AN OVERVIEW OF ANGEL INVESTORS IN CANADA
• Angel investors are wealthy individuals who invest their personal
funds into early-stage firms. In addition to funding, they tend to
contribute industry and managerial expertise to the entrepreneur.
In Canada, a typical angel investment is $100,000 with an average
holding period of five to eight years and an expected after-tax return
of 30-40% annually.
• By some estimates, the current outstanding stock of angel capital
could be more than $12 billion and the annual disbursement could
be more than $3 billion in 1999.
• Major problems facing angels include the shortage of quality
investment opportunities, difficulties in finding co-investors, high
taxes and restrictive security regulations.
• Studying the size and characteristics of the angel market may help
better understand the credit channel of the monetary transmission
Ying Liu (8075), MFA, July, 2000, FN-00-040, KW: 121
The success of many young fast-
growing firms, especially those in the high-
tech industries, has drawn attention to the
sources of capital in financing their growth.
Most of these firms obtain their earliest stage
financing from founders, family and friends
(called “love money”). However, these sources
of funds are usually exhausted long before the
company can develop into the sustainable
Traditional bank financing is mostly collateral-
based, and thus is out-of-reach for many
young entrepreneurs. An alternative source is
venture capital funds interested in taking an
Nevertheless, the costs of evaluating and
monitoring a venture capital investment often
militate against small
under $1 million.
Consequently, a market for informal
private investors, or “angels”, emerges to
bridge the gap between love money and
venture capital financing, or the “angel gap”.
Angels are typically high net worth individuals
who invest their personal funds into early-