Published in “SME, the Entrepreneurship Magazine of Quebec”, May 1998 edition, written by Hélène Buzetti
Part capitalist, part philanthropist, angel investors are financing promising startups that banks ignore
On a Thursday evening of last February, 20 budding entrepreneurs stepped through the intimidating doors of the very select St. James Club in Downtown Montreal. Their hearts were beating as they hoped to meet their guardian angel. Not angels with wings to lift them to success, but rather, people with pockets deep enough to finance their dreams.
Organized by the Mayor’s Foundation for Youth and Montreal’s Junior Chamber of Commerce, the Financial Angels’ Evening lets talented young entrepreneurs rub shoulders with individual investors. This may lead to moral and monetary support which financial institutions are not yet ready to provide, since these entrepreneurs have little by way of history, assets and experience, and their enterprise represents a lot of risk.
Working in fields as diverse as Biotech, Information Technology, Environment and Fashion, the 20 young startups present had one thing in common: they were launched less than three years ago by founders aged 18 to 35 years old, and they were supported by fostering groups like the Enterprise and Innovation Center of Montreal (CEIM), Inno-Centre, the Montreal Community Loan Association or the Young Entrepreneur Assistance Service (SAJE). While presenting their companies to the 150 businesspeople present, the entrepreneurs manned their own trade show booths to attract and seduce any one of these mysterious angels.
“The Young Entrepreneur Assistance Service sponsored our candidacy,” says Denis Lamothe, President of Icarus. “Our goal is to show both our management, skills and the tremendous potential of our technology.” This startup has built technology that transmits telephone conversations via the Internet in real time and confidentially. This eliminates long distance charges, so users recover the initial cost within months.
Such an event is a golden opportunity to meet potential clients. “Imagine: there are people here who want to integrate our technology into the call centers they are planning!” shares Denis Lamothe. “Although we could fulfill the order by ourselves, we would prefer to get new financing to push our marketing big time.”
“More than money, these young adults need advice, sponsoring and access to a contact network,” summarizes Marguerite Blais, Director of the Mayor’s Foundation for Youth, and organizer of the event.
Studio Vox, for example, was mainly looking for the support of lobbyists. Co-owners Laurent Gallard and Gabrielle Béroff developed an audio system to image and describe, which allows blind people to view movies in the same room with people who can see. Ultra-light infrared hearing aids capture the descriptions. Murmurs from the audience are also heard, making sure nobody feels isolated. However, for the product to become profitable, the government would have to impose a quota on the movie industry. “Our ideal angel would be someone who could open the government doors for us,” says Gabrielle Béroff.
“The kind of angel that we are looking for tonight,” says Pierre Savignac, founder and CEO of Emergex Consultants, “is someone capable of understanding that when we say technology and grey matter, we have few guarantees to offer. We are looking for partners that are creative, and more interested in what we accomplish than what we own.”
Who Is Under the Halo?
Financial Angels embody both philanthropy and capitalism. Fundamentally investors, they are usually businesspeople who have succeeded and who want to use their money and experience to benefit newcomers.
According to a study on informal investments conducted by the Science and Technology Council, Quebec has 2175 angels who each have between $50,000 and $1M, for a total of $1.36B! They invest in promising ventures like those introduced in Angels’ Evenings, which unlike the stock market, allows them to watch their investments grow and at the same time feel personally involved.
Actor and businessman Daniel Pilon is one of these benefactors. “There is an economic postulate that globalization will mend all problems,” he says. “But this leads to brutal capitalism that takes away opportunities for beginners, where all business decisions are motivated by pure profit. Most people want rapid results on the stock exchange. Angels would rather encourage those who have good ideas by funding them because they deserve it.”
But not all angels are as visible as Mr. Pilon. Most try to elude journalists if they can. “Being an angel is not a virtue that people brag about,” says Marguerite Blais. We have chosen the term angel for a reason. There is something ambiguous in being an angel, and many are not wearing the right hat. They say they’re bank representatives, but really, they come to invest some of their own money.”