"You can have the best product in the world but if you don't know how to sell it and sell yourself you're not going to be successful."

- Jeff Champagne

Jeff outlines what he looks for in a start-up

Talk Takeaways

Jeffrey sits down with Jeff Champagne on why he invests, the processes he undergoes as an angel investor and as part of an angel group, the due diligence that is undertaken, and the different factors taken into consideration before an investment is made.

Jeff highlights three critical things that he believes contributes to a startup’s success. First and foremost, there must be a viable market for your idea; second, entrepreneurs need to manage their cash flow; and last is for startups to take advantage of the available funding opportunities provided by the government.

About

Jeff Champagne has 38 deals & 6 exits including 4 IPO’s under his belt. He is currently a partner in the OPN Network and Supporters Fund and he is on the board of Spark Angels.

The full #OPNAskAnAngel talk

Jeffery:
So welcome everybody to the supporters fund ask an investor so ask an angel. We’re excited today that Jeff Champagne is going to be with us today. This will be our fifth interview in the series and we’ll continue to interview a lot of great angel investors that are working in this space, in the early stage and pre-seed and see Braun investing so to jump right back in, Jeff why do you invest in start-up companies?

Jeff:
Why do I invest in start-up companies, there’s several reasons we invest and I personally invest in start-up companies primarily, well I mean I’d be not being honest if I didn’t say it was to make money, but in addition to that it’s basically an opportunity to give back and it’s also an opportunity to keep myself involved in on the pulse of what’s going on in in the local startup community.

Jeffery:
Fair enough and that is, that’s a great position to to look at. It is that you’re not going in it from just one angle, you’re looking at all the great opportunities and seeing what’s moving in the market, and then taking an active interest in order to help these companies move forward. What got you started investing in early-stage companies?

Jeff:
That’s actually a really good question. What got me started in investing was I had always had an interest in investing and I was a very typical investor you know. I had one business that was, know, reasonably profitable and had some extra money and I had done real estate, I had done stocks, I had done you know mutual funds, I had done all the traditional and what all called boring stuff. One day about six years ago, I literally just googled alternate investments available and angel investing came up and I reached out to Malcolm McTaggart the founder and leader of Spark Angels Durham and I had a meeting with him and he told me what it was all about and I was hooked. I’ve been an active investor and I have not regretted for a second, it was exactly what I was looking for when I wanted an alternate investment route.

Jeffery:
Awesome! Thank you Google! Pulls through yet again. Oh yeah, there’s a lot of I think even six years ago there might not have been the best information on angel investing, it’s really taken a push in the last couple years in getting more people interested which is great but that’s been a great way to get into it. What’s your favorite part of investing?

Jeff:
My favorite part of investing is the fact that it’s something different than what my businesses are. My businesses are what I’ll call boring traditional you know bread-and-butter companies that you know aren’t all that exciting. Aren’t hugely growth and sexy startup companies so you know they just chug along and they’re there and they’re required, they make money. Whereas the startup world it challenges me as you know joking aside, you know I’ve had to learn constantly about you know all the technological advances, like zoom and all these other ways to communicate. But it’s also kept me in touch with younger people with startups and a different side of the business economy that I wouldn’t normally be exposed to. So that’s definitely we know my favorite part of the investing.

Jeff:
No that’s great and throughout the time period, is there now if you log in and said you know each year I wanna make this many investments into companies, have you kind of set that in stone or what’s your theories or hypothesis around your investment strategies that take place?

Jeff:
That’s actually a really good question, Jeffrey. And for me at least personally, because I jumped in when I started investments upfront you know I probably did five six seven eight investments, I think one year I did ten investments. And you know maybe even perhaps a little too quickly I find now I probably do maybe only three or four in a year if that maybe even less just simply because I do a little more in mind. We’ll get into it later on but I do more due diligence now that I did upfront and also you know I’ve learned so much I’ve learned that a lot you know exits are longer than what you expect and there’s always a few hiccups along the way so you know I don’t think it’s reasonable you know to do six or seven or eight or nine investments in a year for the average angel investor. I don’t think you can properly do your homework and I don’t think you can do it justice. I think that you know, I will probably you know go forward I would say. I’ll probably be in the two to five investment a year range going forward.

Jeffery:
Well that’s a good fair number and especially when you’re spending a lot more time doing the due diligence nowadays where as you mentioned before t might have just been off gotten in a whim and now you’ve kind of circled back around and felt you know what I’ve learned a lot and if I focus in on these areas and make this correct hypothesis and I go after it then maybe I’ll have more successful startups to come out of it in the end .

Jeff:
Absolutely. Absolutely.

Jeffery:
Looking at it for sure, is there any specific verticals that you now look at as you’ve kind of gone through the spectrum over the last six years have you isolated down and say I really love these three areas, they seem to really do well in my portfolio or hey these are three areas or one area that I haven’t even looked at before and I’m really interested in getting my portfolio to have a start up in this space.

Jeff:
Again another good question. I started out with a little bit of a shotgun approach and just sort of invested in anything that I thought was going to make money and like most investors I was probably wrong. Now I think one field that interests me is medical. I’ve invested in a couple of different pharmaceutical companies that have basically either developed or repurposed drugs. They do tend to be a longer play but I think the the potential payout if they succeed you know is not going to be the typical you know 3 to 10x exit that a lot of angel investors look for when you get into the pharmaceutical play or the medical field. You have the potential for you know 100x exit so but I definitely always you know want to be looking for the next good medical or pharmaceutical play and that was even before this COVID exposure. But now with COVID, I think that’s even more so. I’m an engineer by training so I tried it’s you know I’II stay away from just what I’ll call the typical path investments. You know there’s so many you know come out there with an app to do this and an app to do that I’m not saying they’re not all good but for my interest that’s not what I want. You know I want to look for something that’s a little bit different, somebody hasn’t thought of and I’d like to look for something manufacturing base where somebody’s actually building a product that’s the other ones I’ll jump behind you know somebody’s got a cool little robot that can do this or that or somebody’s you know come up with a with a neat little you know invention of anything that can make our lives better so I if somebody’s got a cool product that I think can sell and succeed and I see an exit for it and I see a way to sell it and I think you know there’s a good opportunity to make it you know profitable then you know I’m gonna jump behind something that can actually you know touch and feel and and make .

Jeffery:
So you’re pretty agnostic but you do want to see something come out of the medical and maybe in a product space around the engineering side of it. Those seem to be two verticals that you’re heavily more interested in but you are pretty open across the board ?

Jeff:
Absolutely and then you know you can’t rule that FinTech you know, anything on the financial services site I think is probably the third space that always tickles my fancy a little bit. I like to see what’s new and exciting on that front because those say you all seem to differentiate themselves a little bit from the other. So yeah those are definitely the three areas I like to focus on. And again because I like to you know I don’t want to follow the pack of angel investors. A lot of angel investors tend to jump on the same type of investments. Whereas I prefer to steer a little bit to the side and look for something when they might’ve been investing.

Jeffery:
okay. that some great insight. Outside of your (sic) outside of just going with your gut, now you’re diving in and you’re really learning more, and doing more inside of the deep side of things, is there any requirements that you look for before you make a commitment?

Jeff:
As far as due diligence, I’m much more thorough on my due diligence now. I’ll want to see that, and that’s because you know of you and I working together in the fund as well you know we have very strict requirements for our fund when we do due diligence, and I think one thing I’ve done is been able to pass that on to some of the other angel investors that we work with. To teach them and show them the type of things we need. You know they have to have obviously you know we want to see files. You know anything to do with you know protecting intellectual property, we want to see financial you know reporting for at least a couple of periods, we want to see that we’ve got keyman insurance on the founders, we want to see you know that they’ve got a good sales and marketing plan. That they’ve got you know at least a three year sales forecast, I want to see that the understand you know their competitive nature I want to see that you know. They have a good understanding even when they’re starting out of what their exit strategy is going to be.

Jeffery:
Details on the wrong employee contracts so there’s the IP (sic), there’s a lot of things that really pull out nowadays that you can really dive into and some things we kind of just say oh it’s okay. But really again today, if you want to protect your investment especially in that early on stage, you’re setting the groundwork for later on investments that are going to help when they get there because they get to do diligence at the early stage.

Jeff:
Absolutely, absolutely. If you don’t and I won’t state the name of the investment but you know what I’ve got an investment that I just thought was fun and sexy and it was one when I first started. I didn’t do my due diligence and you know I invested in all three trenches that they came around for, not huge sums of money, but I went into this company three different times and I’ll tell you right now I mean it’s hanging on by a thread and if I was to see the same company pitch to me now I wouldn’t touch it. So that more than anything in my portfolio underscores the need to do the due diligence because they really, today, they wouldn’t have met any of the criteria that you know that I look for when we are evaluating companies.

Jeffery:
That’s good information to share. Is there a timeline that you have for making investments like I know that some can be really quick, others can take months, sometimes even years, because the business has certainly got to the state where you’re comfortable or partners are comfortable, so is there a timeline that you like to flip to an investment you’re working on?

Jeff:
Not particularly. I like to be much more hesitant on a company that is pre-revenue. You know, so it’s a company that’s pre-revenue I’m going to want more due diligence, I’m going to move slower with them, and I’m going to really take my time, and I’m going to ask them a whole lot more questions. If the company is coming in with a couple of million dollars a year in sales, you know I have that and we’ll close in a matter of a couple of weeks. If they’re coming to the table and it’s their second or third you know round of raising financing and they’re able to say okay look you know we’re doing you know three four hundred thousand a month MRR, and you know here’s our due diligence package, here’s our advisors, here’s our employee contracts, you know here’s the twenty things yo look for and they’ve got them all that tells me a heck of a lot how organized they are. And yeah I’ve done investments in as little as a week when somebody has all their ducks in a row. But the less a company has their ducks in a row, the longer I’m now going to take to do that investment in. Yes it could take several months or a year before they’re able to pull together all the documentation I want, because quite honestly I’m just not willing and especially in our new environment I’m not willing to take that chance without having you know the documents or the answers to the questions that I want anymore.

Jeffrey:
No fair enough and that gives a good timeline and if you got everything ready then we’re ready to jump. If they’re to take some time then it we’ll work through it but it can take us a lot longer. From that perspective now you’ve found the company, you start digging into it, you’re ready to go, you’ve got some information on the DD side, you’re getting all that information. Are there other values that you look for now? Not just on the paperwork side, what are the things around the owners, the team, the product, is there something else that really ties them in that you really got to lock in before you make that next step?

Jeff:
Oh definitely first and foremost, bar none. And I tell this you know when we have our pitch competitions and everything else, I always tell and give feedback to the startups that we see the the way a CEO handles themselves that there are some times where you know I’ll invest in the CEO because I believe in that CEO even more than, you know, I believe in the product. I just think that sometimes if the CEO, you know has the confidence, they’re good at pitching, they understand how to pitch the customer, and they understand how to pitch the investor and they’re confident, and they have a couple of you know successful startups and exits I could say there’s probably two or three investments that I have done almost purely on the confidence in the CEO more than the product. and I was you know able to have them convince me because I guess I know that I’m not an expert on every product out there but if the CEO has those qualities and they’ve done all the work upfront, that they come to the table and say look at what we’ve done here’s that, here’s the patents we’ve done, here’s the ground work we’ve done, usually we know about our competitors, like I say the seven or eight or ten key things if they really show me that they have an angle on that there’s a couple of times I’ve taken a leap of faith made an investment based upon them and I’ll be honest so far I have not been burned.

Jeffery:
So the CEO becomes a pretty powerful tool in this whole mechanism of building a business. That if they’ve got all the right pieces lined up it’s going to help de-risk it and the key is that they’re actually working to de-risk that so that it makes it a lot easier for you to work with them investigate further and then find ways to help it support outside of just doing that initial investment.

Jeff:
Absolutely and conversely the same applies. There are at least two companies I can think of where I thought the product was actually pretty cool and pretty investable and I turned it down because I thought the CEO was a jerk and I did either I thought they were too arrogant or they were too shy, and had no idea on really how to sell themselves or the company or their product so you know you can have the best product in the world but if you if you don’t know how to sell it and sell yourself you’re not going to be successful. As I say you know you’ll be more successful being a great ambassador of your brand with a mediocre product you’ll do better than having a fantastic product and and not knowing how to sell yourself. So like I say I jumped on board and I’ve turned down maybe you know products that’ll be the next you know whatever out there, but just couldn’t do it if I didn’t have the faith in the CEO. So like I say I’ve walked away from deals, dude.

Jeffery:
Oh that’s great. Do you look at leading rounds? Is that something that you’re approaching these days as well ?

Jeff:
Probably far too much. I’ve led many many rounds with Spark Angels. You know we are a small group where you know we’re one of ten groups in Ontario. We don’t tend to be that large. There are probably, probably like in any group you know out of the 40 investors, there are 10 of us that tend to be very active. I have no problem in leading rounds in two ways. I will leave the round as far as just doing due diligence and being the liaison with that entrepreneur or the group of entrepreneurs for the company and then also be the one who will collect the funds and do a trust agreement which I’ve done many times because it’s simple for the entrepreneur and what we’ll do is instead of each individual angel investor giving a small amount and creating mountains of paperwork for that entrepreneur, we’ll pull it together and I will basically do one investment on behalf of two or nine investors whatever are interested and then I just make up a trust agreement between all the investors that indicates that I’m holding the investment and that they own shares in it as well and we move on from there. So yes I I find that some people are very skeptical and shy to lead around. Quite honestly I’m not and you know our group has probably half a dozen people that are very confident and very competent in in leading rounds and in the same manner that I do.

Jeffery:
Awesome and it you know what, it takes a lot of extra work but it’s well worth it when you’re making that connection for all the investors but also working tightly and closely with the the CEO of the company. It builds a good rapport for you but it also shows that you’ve got a an exit in mind of where you’re going, I’m gonna put all this together and you guys simplify it and make it easier on them and then you become that go-to person as you move forward and that’s a great position to be in.

Jeff:
Yep yeah absolutely.

Jeffery:
So outside of that side of it do you have any preferred outside of the investment side of things on leading, now you move into the next stage which is I do have any preferred terms or the things that you look for when signing off and saying well this is something that I’m interested in and I want to book it this way already just kind of follow along with whatever’s being offered by the company ?

Jeff:
No, I’m not a follow along kind of guy. But no I always look to be I guess to start with one thing that can kill the deal for me right away is a safe. I know every once in a while somebody comes along and wants to do a safe primer, but I will admit for angel investing that is just something not only ark group but I’ve talked with other angel groups in Ontario and angel investors, you know very very strongly scare away from safes so that is something that can put me off. The other two main angles that I do like to see is pref shares with future warrant opportunities. I like that I also like to have a convertible note because you know if you have a convertible note where especially where I’m making interest and you know common interest rates in convertible notes are five percent or eight percent so that you’re making you know a little bit of a return regardless of whatever’s going to happen and then you have a you know 20% discount on a future cap conversion I think that is probably the number one thing that that angel investors like to see is say a 24 or 36 month convertible note paying 8% interest with a with a 20% discount conversion on a future activity. So you know again I’m flexible between and the third thing is even you know just the loan we’ve got deals where sometimes we’ll just do loans at a higher interest rate and you know get money paid back. It’s only for special companies that have good cash flow opportunities to do that but yeah I would say probably the number one thing is the convertible note.

Jeffery:
Okay and that’s a great breakdown of the three potential options that you look for and obviously sticking behind a convertible note it provides a lot more value in the future. Especially if they put in a cap on it where it says that if they have to raise at any point in time at this amount it’s always a good way for you to convert and still have a discount on that value. So those are great strategies. When you’re making these investments do you also plan for a follow-up investment?

Jeff:
It’s funny, it’s funny you say that about following up, I’ve always followed up on investments. Probably quarterly or every six months just to make sure because some of these investments do tend to be longer term. Especially if it was an equity deal with pref shares you know really nothing is going to happen until they hit a series A or they have an IPO or something big happens. And with a lot of companies it can be years so I think it’s important to do that. Some companies I find, to be honest not enough of them, some companies are very good at sending out quarterly reports and keeping their investors updated most or not. And that’s okay, they’re just busy out there trying to grow the business. But as long as you’re responsive when when you’re major investors reach out and ask you for an update, be responsive, come back, give us an update and I find most are. I must admit I find in general people are pretty good with COVID19 hitting we’ve basically our angel group has formed a little bit of a task force where we have all been assigned ourselves three or four companies that we’ve invested in to reach out to them, stay in touch with them, offer assistance, make sure that they’re going to be surviving, make sure they’re going to be successful, see if they’re having cashflow problem, there’s personnel problems and whatever it is. We have a network with a lot of contacts and we’re basically you know touching base every two weeks now. So you know I would say in good times yeah touch base quarterly, but right now when times are tough every two to four weeks I want to be touching base with my investments, making sure they’re hanging in there and making sure they’re not scared to ask for help if they need it.

Jeffery:
No that’s great insight and I do like the fact that you’re keeping that contact going and every few weeks or reaching out to answer any problems or at least make help the CEOs feel that they’re comfortable that they’ve got some good investors behind them. When you are making that investment, you’ve polished out all the documentation you’ve made the investment I do you save money on the side and say that 30% of your investments you’re going to reinvest in? Is that something that you that you look to do? Or you just kind of play it as it comes?

Jeff:
I won’t play it as it comes you know, it’s you know always try to find money for the right deal you know again you know with the angel investors, we’re supposed to keep a certain you know they tell us to keep a certain percent of your portfolio available and but I’m finding that you know it’s taking longer for companies to turn and mature and exit and get our money out. So I’m probably putting in a lot more money than I ever thought I would. I thought I’d be able to turn it faster I’m hoping that in you know three or four more years I’ll start to see a lot more exits and I’ll turn that money. For now I just don’t think this is a very good space, I think there’s some very good investments so what I’ve done is dialed it back from six to ten investments a year to two to four and I’ll keep putting some in and like I say hopefully when those investments start maturing and paying off then I can make bigger investments in some of these companies with the profits.

Jeffery:
So that’s great. You mentioned just earlier that on the communication side that you like to reach out and you like to keep your the companies, your portfolio companies, kind of working away and sharing information. Is there any form of communication that you really prefer best? Is it you know you want the quarterly updates, you want the monthly, do you want any paperwork you want revenue documents, do you want a Dropbox folder, is there anything that you kind of look for that really helps you get peace of mind so that you can jump in when you need to?

Jeff:
I like because I’ve got multiple pies, I kind of like it when somebody sends me a quarterly report you know, as an attachment on a two or three page bulletin. Hey I’m still a little bit old school as we all know, so that works best for me. I work you know almost exclusively with email so when those come in via email that’s great. Probably second for me is dropbox. Dropbox is very handy. I love it because when we we know when you know with our fund with you and I are working with these companies and we are putting money into things that were basically looking to get updates. You know companies that we’re working with can put documents into a Dropbox folder we can access it and then I can go back in and find it in a future date. so you know I would say email and Dropbox are probably the best .

Jeffery:
Okay all right so the markets have kind of shifted you mentioned earlier about obviously around the COVID19 and a bit of change going on in the market and space around early-stage companies have you noticed anything on the investment side, have you seen things pull back if you’ve seen things move forward the markets seem to be running and gunning like things occurred so I’m just curious to what you found has happened inside of the space that we’re in right now ?

Jeff:
Fair enough in all honesty I can only speak to myself that I can speak to the SPARK group of angel investors, I don’t know a lot about what some of the other groups are doing although just what I’ve heard on the surface they’re similar to us, although the markets are as you say running and gunning, it’s true some of the investors you know perhaps we’re a little overexposed in the stock market and took big hits while they’ve come back if you were investing in conservative stocks or balance stocks you know your portfolio like my portfolio’s bounce back almost to where it was. But there are still angel investors I’ve talked to that you know, were down 20-30 percent because they were they were gambling a little bit more as as their personalities are. So I would say and again, we’ve had two other companies that have come back to us for probably a third round of financing in the last couple of weeks you know we financed them on the first round, they’ve come back a few times so we have there it’s like we pulled all our angels and we were able to get very little second-round funding for them. You know so maybe, I think for one company one person stepped up and for the other company, three companies stepped up, and other than that I’ve also seen a couple of companies come back around for additional financing that got zero. So but again I’ve had several people come to me and say hey look you know if somebody’s looking for a loan, I need some cash flow. So if somebody has you know a good cash flow and they’re willing to take this as a loan and make me monthly payments back at ten or twelve percent, I’ve got money for that. Convertible notes still seem to be a little bit interest, I think people are very skeptical of equity investments right now but that’s again that’s probably just temporary because of the market. So I would in summarizing it, and I know this one’s a little more long winning but it’s not a simple question, in summarizing it I would basically say for someone that’s done their homework, that has a really good opportunity, that has established, I think it’s going to be very hard for somebody that’s pre-ref but I think for somebody that’s got a bit of an established revenue runway and has done their homework and is properly pitching it I think that opportunity is still there. The angels will open their pockets and certainly VC firms will as well like ours but I think people are just gonna have to do a little extra homework, they’re gonna have to be a little better established than what they had to be even three months ago to get that funding. It’s definitely going to be more competition for a slightly smaller pool of funds for at least the next little while.

Jeff:
Now that makes complete sense and I think I’ve seen the same where you know the people were investing half a million, they’re now invest in a quarter million. Things have shifted slightly but I think people are still looking for a great deal and still interested to invest. Things have just slightly slowed down a little bit but rightfully so, people are trying to read age where they positionally fit and move forward from there. Any sort of recommendations that you would give to a startup on ways to attract investors, attract customers, all of those things to get people interested in them in their brand?

Jeff:
well and not to pitch us you know this is not a plug for our OPN fund supporters than that but you know what these these pitch competitions, I think are fantastic. Because what I’ve seen that they do and again I even changed even you know being a GP in the fund I wasn’t totally sold on us in these pitch competitions because you know it’s an investment of funds for us, but what I’ve seen out of it, is not only does it give us exposure to to see all these companies but it gives these companies that chance to pitch. You know I think you know that as panelists, what we really try and do is help these companies and I’ve seen that they do need some help, a lot of them.They need to understand like I find too many startup companies do a pitch to investors on a sales pitch like they would do to customers and you have to pitch a customer very differently than you pitch an investor and I say that almost every single company that we’re doing you know pitch a value – so I think they really need to get as many pitch exposures as they can I think you need to be involved in your community if there’s any possible way to you know link back up percent of your sales or be involved I think you’ve got to do that. I think it’s important to be involved on LinkedIn ,I think you’ve got a network with your peers, I think you know again some of the things we offer with these you know business-to-business peer networking of startups, I think it just you can say oh jeez I never thought of that especially for brand-new first-time investors, right. There are serial startups where people like to start a company build it and sell it but for the first timers they need to be mentored they need to have it explained and it you know it’s having these opportunities through LinkedIn through pitch competitions through getting involved with the community incubators, accelerators, you know these are phenomenal approaches you’re talking with peers that are having the same struggles and challenges with you every single day. So like the sparks entering in our show on some of these other one the Mars century being on several different Sciences right you know our little sparks enter an actual I was small but it’s still a fantastic. Little you know, incubator for these companies to get started, it’s an expensive space, you network with your peers, you’re not socially isolated and then you know for them for the the shooting stars you know we’ve got MARS in Toronto, you know where you get opportunities to you know open doors to excessive investments, IPO guidance you know sort of for the bigger player so I think it’s phenomenal how angel investing and the opportunities for startups has grown so much in six years to be able to have angel investors, VC firms, incubator, startups there’s so many things that you know weren’t there 20 years ago when I was starting my company.

Jeffery:
For sure and just to circle back there’s some great points you made on getting out in pitching and getting in front of people as much as you can that brings a lot of value. It gets people comfortable with you, also gets people giving you their opinions on how to help. And then work your community and getting a lot of face time in front of people using means like LinkedIn and other marketing, those are always great pieces that are going to benefit you and then I think to kind of round it all off, the key to all of this is that you’re finding ways to grow inside of a community. And the more times you get out and get face time, the more times you show yourself, the more interest are, the more de-risking people are going to feel around you because they’ve seen you a few times and all these things really help prop you up so I 100% agree with that. And starting off and de-risking it from getting TechStars, getting one of those accelerators incubators spark, all of those guys behind you, it helps build your brand quick or two because they help you get through a lot of those earlier pain points. It’s turning into a business so those are great points on how to help a startup move forward. If you now take this whole life cycle of everything that we’ve gone through went, from you know looking at a company, figuring out if you’re going to invest in them, the reasons you’re diving in, getting the information, making that investment, the terms are going for we’ve kind of put together this nice stream of how and what you look for in a business. Is there anything that you can take out of all of these companies that you’ve worked with and invested in, is there anything that you can look at maybe it’s one or two pieces that you would recommend out to the audience that says you know what if you’re gonna do these two things you got a higher percentage chance of success because I’ve seen some companies that work with some companies that invest in some companies and underlying here’s a two-three things or one thing that really I think underlying helps everybody?

Jeff:
Oh absolutely. No question. Two things come to the forefront immediately. First and foremost I think entrepreneurs need to know the way too many people develop an idea and just run with it because they think it’s a great idea, I think first and foremost is you need to make sure that there is a market for your product and you need to make sure that it’s not just a bubble market. You need to make sure that it is a long-term, sustainable market to sell your products, and even better if there are opportunities to sell multiple products into that same market. I have seen far too many great ideas that have survived far too long that didn’t sell because the market didn’t exist and it might not have existed because the product wasn’t priced properly, it might not have existed because you know they didn’t protect their IP property and somebody beat them to market, it might have been because there was just too many other things in the space, you know like you know coupon promotion companies and things like that. Some of these ones are just very saturated spaces, and if you don’t differentiate yourself (sic)… So that that is far and away the before you invest tens of thousands or even thousands of dollars in your idea make sure you have a thorough understanding of the long term market of your product. And then secondly as much as it seems like a cliche you have to manage your cash flow. And I do find investors, overall I should say, entrepreneurs overall are getting much better at this, but you know if you have to manage you have to realize that you’re not going to take unrealistic salaries at the beginning, that you know you might not be able to handle ten people, you might have only five people and build it up. It’s important to be flexible with terms and conditions into improving cash flow upfront. If you’re selling products you know use fractionators, you know which will basically buy your receivables from you and you lose a few percent but you get your cash flow early like you’ve got to be creative. And I guess third thing I would say is there are so many government funding opportunities out there. Get out there and take advantage of the government funding opportunities. You know most people don’t even realize how many there are and these are some of the things that angel investors and VC firms and you know things like our supporters fund, we and the mentors and advisers, we have on our board know where to find the money, know of the government money out there. Those are the three things I think are probably the most critical things to success because there is so much more free money out there to get started than most people realize.

Jeffery:
No that’s great. Totally agree with that test the market, figure out if the market can get outside that bubble and and how much you can expand. People want to invest in companies that can grow and expand out of Toronto and be more global, and then of course looking at when you’re diving into these larger opportunities, I think you really do have to focus in on again this goes back to the owner how well are they looking at expanding. Can they manage that cash flow? Can they keep a ship tight when they need to and expand when they need to? Can they find government money to help them grow and expand as well but it really comes down to that managing that bottom line so three great great points. Well gonna jump into the one question that’s posted here from Doug before I ask you kind of wrap up our last question. So Doug asked if you ever missed a great opportunity overlooking a great company team or product or service?

Jeff:
I have, there’s a couple. And it’s funny. I think every angel investor you know, we said the way angel investing typically works is that you know we have, it’s not like Shark Tank that everybody sees on TV, if you haven’t had an opportunity to pitch your company Doug yet – to angel investors it’s typically done over a meal of breakfast or a dinner and we’ll see three companies, and they’ll do a 15-minute pitch and then we’ll do a QA and then you know the company leaves the room and we all talk about it, and we decide if we want to pursue it further as a group. And you know so sometimes there’s an opportunity to lose. You just decide okay I’m not interested, or you’re distracted, or you’ve had a fight with your wife that morning and you’re not really paying attention so yeah it’s a big fear. There’s again I won’t mention the name of the company but there was a company that came through that pitched and a lot of us talked about it and we decided that we really didn’t think it had a future. And it went on but there were two people I think one person from spark and one person from York that invested in this company and then you know he didn’t really hear about it. Two or three years go by, and then we had our Christmas party not this Christmas but he a year ago Christmas, and you know the guy who was one of our angels had a big smile on his face and we were joking with him we said well what’s the smile for and he showed me this check and he says yeah he says you know that company that you guys all passed on, well I just got a check for a hundred times my money. So two people got it, the rest of us stood there with our jaws we could barely remember the name of the company. We went back and pulled it all tomorrow like yeah like we missed it. Like we didn’t think and somebody believed in it, so you know especially when you’ve actually seen it happen yeah your biggest fear is that when you have a presentation in front of you know you can’t act, you can’t follow up the due diligence, you can’t invest in every single pitch. You see especially guys like Jeffrey and I, we’ll see up to 50 or 100 companies in a month. The average angel investor only sees three. You can’t do it all and I think I honestly have a bigger fear of missing a great opportunity than I do on having a company failed to be honest.

Jeffery:
No that’s a that’s a great point. I’m dying to know who this company is so you can tell me offline. But it does happen and you’re right it’s when you see a lot of companies in your really early stage, you’re trying to vet through which ones that you think have the best viability and a lot of the times you can’t see everything. And that’s where you bring in these groups and everybody else can jump on things as well and sometimes and if had happened in the past we’re starting to go through the information and then they said oh I need to do this to close now and we’re like, I was I don’t like being pressured so it’s like all right I’m out. And but the thing was that was the conversion sitting within 24 hours and then after I still couldn’t stop thinking about like why didn’t I just do it but because I don’t like the pressure. I have no idea but the company’s doing, at least they’re doing well, so but my head still thinks man I wanted in and that company but because they created this unneeded tension I just couldn’t go forward with it. So I think there’s always going to be a little avenue of what is the right and wrong and you have to bounce the note as quick as you can to make a decision. If it’s ready but I think he waived the choice anyways as the right direction for you and you know sometimes they go by and they get through the cracks and it is what it is. But obviously it’s amazing that you’ve been able to keep investing and you didn’t lose faith because someone walked in with a big hefty check. So that’s a good thing. So the last question just to kind of wrap things up, and Douglas thank you for the question. So to wrap things up, Jeff, is the last question we have is based on the early stage investments that you’ve been making and the way the markets have been going in North America I need you to take your crystal ball and say here’s what it looks like in the next 12 months of investing and this is the type of verticals that people are gonna start focusing on the next 12 months and then here’s where we’re gonna end out in the next three and what does that look like?

Jeff:
Okay that’s a good point. You know what is angel investing gonna look like or what is you know the funding, not just angel investing, what is funding opportunities for startups gonna look like. It’s like so many different things you know. Doug Ford said, today school in September is not gonna look anything like school has looked before. Going back to this day and I think the startup community is going to see that funding is not going to look anything like it did a few months ago, and that’s going to be tough. Now I also think there’s going to be exceptions. I think if you have anything related to doing with healthcare or pharmaceutical in the next year, I think you are probably going to have an easier opportunity than your peers to get funding and you’re going to get people’s attention more. I have invested myself personally and some penny stocks of a few different you know medical companies that have doubled and tripled just you know in the last couple of weeks for no known reason at all other than they’re riding this little wave of you know a few people doing well. But that’s penny stocks right that’s a whole different animal. I think that the average startup is going to have to work harder, they’re gonna have to be smarter, and they’re going to have to do their homework more, to get any money at all. I I would say be patient because I think in three months you know the next three months you may not get any, you might be turned down. But I think when we really emerge from this six months or nine months down the road I think you need to have your confidence and you need to approach it again even people, whether it’s an angel group or a venture capital company, or any of the bigger organizations that if they say no have the confidence to go back and say well look you know you said no to u three months ago or a year ago and look we’ve grown X amount since then or we’ve gotten three patents since then or we’ve added these people to our board. Come back if we say no, come back and show us that you know, not being flagran,t and saying you were wrong but come back and say hey look you know what we got turned down and we’ve still been able to do this, this, this, and this in spite of it highlight your successes. I think three years from now to be honest that’ll probably be back almost to where it is you know or to where it was three months ago. I think three years from now post pandemic, as long as we don’t get hit with a big second wave obviously I have to preclude because we don’t know what’s going to happen, but on the assumption that you know the world is going to keep heading back towards normal I think three years from now we’re going to be in the same world we were in six months ago as far as investing. But I think in the next three to six months if you need funding to survive you’re going to have to be sharper, you’re going to have to work harder, you’re going to have to be more creative, and you’re gonna have to practice your pitches, and be prepared to accept more nos and work harder to get people’s attention because you’re competing for a smaller pool for sure. But I assure you, as long as the world keeps improving, that pool is going to keep expanding because there’s lots of angel investors and there’s lots of VC firms out there that have money to invest, that want to invest. All you have to do is convince them that you’re the right company to invest in. Because they make money by investing, they don’t make it they don’t make money by saying no. We all make money by saying yes. You just have to convince us that you’re the right company.

Jeffery:
Well Jeff, thank you very much – that’s some fantastic advice. Throughout obviously the entire talk. I did enjoy the the the last part we were saying that you know what it may not happen today, it may not happen three months, but if you keep working at it, and polishing, and getting yourself ready and continuing to grow and build the value that they will come and they will make that investment and you just have to work harder on that pitch to make sure that people understand where you’re coming from so all valuable insights. But I want to thank you for your time today Jeff. Hopefully that went very smooth for you because I actually thought it was fantastic. You really touched on a lot of pieces there. But I think overall the information was great. I’m sure the crowd enjoyed it and we’re gonna cut this up into snippets and send this out over the next couple weeks, a couple months, but I appreciate again your time and being able to be forthright in answering these questions and in spending your time with us

Jeff:
Well thank you Jeffrey. I enjoyed it very much. It was interesting. This is the kind of thing I like doing I hope that some of the people listening found it helpful and insightful. I’m available if anybody you know through our fund website. My email is think (sic) if anybody wants to reach out and chat about anything please do. You know any questions, know Jeff area are always available to help. And this is what we do, this is our passion. And this is why we do it so I’ve enjoyed it very much and I hope at least a few people have gotten something from it.

Jeffery:
Awesome. We’ll certainly do that and I will make sure we share that information out.

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