The Angel Advantage: How Angel Investors are Leveraging Experience to Support Early-Stage Startups

Canada stands as a thriving hub for angel investors, home to over 4,200 individuals contributing to 45 diverse angel groups, with a significant 60% based in Ontario. Angel investors provide a unique lifeline to early-stage startups by providing founders with access to capital that is not yet available through more convention funding sources such as venture capital and private equity. However, angels bring more than just capital to the table – they provide early-stage startups with mentorship, guidance and advice that is critical for guiding founders through the complexities of bringing their ideas to market.

Beyond the Financials

We recently hosted Benton Leong, entrepreneur, mentor, coach and angel investor with the Golden Triangle Angel Network (GTAN) , as a guest speaker for our Angel Investing 101 program. Leong emphasized that angel investing reaches beyond financial opportunity and serves as an important way for investors to provide value to the next generation of entrepreneurs by sharing experiences from their own lessons and mistakes,

The ideal angels are those that actually give back. No so much with just simply writing that $25k, $50k, or $100k cheque – but with their experiences, their lived experiences as a founder, as a successful businessperson who knows how to grow a company, who knows how to operate a company, who knows about imports and exports and taking Canadian services or products overseas.”

Angel investing proves to be a fulfilling endeavor, as Leong highlighted the primary motivations behind individuals becoming angel investors. At the forefront of this list is the desire to ‘give back to their community’,

It’s a chance to redeploy the skills and experience that you have”

The majority of angels are fueled by this altruistic drive, aiming to contribute to their communities
while also fostering continuous learning and growth.

Patience Please

Leong went on to discuss the core attributes of angels —and while they’re not required to enter the network, Leong believes they are essential components of success. The top four attributes: patience, tenacity, experience and sustained vision.

Leong stressed that angel investors must be willing to be patient. When working with first time entrepreneurs, investors must acknowledge the learning process and be there to support any hiccups along the way. First time entrepreneurs may not know what they don’t know.

You’ve got to be patient with them as they are working out the kinks in their products or their services, figuring to product market fit, bringing it to the market”

Paired together, patience and experience create time and space for entrepreneurs to learn and grow,

Gently let them know that they’re lacking in certain knowledge areas or that they don’t have a certain skill set and help them as best you can fill those gaps”

In addition to the patience required in the learning process, angel investors must also exercise patience when it comes to seeing returns. It is crucial to set reasonable expectations, acknowledging that returns may not materialize until 5 to 8 years down the road. The journey to a Series A funding round often takes longer than anticipated. As an early-stage investor, your role involved providing support to bridge the gap as these startups progress towards securing a Series A round.

How to Stack the Odds in Your Favour

While many may liken the high risk of angel investing to gambling, Leong offers a different perspective. There is no doubt that angel investors take on a substantial amount of risk due to the lack of maturity in early-stage startups. Yet, by leveraging their own expertise, acting as an advisor, and using group connections to help companies find follow on financing, angel investors can effectively stack the odds in their favor.

One way to determine your performance as an angel investor is your portfolio size. A smart, diversified portfolio will help to even out risk factors and increase the probability of return,

If you want to have a successful strategy for angel investing, create a diversified portfolio of about 30 companies. 30 is the magic number. You can put more money in and invest in more companies but then the return rate doesn’t go very much higher than what you achieve with about 30 companies in your portfolio.”

Another tip for mitigating risk–co-investing. Leong recommends, especially for newer angels, to co-invest with a successful investor to reduce risk and improve return odds,

Buddy-up to sit alongside someone who’s been doing this a few years and understand what questions to ask, how to probe for the weaknesses of a company and then how, upon seeing those weaknesses, just not simply walk away, but has a strategy for shoring up those weaknesses of working with the company. That’s how you get successful companies.”

Joining an angel network is another strategy to enhance investment outcomes. Angel groups provide significant benefits to members by providing mentorship, fostering social capital and leveraging strength in numbers for diverse investments. In these networks, investors collaborate, gaining knowledge and trust from the community around them, creating group band and strong deal flow. In angel groups, there are greater advantages to pitch to known groups rather than investors chasing after them. Angel networks streamline the investment process, creating a supportive ecosystem that maximizes opportunities for success – both for the investor and the founder.

Join our dynamic community of like-minded individuals who are actively involved in funding and mentoring promising entrepreneurs. For more information on how to become an investor with our angel investment company, read more here.

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