Ian Curry (right) of DNA Genotek. (Scott Adamson, special to the OBJ)

When DNA Genotek initially sought angel financing in 2004, the company was looking for capital to sell and market its all-in-one vial used to collect DNA samples from saliva.

In about three months, the life science startup had secured $1.4 million in angel financing from investors in Kingston and Ottawa, including the Band of Scoundrels. A year later, the company was named Company of the Year by the Ottawa Life Sciences Company, and had found friends and motivation among the city's network of Angel investors, explains president and CEO Ian Curry.

OBJ: What stage was your company at when it decided it needed outside financing?

CURRY: It was probably more advanced than most companies in that state. We were very close to having a product, we had actually shipped beta versions of the product out to people and gotten some feedback. We were at the stage where we had a near-product that we needed to sell and market. That was really the focus of my communication to prospective investors. If you are not investing in the development of something, you are investing in the selling and marketing of something.

OBJ: What led you to pursue angel financing, rather than other forms of financing?

CURRY: We didn't need the amount of capital that typically a single venture capitalist would want to invest and typically they like to do it in partnership. It just didn't fit. We didn't need that amount of money and we needed it faster than VCs typically move because they invest more.

OBJ: What was the climate like for angel financing?

CURRY: At that time, I don't think it was a great time. In general, it was a bad time for investing at all. I think the angel community, at the time that we were searching, had experienced quite a bit of negativity in their investing for a whole variety of reasons. They had been through cycles of where they had invested in companies (and) some of those companies had grown and done OK and other people had come in and invested. That process, while it may be completely legitimate, obviously the people who were in earlier had a problem with that. I think definitely the angels had experienced that.

OBJ: Despite this backdrop, you were actually oversubscribed. What factors played in to that?

CURRY: I guess that fundamentally we had a business model that made a lot of sense to people. We had something that you could tell whether or not it was going to work in a reasonably short period of time with a low amount of money, in the big picture.

I look at myself as an investor in that kind of situation. They are going to know whether or not this is going to work reasonably well in a year.

OBJ: What led the company to the group format of the Band of Scoundrels?

CURRY: I came into the company when the CFO and founder had already been out trying to raise money. They had already been in contact with the Band of Scoundrels. So I just kept that going and found quite a few other angels.

The group is certainly well-known in Ottawa, so if other angels take comfort in their processes and their numbers and their experience, that is an advantage, for sure.

OBJ: What other advantages were there of going the angel route?

CURRY: I hesitate when I hear the word advantages because everything is a trade-off ... I look at them as differences. Individual angel people, if you can connect with them, they can make a pretty fast decision. And they are sophisticated people, but the processes that they use to decide to invest are often based on more straight-forward processes, meaning, "Who else is investing? Do I know that person? Do I know you? What do I know about you?" These are all things that venture capitalists do as well, they just take more time. If you have the right pitch, I think you can get an angel investor excited reasonably quickly and they can invest reasonably quickly if the process allows that. Whereas venture capitalists can get excited pretty quickly, but they just have processes that just don't allow them to move at the speed of their excitement.

OBJ: What did you learn from going through the process?

CURRY: I learned there are a lot of great people in Ottawa. It left me with a great feeling. It wasn't easy, or anything like that, that's not what I mean. But I met so many people in Ottawa that are fundamentally great people. I gave them the story of DNA Genotek and saw their excitement and their positive feedback towards us. Some of the people didn't even invest. There are a lot of wealthy people who are just great, nice, solid people who I would want to know forever and call my friend and for sure who I don't want to let down. I would never want to let any investor down, venture capitalist, institutional investor, anybody. It was very, very motivating for me. I think of the people who invest in this company every day.

OBJ: What advice would you share with a company that is considering obtaining angel financing?

CURRY: Have a good business plan, treat everybody with respect (and) communicate openly and clearly. These people just want to know what the risks are. They don't want to just hear the good side. Everybody tells them the good side. They want to hear what could go wrong. Tell them. Don't be afraid of that. Typically, angel investors are all very experienced businesspeople and they know stuff rarely works the way the story is laid out. Be straightforward and tell them what the good parts are and tell them what you think the risks are.

If you can get connected with the right, reasonably small, number of angels, then they will connect you with the rest. If they get excited about what you are doing, they will call their friends.

THE EXPERTS SAY

The difficulty we're finding is there are fewer and fewer angels that are active in investing. We started the Ottawa Angel Alliance back in 2005 with 37 members, we now have barely 20.

What we are finding is that there are very good deals in Ottawa. It's a pretty good picture, but the fog of the bubble is still obscuring that picture. I think there is still a lot of lingering pain out there.

I think people have to see other angels making money and start inquiring, "What is it that you guys are doing differently?" Like anything else, success drives success.

Statistically, we've convinced ourselves that angels can generate significant returns. We're convinced that the likelihood of generating a significant return is much higher if you are part of an organized group than if you do it solo, for a number of reasons. Successful investments require a fair amount of work. Secondly, there is a minimum amount that any company needs. It is unlikely that an individual investor, unless they are what we call a "super-angel," can handle that themselves. It requires pooling of capital. Thirdly, from the point of view of influencing future governance of the company, there is safety in numbers. So, if you are part of a group that represents 10 or 20 per cent of a company, you are much more likely to exercise influence on that company than if you are an individual having half of one per cent of a company.

Irving Ebert, managing angel, Ottawa Angel Alliance and co-founder, Purple Angel

I would suggest that businesses need to look at potential financing sources as partners. A partner brings more than money, they bring advice and entrepreneurs should be seeking out these financing partners that can help their businesses be successful. It's more than mentoring. To me, it is about seeking out a partner who is somebody who rolls up their sleeves and gets involved in the business and has capital at risk.

An angel investor will more likely invest in a company that has already been invested in by other private individual investors or people they know will invest alongside them.

One of the things that some provinces, states and countries have is programs to attract capital for small business. Many do this through tax incentives.

British Columbia has a program (where) an eligible small business can raise capital and the investors, as long as they are (at) arm's length, can get a 30-per-cent tax credit on their money.

This program has provided to be very successful for all participants, including the government. They get a return on their investment usually in two or three years through job creation and taxes.

The businesses get their capital and investors tend to invest because they look at it as already getting a 30-per-cent return. It's a good way to attract capital and its something the National Angel Organization has been promoting in the province of Ontario.

Andrew Wilkes, chairman, National Angel Organization