Burned once, angel takes on investments with caution

Burned once, angel takes on investments with caution

Armina Ligaya | 17/11/13 7:00 AM ET
Parm Gill can be forgiven for being incredibly particular about the projects he chooses as an angel investor. Why am I willing to jump in on pitches that others often snub? Here are eight principles I follow that can help increase the quality and quantity of angel investing opportunities in Canada. The Ottawa-based entrepreneur was forced to file for bankruptcy with his first startup, an Internet service provider called Cyberus Online. In 1999, he sold Cyberus to Dallas-based online computer manufacturer Eisa.com. But he soon discovered that Eisa.com had falsifed its financial statements during the sale process, and was swimming in debt.“They seemed reasonable in the due diligence that we performed in order to know them and their business,” Mr. Gill said. “They seemed legitimate, and they actually had a couple of Canadians working with them, whom I got to know well. It seemed, at the end of the day, they had no clue what was going on either.”

In an effort to salvage the company, Mr. Gill bought it back in 2000 for 7% of the roughly $300,000 it had sold for. Still, with creditors staring him down, he had to file for bankruptcy protection in 2001. In the nine months Eisa.com had owned Cyberus, it ran up about $6-million in debt.

Cyberus managed to get its affairs in order and merged with Ottawa startup Conmet in 2001, before being sold to publicly traded Cybersurf in 2002.

While that experience had a happy ending, it’s one that forever frames Mr. Gill’s views when he vets entrepreneurs that approach him for an investment.

“It sounded good, it looked good, right?… We learned those lessons, and I take that and apply that looking at startups today,” he said.

Mr. Gill continues to invest, individually and as part of the Ottawa-based Capital Angel Network, where he is executive director. While he would not disclose how much he has invested over the years, the network invested $11.7-million in Ottawa-Gatineau area companies in 2012.

I’m always trying to find the next big thing, the next big game changer. Those are few and far between

In addition to screening the flood of pitches the angel network receives, Mr. Gill is personally contacted by hundreds of startups, but invests in “less than 10 of them,” he said. His investments are equally split between Canada and the U.S., with a focus on technology. “That’s my background, and what I understand and what I like,” he said.

“And it’s constantly changing and evolving, and there’s a lot of great opportunities ahead. I’m always trying to find the next big thing, the next big game changer. Those are few and far between.”

The scope must be global not just the local or North American market, he added.

“I find way too many apps for this, or apps for that. That’s not what I want to hear about,” he said. “I want to hear about what your real vision is, longer term, how big the opportunity is, and what real problems you’re solving in the world. Real solutions for a global market place. There are billions of people in China, India, and so on. That’s the opportunity. That’s the market we should be trying to go after.”

The key, he said, is for entrepreneurs to differentiate themselves from the sea of startups seeking cash.

“What is going to set you apart?,” Mr. Gill said. “Why do you think you’ll get funded over someone else? And again, the majority don’t get funded. How are you going to set yourself apart so you can get to the point where you do get the funding, and you can actually grow?”

Mr. Gill says he travels coast-to-coast looking for startups with this kind of potential.

He won’t disclose the names of his latest investments — in part because some haven’t launched yet — but says he’s working on a “game changer” in the retail space.

“Hopefully, that will lead to people making better and more informed decisions when shopping for clothing, let’s say,” Mr. Gill said.

He’s also working on another of his own ventures in the “privacy space” related to email.

Despite the financial snafus, Mr. Gill looks back on his first startup as a success that has helped him in the long run.

“In the end, it worked out,” he said. “A lot of lessons learned, all the stuff they can’t teach you in business school… It was a great learning experience. I wouldn’t change it for anything in the world.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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