Knights riding in with cash to spend - Angel investors making dreams happen

January 26, 2012
Author: Winnipeg Free Press

Among the many characterizations of the Winnipeg business community is the old adage there’s a lot of private money around this town.

But if you’re an entrepreneur with a promising young business in need of investment capital, and you don’t have the password into the circles where that quiet money resides, it doesn’t really do you any good.

Angel investor groups, on the other hand, formalize that concept of quiet money and make it far more accessible.

Unfortunately, another trait of the Winnipeg business scene is that, unlike most other cities this size and larger, there are few, if any, organized angel investor groups.

Until now.

The Manitoba Knights is a group that was formed in the fall, loosely connected to Biomedical Commercialization Canada (BCC), a business incubator that’s affiliated with and partially funded by the National Research Council (and the province).

Marshall Ring, the chief executive officer of BCC, says this angel group numbers between five and 10 people representing about $10 million of investable capital.

It will focus on Manitoba-based companies with early-stage technology and high-growth potential. Those are ostensibly the kind of companies that would be eligible to participate in BCC’s incubator, but Ring said, "It does not preclude non-BCC companies from getting involved."

BCC’s objective is to prepare its member companies to be investmentready so they may have a leg up with the Manitoba Knights, at least in the early stages.

In addition to the professional support BCC provides companies that might make pitches to Manitoba Knights, the angel investors will also benefit from getting the seal of approval from one of their own.

Every deal will be vetted by Harry Ethans, a veteran corporate finance consultant, investor and corporate executive (he was a key lieutenant in Canwest’s salad days).

"It’s funny, but I have not necessarily been inclined toward early-stage investments," Ethans said.

He recalls how Canwest got involved in the bubble like every other media company back in the day and how it did not turn out well.

"Maybe it’s my corporate upbringing, but I like cash flow," he said.

But Ethans worked with Ring and the BCC board to put together an angel model that addressed some of the issues that can sometimes make earlystage technology investment such a crapshoot.

For instance, he said companies that pitch to the Manitoba Knights can’t still need three years to get to market; they can’t be uncertain as to who their customers are; there has to be some recurring revenue; and there needs to be some validation from a beta customer.

In the very early stages, there is plenty of enthusiasm from the Knights. After an introductory presentation of some of BCC’s member companies, a small investment of $50,000 — typically the Knights would want to make cash infusions of between $100,000 and $3 million — was made in an enterprise called Arterial Stiffness Inc. It has developed a portable, noninvasive personalized heart-health feedback system.

The Manitoba business community may feel particularly hard done by because of the Crocus debacle, but the fact is venture capital has moved upstream just about everywhere and is really only interested in companies much farther along the growth cycle.

Jan Lederman, a Winnipeg lawyer and executive chairwoman of the Manitoba Innovation Council, is working at rounding up other angel investor networks.

"Angel investors are extremely important for emerging high-growth companies," she said in an email exchange. "This is especially so on the technology side, where there are few hard assets that would be of interest to a traditional lender, or where the company has good prospects but needs capital to get to market and grow quickly."

Ethans said, "We really think it is an opportunity, in a responsible and professional manner, to start to build a technology hub here and create some made-in-Manitoba businesses."

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"Angel investors are extremely important for emerging high-growth companies. This is especially so on the technology side, where there are few hard assets that would be of interest to a traditional lender, or where the company has good prospects but needs capital to get to market and grow quickly." -Jan Lederman, Executive chairwoman of the Manitoba Innovation Council