A Practical Guide to Angel Investing: How to Achieve Good Returns

Preface

Since I co-authored Age of the Angel six years ago in 2010, the Angel investment asset class has undergone tremendous professionalization and maturation. It was time to completely rewrite the book in order to incorporate the deep stream of NACO Academy modules, new research on successful Angel investment best practices, new entrepreneurship tools, the rise of early exits, and new government regulations and stimulation programs.

The Angel ecosystem in Canada has blossomed over the last seven years to become a global leader in startup investing. In Canada, the Angel investment asset class now invests as much money as the venture capital industry, while investing in about 25 times as many new ventures!

This book is designed to capture the insights and experiences of this vast ecosystem of Angels and experts to completely rewrite NACO's guidebook on how to be (or get money from) an Angel investor.

This book is designed for three audiences. It is primarily written for new and recent Angel investors – to introduce you to the world of Angel investing and provide guidance on where to find deals, what to look for in a good investment, how to structure your investments, when to exit (leave the deal), and who's who in the ecosystem. There are lots of facts and figures, tips, stories and quotes throughout, and I have tried to achieve a casual tone.

Secondarily, this book is intended to help current Angel investors by demonstrating the diversity of opinions, indicating trends, and pointing toward current practices. As Karen Grant, Executive Director, Angel One Investor Network points out: "There is no such static thing as a best practice. Because the economy changes, our practices must change with them. And that varies from one place and time and group to another."

Angels can use this book as a guidebook as you navigate the new world of Angel investing or skim it to find the bits you like, nod your head in agreement at certain quotes, laugh at jokes, and find something you didn't know or hadn't thought of before.

Finally, I hope there will be something for everyone in the early-stage financing ecosystem. Entrepreneurs will better understand investors and the fundraising process. Those who support the early-stage sector, such as consultants, lawyers, accountants, bankers and government agencies, will better see how their roles fit into things from their clients' perspective. Friends and family will have deeper insights into what you are going through if you are trying to raise money. The curious will learn more about the fascinating world of finance and entrepreneurship.

I tried to quote each of the many people who generously shared their stories, opinions and thoughts with me. In a few cases, I use quotes without attribution when summarizing several comments into a shorter statement: think of these unattributed quotes as summarizing a point of view held by many people into a Zeitgeist quotation.

This book is also meant to highlight the many resources, programs and events that NACO offers:

• NACO Academy – an integrated program of educational modules from beginner to advanced courses
• NACO Website – a resource with a wide range of member services and NACO Online Sample Documents you can use to share your investment practices, including investor declarations, legal agreements, checklists, term sheets and other documents
• NACO 2014 Report on Angel Investing Activity in Canada – research reports on Angel investing activity in Canada
• NACO National Angel Summit – the annual networking and educational event
• NACO Co-Investment Events – events designed to help your investee companies raise their next round of financing with large-scale deal syndications

– Steven A. Gedeon, PhD

March 2016