1 Jan 20240 Comments
Happy New Year!
Today is the first day of 2024, starting the fourth year of Adrenaline Fund which completed its 2023 Vintage int late December. To summarize, as per our plan during 2023, the Adrenaline team made 10 new investments bringing the three year total to 30 investments This puts us on track to deliver a highly diversified portfolio of approximately 50 amazing early stage companies to our founding LPs by the end of next year.
Adrenaline Fund, founded in 2020 as part of the multi-fund Archangel Network of Funds, uniquely applies a hyper efficient rules-based model to early stage investing, supporting and supported by the ‘crowd intelligence’ of our startup and angel ecosystem.
We are fuelled by a remarkable group of Limited Partners — Canadian accredited investors equally interested in our Purpose to build economically vibrant Canadian future and the prospect of the excellent Returns delivered by such a highly diversified portfolio.
While like vintage wine, tech portfolios take time to build to perfection, already Adrenaline Fund has its first Exit, with an acquisition in progress, slated to close this month.
The entire team at Archangel Network of Funds, and the Adrenaline Fund, is driven by a core Purpose, developed over years of building and supporting early-stage companies. In a nutshell, we want to directly impact Canada’s economic prosperity into the future by:
- Investing in Entrepreneurs who are building the future of the Canadian Economy through Innovation,
- Lowering barriers for accredited investors to participate in, and gain more experience, in early stage investing, and
- Accelerating, and directly supporting, the Canadian Angel ecosystem while enabling Canadian startups to scale up to global leadership.
In this post, I’ll further explore our unique model, an exceptional team, what we’ve done so far, and propose a future where this impact can grow many times larger than our results to date.
The Adrenaline Fund team has unparallelled experience in building companies, mentoring startups and selecting and investing in the next generation of Canada’s tech leaders but at the early stages. In addition to myself, our team includes Benton Leong and Amber French, and is ably complemented by Venture Partners Mike Janzen and Althea Wishloff.
To update on recent progress, the 2023 Vintage portfolio, reflecting a broad diversity of sectors and stages, comprises 10 great companies, below (the first number shows 2023 and the second the total portfolio to date):
- Technology: 4 / 12
- Medical Technology: 2 / 8
- Industry 4.0: 2 / 7
- Climate Tech: 2 / 3
To clarify the above sector brakdown:
- Technology includes most traditional ICT including software, networking, AI and FinTech, and more.
- Industry 4.0 covers technologies revolutionizing industry and manufacturing, including robotics and smart manufacturing.
- Climate Tech covers a broad range from traditional Clean Tech but also including sustainable AgTech and FoodTech all focused on a more sustainable future.
Also, many of our investments meld a strong Purpose with Profits, including addressing predatory lending and helping make home ownership more accessible.
We are excited to welcome the following companies to our Adrenaline Fund portfolio, reflecting the powerful value-adds of the Angel Ecosystem we support:
MODEL AND WHY IT WORKS
As mentioned, we believe that the Adrenaline Fund model and thesis is unique in Canada, by fusing the power of a rules-based approach to the early-stage Angel investment ecosystem. By efficiently delivering a large, diversified portfolio of high quality companies, we uniquely open access to a much broader class of angel investors.
First of all, the investment decision is designed to support the existing Angel ecosystem through a set of rules to govern the investment process. At a high level, the Rules, remain consistent over the longer term, but are tuned in response to changes in the ecosystem.
A colleague questioned the wisdom of, such a “blind investment process”, suggesting it is a bit crazy and perhaps akin to wagering on slot machines. Nothing could be further from the truth. The secret sauce of Adrenaline is the collective value-add of the ‘qualified lead investors’ who after investment contintue to mentor and provide ongoing strategic oversight (e.g. as a board member or board observer).
In fact, research by Brian Smith, Professor of Entrepreneurship and Finance at Wilfrid Laurier University along with global tech investment trends studied by BDC Ventures, shows an almost 25 times multiplier of success for such angel-backed companies who benefit from the value add of the angel networks.
The research numbers show that in generating larger ‘Scale Up’ companies (with valuations reaching US$250M), Canada overall has a dismal 0.3% track record (or 1 in 300) compared to the 2.5% that reach that scale in the US (or 1 in 40).
By contrast, within the Angel ecosystem, specifically GTAN where the study was conducted, an amazing 8% of investee companies reached the $250M threshold. Unpacking the reasons for this remarkable out-performance would include factors like: the GTAN selection process, the ongoing value-adds of experienced ‘deal leads’, the strength of the Toronto-Waterloo Tech Corridor ecosystem where GTAN focuses, and syndication with other capable seed/angel stage investment funds.
Further, the Adrenaline Fund model is structured to be open and accessible to the greatest number of Canadian Accredited Investors by having the aggregate investment staged over 5 equal annual cash instalments (say $250,000 at $50,000 per year). Since the fund is structured to segregate ‘Vintage Years’, and each Vintage aims to invest in 9-10 companies per year, this ensures a diversified portfolio of about 50 companies at an extremely affordable entry point. The Vintage structure allows new LPs to join once at the beginning of each year, thus growing the maximum amount of each Adrenaline investment and helping startups even more.
Most importantly, the fund attracts investments from individuals new to angel investing since it provides a simple and time efficient path potentially learn more. Quite simply, we are unlocking new capital to support Canadian innovation.