WATERLOO REGION — As the Canadian economy slowly emerges from the COVID-19 pandemic, there is growing concern many of this country’s youngest startup companies may lose access to a vital source of early funding.
Companies often rely on so-called angel investors to fund the earliest stages of their growth, and it’s a crucial source of investment for businesses that aren’t yet big enough or have sufficient sales to capture the attention of major investment firms or banks.
With growing global uncertainty over just how quickly the economy will recover from the pandemic, however, and with access to critical U.S. capital largely cut off due to border closures and reductions in travel, there are worries Canadian angel investment may dry up.
Waterloo Region’s tech and innovation sector owes much of its success to angel investors, said Iain Klugman, chief executive of local technology hub Communitech.
“It is the capital that launches almost every successful company in the history of Waterloo Region,” Klugman said, citing local success stories such as OpenText, Vidyard and D2L (formerly Desire2Learn).
“It is the capital that launches innovation-based business; almost always the first (investment) round is driven by angels.”
Angel groups across Canada are calling on the government to create incentives to get Canadian capital off the sidelines and invested into homegrown companies and talent.
And we’re not talking huge amounts of money, either. Klugman said many angels invest perhaps $50,000 to $100,000 of their own cash every year into companies — often in exchange for convertible debt or an early ownership stake.
Yet the pandemic and the economic malaise that has accompanied it could stall future investment as angels put a pause on potentially riskier endeavours in favour of safer bets, like real estate.
Klugman fears this funding freeze will come just as the push for entrepreneurship picks up among university and college students graduating into a weak economy, and people recently laid off from work who may look to self-employment as a more viable option.
“It’s time for the government to put into place some incentives,” Klugman said. One option would be an angel tax credit worth up to 50 per cent of the investment, he said.
Jess Joss is worried companies will lose more than just access to early-stage cash in angels stop investing.
“Think of these companies as seeds, and the angels are the water and fertilizer,” said the chief executive of Equation Angels, an amalgamation of more than 100 angels from Kitchener-Waterloo’s Golden Triangle Angel Network, Burlington’s Angel One group, and London’s Southwestern Ontario Angels.
These investors provide much-needed cash, but they also bring “mentorship and access to their networks,” Joss said.
“It’s not just money, but smart money.”
Ontario’s 13 angel networks are also facing a fight for their survival. These groups help co-ordinate angels and their funding efforts in different regions across the province.
Many operate as not-for-profit agencies, and in March 2019 they lost provincial funding they say was critical for day-to-day operations. Each group received a maximum of $50,000 per year.
They may also soon lose funding made available through the Federal Economic Development Agency for Southern Ontario, Joss said.
The past decade has seen record levels of investment of more than $1 billion into early-stage companies (including a record-setting $163.9 million from angels last year), according to the National Angel Capital Organization, a group of 45 regional angel investment groups and 40 accelerators or incubators across Canada.
Another potential model of angel investment is the Archangel Network of Funds, a consortium of nine investors who pool their resources across three different portfolios in order to diversify the types of projects they fund.
One of the partners in the network is Amber French, and she said angel investors often run their own business — ranging from HVAC operators to patent lawyers — and some have seen their businesses take a hit during the pandemic, which has taken a toll on their willingness to take on new investment opportunities.
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“The Archangel Network is a good example of spreading money out and reducing the risk,” said French, who is also the managing partner of Catalyst Capital in Kitchener.
The long-term impacts of reduced investment into Canada’s earliest startups could be dramatic, Joss said.
“If you lose a generation of angels, you lose a generation of entrepreneurs, and then you lose a generation of economic recovery for our country,” she said.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
