An all-women angel investment fund that has been in the works for more than a year and a half has received a ruling from the Manitoba Securities Commission to allow non-accredited investors to participate.
While organizers of the fund, called Women’s Equity Lab Manitoba, applauded the securities commission for allowing the exemption, it comes with a number of hoops that must still be jumped through.
The securities regulators in Canada only allow non-traditional investments to be made by accredited investors.
In Manitoba, an accredited investor is someone who either alone or with a spouse beneficially owns financial assets exceeding $1,000,000 and/or have had net income exceeding $200,000 in each of the two most recent calendar years.
WEL was able to get the exemption they were looking for — after more than a year of legal wrangling — but there were strings attached.
For instance, WEL will have to set up an escrow account to hold the funds supplied by non-accredited investors separate from other investors. As well the MSC exemption only allows the fund to receive investments from 10 non-accredited individuals.
Joelle Foster, the CEO of North Forge Technology Exchange and one of the four unpaid managing partners of the fund, said the ruling will mean it will finally be able to start soliciting investment pitches, but the conditions are still far from ideal.
“It’s wonderful they granted us this exemption. I’m not complaining because they have opened the door for us, but we still have this, this, this and this to do before we can roll it out,” she said.
The Manitoba fund has 20 accredited investors lined up who will each invest $5,500 ($500 of which will go toward administrative expenses).
Foster said it will take some time to establish the escrow account for the non-accredited investors but they have decided to go ahead and activate the fund with $100,000, bringing the non-accredited investors along later.
The fund will invest in early stage companies in Manitoba. The managing partners — who also include Sandra Foster, Rosalie Harms and Priti Mehta-Shah — will not decide on their own which companies to invest in. Rather all investors will have a say with a vote of at least 70 per cent in favour triggering an investment.
All the investors in WEL will be women, but the fund will not exclusively invest in companies with women founders.
“Our priority is to make the best investment decisions we can,” said Sandra Foster.
With the initial $100,000 fund to work with, it is expected they will be able to make two or three investments and then raise additional capital to start a second one.
WEL Manitoba is affiliated with a national organization that has chapters in Atlantic Canada, Toronto, Victoria, Vancouver and Silicon Valley. There are a total of 150 women investors throughout the network. The ones in B.C. have been around since 2017.
Women-owned businesses only receive two per cent of global venture investment and make up 27 per cent of Canada’s angel investor community, according to data from the National Angel Capital Organization.
The initiative to broaden access to non-accredited investors was seen by the Manitoba managing partners as a way to broaden participation by women.
Joelle Foster said the experience negotiating with the MSC was frustrating.
“I’m not complaining, but they need to trust us more. The managing partners know what the hell we’re doing,” she said.
“The majority of us are pretty darned smart now. We have the relevant knowledge. We don’t need someone to protect us from ourselves.”
She claims the barriers to achieve accredited status in Manitoba affect women most.
“Do you know how hard it is to get a $200,000 per year job in Manitoba? Not all lawyers and accountants make that much. It is a barrier.”
In Alberta and Saskatchewan there is a self-certified status for people who don’t meet the financial threshold but have “relevant business knowledge” as well as a business, law or accounting degree or have run their own business.
Those are not available options in Manitoba.
“There are so many barriers put on us in Manitoba,” Joelle Foster said. “It’s no wonder there are not more angel investors here.”
martin.cash@freepress.mb.ca
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