It takes a certain type of person to take a huge gamble on an entrepreneur's lofty idea with their own money, but with high risk comes high returns - sometimes. Angel investors fund numerous business startups every year and yet they seem to fly under the radar."Every one of them has been burned and written cheques that have turned to dust," says Henry Kutarna, an angel investor in Calgary who heads up a group of these individuals through Alberta Deal Generator, part of a network established through Innovate Calgary and TecEdmonton. "We have a sense of humour and irony," he says.
Angel investors are high net worth individuals comprised mostly of people who've made their fortunes as entrepreneurs in their own right, but some come from big business and simply have a passion for helping entrepreneurs - and making more money in the process.
Either way, they are an important source of cash for startups in everything from technology to manufacturing to real estate. Kutarna, for example, manages a private family investment fund and brings together a network of about 300 angel investors in Alberta. He's also part of another angel investor group called Venture Alberta.
"We see our mission as to help create a capital market for technology, early-stage deals in Alberta," he says. "Today, I'm most excited about technology because of the high-growth potential . . . and the creativity and innovation you see in these early-stage deals."
He originally started managing deals in real estate and moved to manufacturing before focusing in on technology startups, but angel investors can throw their money behind any venture. The common thread is that they tend to be very active in these ventures - lending their own expertise as advisers - and they want to make big money.
"They want five to ten times their money in three years," says Kutarna. "You find an angel investor has a higher risk tolerance because they're early in the process. They are willing to roll up their sleeves and sit on your advisory board or work alongside you."
Some people wonder what drives angel investors to put so much of their own money on the line, but they're all aware of the risk - and the returns - and are usually motivated by more than just profits, says Kutarna.
"They are also people that like and enjoy working in the startup environment," he says. "They like to help a young entrepreneur get going. There's an authenticity to them that's cool to see."
There is also the social element to it, says Elspeth Murray, director of the Queen's University Centre for Business Venturing. "Rather than having a wine club, most angel investors invest as part of a group," she says. "It's as much a social activity and a way to give back or syndicate the deal as it is anything else."
For entrepreneurs with a vision, they are also a source of much-needed capital. But if you don't know where to look, it's easy to miss them. Yet there is this group of individuals just sitting there waiting for that next big thing - the next pitch.
Great !!!
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