Angel Financing in Montréal (3)
Austin Hill made a talk at Barcamp about angel funds in Montréal. I ¨noticed that most of the attendees were intersted; so here are some notes about angels.
First, what is an angel and what are they for? Angels invest into a new promising company that looks like it is going to disrupt the market (think Google, facebook or youtube). Entrepreneurs get access to capital to fund their R&D, launch and make a viable product, while the angels hope for a very high return, proportional to the risks.
In Montréal, known investors are MontrealStartup, Brudder Ventures aka Austin Hill, Brightspark, JLA Ventures Partners, and Codency. However, as Austin Hill said, angels can also be individuals who invest privately, like second-time entrepreneurs, lawyers, accountants, VPs of technology companies or people who sit on the board of directors of those companies. Finally, there are also investors like iNovia Capital, which focuses on projects coming from universities in Québec.
From Austin Hill’s experience, getting funds from an angel is very much like dating. First, you have to make sure that the angel plays in the same space and market you want to play in. In Montréal, if you want to do Internet search for instance, one idea is to see who invested in mamma.com. If you want to go into services for mobile phones, you would want to investigate who invested in OZ Communications or in Bluestreak. If you want to do social networking, then try to get the people who invested privately in capazoo.com. You can also try to hit VPs / boards of directories of tech companies like canoe, Bell, Videotron etc.
Austin Hill
Meeting those people involves a lot of networking in cocktails, 5 à 7 (TechnoMontréal’s for instance), the monthly Montréal Tech Entrepreneur breakfasts, dinners etc. Like in dating, getting introduced by someone they know is a bright idea, which will get your project reviewed with a good eye. Here, you need to focus on a couple of key investors, instead of chasing everyone.
After the meetings, and if the angels are interested by your pitch, there is the due diligence process, where investors will investigate into your team, your competitors, make exhautive checks about your technology and your business plan. Afterwards, they will present you a terms sheet detailing their investment offer. This is the negotiations process, where you will most likely need lawyers and lots of coffee to examine the fine-prints. For reference, angels in Québec will want convertible debt: their investment is a loan (with interests!!), which can be converted into discounted shares when VCs invest into the startup at series A. It’s a bad idea to make a valuation of your company and then finding out afterwards that VCs disagree with the valuation.
Good angels are the ones who will work with you on finding VCs, and who can advise you on your product and the market. Getting the ideal angel is not easy, and will take you a lot of time.
More about angel investments:
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