Thank you very much, Chairperson Easter, and to the committee members for inviting us to present today.
I think of all the organizations here, we're probably one of the ones that are least used to these opportunities, so we appreciate the opportunity.
We're here today because we wanted to bring an opportunity to the government to make a small investment to try to solve what is a critical problem by leveraging the private sector to support economic development through innovation. We think this small investment will have a huge impact in creating the infrastructure, really, that will allow private sector investors to deploy more capital to support the development of new technologies and new companies that will really become the future employers for our country.
Because I don't know all of you, and I haven't had the chance to meet all of you, I want to give a bit of background on who we are and what we represent.
Since 2002, NACO has been the national industry association for the angel investor community in Canada. Today, we represent a community of 41 networks and 3,000 investors across the country. That started with 100 investors who came together many years ago simply to talk each other into making some investments and to help each other avoid mistakes. Really, our community today spans across the country, everywhere from Victoria to St. John's to Yukon to Winnipeg. We're in every community, and that's really what makes angels unique.
Our organization's mission is to grow and develop the Canadian investor community and evolve it into an asset class of investment that can be there to drive economic development. Our vision is for a broad-based community that exists in every community where there are entrepreneurs. I can guarantee each of you that in your riding you've met with young promising entrepreneurs with ideas who are looking for capital and who are having difficulty finding that capital.
We do three things for our community. We bring together the angel investor community by identifying them, by recruiting them to join our nation-building initiative. We connect them together to help each other to share ideas, share best practices, share deal flow, collaborate, pool capital together, and fund those companies. We also help them improve outcomes through research, through education, and through best practices by that same collaboration. Finally, we act as a voice for that community by telling their stories, by telling the stories of the investors and of the entrepreneurs, and through that by trying to drive the kind of cultural change that we need in Canada in order to generate the culture of entrepreneurship and risk-taking that's going to be necessary to compete in the long term on the global stage.
What are angel investors? For those of you who don't know, angel investors are high-net-worth individuals—and this is defined in regulation—who are usually entrepreneurs and professionals. They have large social networks. They usually are locally focused, so usually it's about giving back to their community and to people and entrepreneurs in their community. They enjoy investing in early-stage, high-risk entrepreneurs—in people, essentially, who most other people wouldn't invest in. Certainly financial institutions wouldn't invest in them because the economics are just much too risky, but angel investors do it because they know that they're giving back.
The problem with angel investors is that they often invest alone. They also often lack the awareness that they are angel investors, or the awareness of how to invest or of what leads them to invest, and therefore they make mistakes. Unfortunately, they don't invest in themselves and in their processes; they invest only in companies and entrepreneurs. That means it's quite difficult for entrepreneurs to find them. It's quite difficult for entrepreneurs to pool larger rounds of capital, to get to the point where a VC or institutional investor will actually take a look at them. That creates a gap. We call this the “funding innovation continuum gap”. Really, it starts somewhere around the point where incubators and accelerators can no longer support these companies and its lasts until the point at which the VCs would come in, which usually is about the $5-million investment mark. So anywhere between $50,000 and $5 million there's a massive gap that everybody is always relying on private individuals to fund. We connect that community together to help them overcome the “valley of death”. That valley of death can take three to 15 years, depending on the company and the industry. It's a critical component of funding the innovation continuum.
Angel investors invest their own capital. We break this down into three types of capital: financial capital, intellectual capital, and network capital; in other words, their money, their networks, and their experience. They bring that to bear to help the entrepreneurs build the companies, grow them, and scale them.
The important thing to understand here is that angel investors are literally everywhere, but we need to help them identify and be more coordinated. Without that, the entrepreneurs are often forced to move to urban centres. You hear a lot about entrepreneurs having to move to one of the four or five key urban centres. That's not really necessary if they can find the investors locally and if those local investors can help them to find more capital outside that local market.