Do you have a great business idea? If you’re an entrepreneur who’s confident in your idea and needs funds to start up or scale your business, angel investors can help by providing upfront capital so that you can take your business to the next level.
Angel investors can be found by tapping into your personal network or through an online angel investor network.
There were 1,187,658 small businesses registered in Canada, according to a December 2021 report by Statistics Canada. Below, I’ll go over some of the best ways to find (and approach) angel investors in Canada so you can get your small business off the ground!
Angel investors are individuals who provide capital to start-ups or entrepreneurs seeking to grow an existing business, often in exchange for convertible debt or ownership equity.
These “angels” are so-called because they typically fund entrepreneurs who may not be able to obtain funding through traditional means, such as a bank loan.
Often angel investors are successful entrepreneurs themselves. Through their years of experience building and investing in small businesses, they develop a keen eye for individuals and business ideas that are likely to succeed.
Unlike venture capital firms, which typically leverage the bank’s money, angel investors risk their own money. With their money on the line, they may take a more hands-on approach to guide the business through its start-up phase to help ensure the security of their investment.
In addition to their initial investment and guidance, they may also offer:
- Access to connections
- Partnerships with other companies they own or invest in
- Continued investment for growth
Whether you operate a start-up that’s trying to get off the ground or you have an existing business that’s trying to expand and take things to the next level, an angel investor can help by providing you access to capital, networks, connections, and guidance that you may not be able to access on your own.
For example, angel investors may provide these resources to entrepreneurs who:
- Are young and have little experience
- Have had previous businesses that failed
- Don’t have ideal credit scores or a long credit history
- Don’t have a lot of business capital
- Don’t have access to traditional lines of credit
- Have a “risky” business idea (such as crypto mining or cannabis)
Often, these entrepreneurs have tried (and failed) to secure funding through traditional bank loans. They could have the best idea in the world but could lack the credentials, history, and capital to gain the trust of traditional investors.
Despite being dubbed “angels,” these investors are business professionals and seasoned entrepreneurs investing for personal gain.
Angel investors take on high levels of risk by investing their own money in businesses that often approach them as a last resort. These investors see the potential for two outcomes:
- Your business fails, and they lose their investment
- Your business is successful, and they profit
Terms can vary, but angel investors typically expect their initial investment to be repaid with interest, a percentage of your profits, or both. In many cases, the investor expects equity in the company.
One of the upsides of working with an angel investor is that entrepreneurs can negotiate terms and find a middle ground that works for both parties. This is especially true if multiple angel investors are interested in the entrepreneur’s business.
Now that you know more about how angel investment works, let’s discuss how to find angel investors in Canada.
One of the best ways to find an investor is to tap into your personal network. Angel investors can come in all shapes and forms; the only requirement is that the individual has enough capital to invest in your business.
You could find a potential angel investor by simply scrolling through your phone.
Your wealthy uncle, mentor, friend who owns a successful business, or even your old boss could provide the money you need to start your business.
That being said, I would caution against tapping into your personal contacts, especially for larger sums of money. If things go south, you could easily ruin a meaningful relationship.
Searching for angel investors through your business network is better for multiple reasons:
- You’re more likely to receive sound business advice and guidance
- You’ll typically gain access to a wider business network that can help your business grow
- There tend to be fewer emotions involved between business partners and investors than with family and friends
If you want to be a successful entrepreneur, you’ll need to cultivate networking skills that will allow you to connect horizontally with fellow small business owners and vertically with potential investors.
The best place to find these individuals is by attending business conferences, trade shows in your industry, fundraisers, and other events.
Whenever possible, spend time where high-net-worth individuals do. This will increase your chances of bumping into (and having a conversation with) potential angel investors. Some creative ideas could include:
- High-end cafes
- Country clubs and golf ranges
- Upscale clubs and restaurants
- Five-star hotels
- Ski resorts
- Art galleries
I’m sure you can add a few of your own ideas to this list. The industry you’re in will also dictate the type of environment you’ll find potential investors in.
In addition to developing your personal business network, there are also a number of online angel investor networks that you can tap into. These online networks can be very competitive.
However, if you have a great idea, can present it well, and have good communication skills, then you could find the perfect angel investor online.
Here are some of the best online angel investor networks to tap into.
- Website: nacocanada.com
NACO is a prominent organization representing angel investors and promoting angel investing in Canada. They provide resources, networking opportunities, and educational programs for angel investors.
Since its initiation, NACO angel investors have invested over $1.38 billion into over 2,000 small Canadian businesses.
- Website: angelonenetwork.ca
Angel One Network is an angel investor group based in Ontario. This not-for-profit network has been operating for nine years, and its members have invested $25.2 million in 137 companies to-date.
They focus on early-stage investments and provide funding, mentorship, and support to startups.
- Website: mapleleafangels.com
Maple Leaf Angels is one of the more active angel groups in Canada. This group of high-net-worth investors aims to invest in high-growth potential startups and provide expertise, capital, and mentorship to entrepreneurs. Since 2007, this network has invested over $43 million in 102 companies.
- Website: yorkangels.com
Ontario-based York Angels is a private group of investors with interests in various sectors, including telecommunications, retail, SaaS, and pharmaceuticals.
There are over 100 members in the network, and the group has offered over $40 million in funding to over 350 start-ups. They provide funding in the range of $150K to $1M.
- Website: goldentriangleangelnet.ca
GTAN is an angel investor group located in the Waterloo, ON. They focus on investing in innovative technology startups and provide capital, mentorship, and connections to help entrepreneurs succeed.
Its investors have offered over $100 million in funding to over 200 companies. GTAN is also partnered with Angel One, SWO Investors, and We Can Investors.
- Website: angelinvestorsontario.ca
Angel Investors Ontario recently celebrated its 15th anniversary. This organization connects angel investors with promising startups in Ontario. This platform funds diverse businesses, including tech start-ups, green companies, and more. It’s partnered with over 15 other angel investor clubs in Canada.
Meeting potential angel investors is only half the battle. A contact means very little if you can’t approach them, pitch your idea, and convince them to invest in you and your business. Here are some tips for approaching angel investors.
Attending conferences held by angel investor networks like the ones I mentioned above is a great way to get into contact with potential investors. Even if you don’t get a chance to speak to investors one-on-one, you’ll meet valuable contacts who could help you contact investors at a future meeting.
You may also have a chance to collect business cards and contact information for investors or club members, so you can discover how to pitch your idea.
When you’re given the opportunity to pitch your idea to an investor, you should be concise, knowledgeable, well-spoken, polite, and enthusiastic. While you should demonstrate expertise in your industry, you should also be open-minded and willing to listen to guidance and advice.
Angel investors often take a hands-on approach when investing in a business, and they’re less likely to work with entrepreneurs who are stubborn and unwilling to listen.
Before signing the dotted line and investing in your business, you and the investor will agree on various terms and conditions related to the business and investment. Here, you’ll agree to details, such as:
- The amount of the investment (and time period)
- Key milestones
- What happens if the business fails
- The equity or business percentage that will be given to the investor
- … and more
Before it gets to this point, speaking to a third-party financial advisor or business professional is a good idea. They’ll be able to evaluate your business idea, provide helpful insights, and arm you with the knowledge and terminology that you’ll need to negotiate the best deal with the angel investor.
Working with an angel investor has a number of benefits compared to receiving funding from a venture capital firm, crowdfunding, or obtaining a traditional bank loan.
Angel investors are often high-net-worth individuals who bring their own network and professional guidance to the table in addition to their initial investment. These are invaluable for start-up entrepreneurs.
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