Yes, Mr. Chairman, thank you very much.
To the committee, thank you for including us in today's discussion.
Today I'm going to actually split the presentation between Andy and me. So with that, what I would like to do today is explain the role of angel investors in Canada's commercialization ecosystem--and yes, there will be a test.
Angel investors, individually and via formal angel groups, invest approximately $3 billion annually in seed and early stage companies. Those are Industry Canada statistics.
The National Angel Organization, of which I am president, is the industry association that represents angel investors throughout Canada, including over 30 formal angel groups, representing about 4,000 angels and angel investors. We are a grassroots, non-profit organization that runs from coast to coast, whose mission is to promote best practices in angel investing, to facilitate the formation of angel groups as a means of overcoming the barriers to investment in early stage companies by accredited investors, to facilitate deal co-investment and syndication via increased investor communications and networking, both nationally and internationally, and to facilitate and organize channels of communication with government researchers, entrepreneurs, and the capital markets.
As the industry association for angels and angel groups in Canada, NAO is also partnered with other angel groups in the U.S., Europe, and Asia, to promote foreign direct investment into Canadian companies.
We--that is, business angels--are the oldest, largest, and most-often-used sources of funds for entrepreneurial firms. Most Canadian start-up companies have been funded in some form by angel investors. Most angel investors—this is not family money—are entrepreneurs, often serial entrepreneurs who have successfully founded and/or operated one or more companies. They typically invest in and mentor several start-up companies at the same time. Angel investments in Canada facilitate the transformation of R and D into successful businesses that public institutions, venture capital funds, public investors, and banks can then finance.
The bottleneck holding back the benefit of the government's large investments in research has been a shortage of coordinated angel investments. According to Sustainable Development Technology Canada, Canada faces an estimated $5-billion annual funding gap, sometimes known as “the valley of death”, in financing early stage companies.
Interestingly, as the venture capital industry has come under some pressure, they are not investing as much in early-stage companies and certainly in seed rounds. This has increasingly fallen to angel investors in terms of supporting. The emphasis by all levels of government in Canada has been on the funding of research and development. Proportionately few resources have been allocated to commercialization of innovation. However, this commercialization is one of Canada's only true sustainable natural resources.
With that, I'm going to turn it over to my colleague and chairman, Andy Wilkes.