Thursday, October 05, 2006
Angel investors bolstering startups
Money coming from a four-year, $46M program to get new discoveries to market
The Ontario government is allocating $2.5 million to encourage so-called angel investors to put money into startup technology companies.
The money is coming from a four-year, $46-million program announced this summer to help get new discoveries to market, said Jane Almeida, a spokesperson in Premier Dalton McGuinty's office.
Angel investors are individuals who invest their own money and business expertise in early-stage companies.
The $2.5 million will help the National Angel Organization make sure emerging high-tech companies are linked to the right investors.
The organization will work with the Ministry of Research and Innovation, the Ontario Centres of Excellence and others to help angel investors identify and get information about investment opportunities.
Bill Mantel, director of commercialization for the Ontario government, said the funding will be used to link the angel investors and "help them organize and develop tools to evaluate the information (about startups) and share those evaluations."
Tim Jackson, a co-founder of Waterloo-based venture-capital firm Tech Capital Partners, said the initiative is a good idea. He said angel investors play an important role in filling a gap in financing that venture-capital firms can't always fill.
Venture-capital firms generally invest in startup companies that need more than $2 million to get off the ground. Many smaller companies don't need that much, Jackson said.
Angel investors typically provide business expertise to small startup companies, he added. "So . . . trying to co-ordinate angel investors and get them more organized is a good thing."
He said he's hopeful the money will help angel investors share information so start-up companies can access money more readily and with less expense and duplication.
Although $2.5 million can't solve all the problems, it may help angel investors in different communities share best practices, Jackson said.
In the technology market, it is not unusual for a successful entrepreneur to sell a business and then be looking to invest some of that money in a new, emerging company, he added.
"So, hopefully, with this type of network, they won't have to do it blindly and can learn from others who have done it," said Jackson. "It can help new angel investors who are uncertain about how to go about it."