After nearly two years in Canada, U.S. startup platform AngelList is extending a program here that lets angel investors more easily build “microfund” startup portfolios to draw private capital from a broader range of sources into early-stage Canadian businesses.
AngelList first came to the country in 2016, through its AngelList Syndicates program in Ontario. It lets experienced, accredited investors pool capital into startups that were participating in regulator-approved programs such as the Creative Destruction Lab. AngelList has since expanded the syndicates program across the country, as well as the scope of startups that can apply to be on the platform.
Building on that, it is now bringing its Angel Funds program to Canada, just two weeks after the Canadian Securities Association’s “regulatory sandbox” innovation wing amended an earlier decision about AngelList’s products. Angel Funds allows angels to design funds directly on the company’s platform as lead investors and bring in capital from other investors with the ability to make discretionary investments like a traditional venture-capital fund manager. The platform is designed to handle much of the administration of angel investment, reducing friction and costs, while allowing the lead angels to build a diversified portfolio of startups.
The expansion of Angel Funds into Canada could herald even further early-stage investment in the country. It’s been available since May, 2017, in the United States, where close to 100 funds have deployed more than $100-million in capital, the company says. While there are no fees for a startup to list on the platform, AngelList collects a fee on the value that is created of about 2.5 per cent, although it varies depending on the amount raised.
Since the AngelList syndicates program launched here in 2016, the firm says 55 investments have been made into Canadian startups for a total of more than $17.5-million, with the vast majority of capital coming from outside of Canada. Angel Funds could draw even more of that outside capital into Canadian early stage companies, said Alex Norman, an AngelList partner who oversees its Canadian operations.
“What we’ve seen in the States is the type of peoples’ backgrounds are much more diverse, so it allows more people to participate as lead angels and build a track record,” Mr. Norman said in an interview.
In later-stage investments, “you’ve got large foreign capital co-investing alongside Canadian VCs, but the early stage is still a very local story,” he continued. Through Angel Funds, “you’ve got more capital into early stage from abroad, which wasn’t in the ecosystem, so it’ll hopefully give companies a longer runway to prove what they want, and a bit more connective tissue to the rest of the world.”
Mr. Norman said that AngelList had been in discussions with Canadian regulators bringing Angel Funds here since they launched last year in the United States, and regularly worked with them to explain how the product would fit into the country’s investment landscape. The Ontario Securities Commission, the regulator where AngelList registered in 2016, did not immediately respond to a request for comment.
AngelList said the program requires that angel investors come with experience, a validated investment thesis, and a track record of adding value to startups they invest in. The program then gives them access to thousands of startups to explore. More than 3,000 angels and limited partners are currently on the platform, Mr. Norman said.
Seed-stage financing has grown in Canada over the past five years, rising to $214-million invested in 178 deals in 2016, and falling slightly to $205-million among 143 deals last year. Total Canadian VC financing grew 11 per cent to $3.5-billion in 2017, according to the Canadian Venture Capital and Private Equity Association.
Photography marketplace Unsplash, the food-and-supply-ordering service Chef Hero, and rewards-program-service Drop, all of which recently received Series A venture-capital funding, previously received investment from Angelist syndicates.