Brian Scott, a Board Member of the Innovation Collaborative and a member of BlueTree Allied Angels began blogging on WordPress about angel investment and the startup process. BlueTree Allied Angels is a professionally managed PA-based angel group. The Erie group within BlueTree has invested more than 3 million dollars into startup companies within the last three years. The group would like to see more of these investments go into Erie based firms.
For an introduction into Angel Investment, you can read Brian’s blog post here.
Recently, Brian was invited to speak at the 2015 National Angel Summit Angel Ready Start-Up Showcase. NACO stands for National Angel Capital Organization. It is a Canadian based organization that helps Angel investor networks not only within Canada, but across the Border into the Northern regions of the United States.
To encourage cross-border collaboration between Canadian and American investor groups, NACO will allow 5 American companies to pitch their businesses to 300 angel investors.
Know an angel ready company? Please contact Brian for more information about pitching at the NACO event: firstname.lastname@example.org.
Brian spoke to the Innovation Collaborative staff about NACO, how Angel investors collaborate across borders, and how that collaboration benefits entrepreneurs.
Do angel investors typically invest cross border?
In Quebec and Montreal, their angel groups do a lot of cross border investing with Boston and New York. In Vancouver, they do a lot of cross border investment in Seattle and Portland. In this part of the country, even being near Buffalo, Cleveland, Detroit, Windsor Canada, there is not a lot of cross border angel activity. Because NACO’s event will be held at Niagara–on–the–Lake, there is an opportunity to begin to develop a cross-border network of angel investment between our region and angel investors in Canada.
How does Angel collaboration improve opportunity for entrepreneurs?
Brian: For the entrepreneur there can be more investment funding put together. A network of angels investing together, can tap into more collective funds, as a group. Also, it helps provide entrepreneurs with additional mentorship and cheerleaders. One of the most important elements of obtaining Angel funding is to build relationships with mentors within the Angel group. Angels are typically high net worth individuals that are successful entrepreneurs or business leaders, so they are a great resource to tap into. Angel collaboration also can provide extra legitimacy for the startup when that company seeks follow on funding.
What does investment funding collaboration look like?
Investment over the lifetime of a successful startup usually comes from many places. These might include Seed Funds, awards from competitions, or multiple angel investor groups. For example, a collaboration between Angel investors can speed up the investment process because the entrepreneur can make the same pitch to several groups in a short timeframe. In addition, different Angel groups might have a four or five page due diligence checklist, but instead of each group doing their own due diligence, the work can be split up into logical groupings so that each investor group completes a separate portion of the due diligence to build a shared due diligence report.
How is mentorship important to Angel Investment?
Having an experienced angel act as an advocate or mentor through the investment process is not all that common. There is a lot of value to working with an angel that knows all aspects of the investment process really well. Normally an entrepreneur applying for funding goes through a multi-step process that includes building a pitch deck, going through pre-screening, screening, and then a full investor meeting – pitching their company or idea each time. If the Angel group has strong interest, then the entrepreneur needs to work with the Angel group on a term sheet and the due diligence process. An Angel mentor who knows each step of the process well can help entrepreneurs have a much better chance of getting funded because Angels are looking for different things in each step of the process.
If you plan on seeking Angel investment, it is important to reach out to an Angel that knows the process well for guidance and mentorship and to be an advocate for you within their group.
How does Angel investment contribute to local economic development?
Angel investment offers one component of a healthy startup ecosystem. There are two key elements to that benefit. First, Angel investment helps to develop a culture of risk taking. Those who have been successful angel investors, might be more inclined to participate in other aspects of the startup ecosystem and fund more local startups. In some cases, angel investors have launched their own startup businesses and have some good experiences to share. More simply, a successful angel investor might be more inclined to offer additional mentorship to entrepreneurs or participate in other aspects of entrepreneurial service provision, such as ‘pitch’ competitions to help entrepreneurs practice their pitches.
Second, Angel investment provides a rigorous due diligence process. This process helps the startup improve their business model and readies the startup to expand their business into regional, national, and international markets. A rigorous due diligence process also helps to lower the risk for angel investors so that potentially more funding can be available from the angel community in the future.