting often in bigger round sizes and investments.
KITE: Lastly, is there a final message or event that the NACO would like share?
YN: NACO’s newest report that analyses angel investing in Canada will be coming out this May. In this year’s report we go more in-depth on the best practices that our members are following, on investments being made, and we even went a step further and analysed the impact of angel investing on early stage companies that have received the money our members are providing. This is really interesting information that underlines the impact angel investment has on essentially pushing forward innovation domestically and hopefully closing the prosperity gap that exists between Canada and the other innovative jurisdiction in the world.
Lastly, NACO has its Angel Summit this coming October that will bring together around 300 investors from all across Canada and all around the world for a 3-day period.