Seed Investing

As mentioned, we believe that the Adrenaline Fund model and thesis is unique in Canada, by fusing the power of a passive approach (like an ETF in the public markets) to the early-stage Angel investment ecosystem.

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, shared with LPs, stay largely the same but are tuned in response to changes in the ecosystem. Thus, rather than active decisions, the focus is on tuning the rules and working to ensure that the angel and startup ecosystem remain of high value.

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 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. In summary, in generating larger ‘Scale Up’ companies (with valuations reaching US$250M), Canada 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). 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 incredible 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, he model is structured to be open and accessible to the greatest number of 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.

As mentioned, we believe that the Adrenaline Fund model and thesis is unique, at least in Canada, by fusing the power of a passive approach (like an ETF in the public markets) to the early-stage Angel investment ecosystem.

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, shared with LPs, stay largely the same but are tuned in response to changes in. the ecosystem. Thus, rather than active decisions, the focus is on tuning the rules and working to ensure that the angel and startup ecosystem remain of high value.

In case some of you think, like a colleague initially did, that such a “blind investment process” 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 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. In summary, in generating larger ‘Scale Up’ companies (with valuations reaching US$250M), Canada has a dismal 0.3% track record (or 1 in 300) compared to the 2.5% number for the us (or 1 in 40). 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 incredible out-performance would include factors like: the GTAN selection process, the ongoing value-adds of experienced ‘deal leads’, the strength of the ecosystem support in the Toronto-Waterloo Tech Corridor where GTAN focuses, and syndication with other capable seed/angel stage investment funds.

The bottom line is that, while adding the energy of investment to an existing process that works, Adrenaline Fund is set up for success.

Further, he model is structured to be open and accessible to the greatest number of 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 8-10 companies per year, this ensures a diversified portfolio of 40-50 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 who had never been angel investors since it provides deal flow and deal structure for new investors. In other words, we are unlocking new capital to support Canadian innovation.