First Angel Network Association (FAN), a not-for-profit focused on Atlantic Canada’s early-stage tech ecosystem since 2005, is shutting down.
In an email obtained by BetaKit, sent to its network by Brian Lowe, co-founder and director of FAN, the organization it will shut down its operations, effective March 31. No reasons were given for the closure in the statement, simply stating that “the First Angel Network is concluding its work and we look forward to seeing the next generation of angel investors create new networks to support Atlantic Canada.”
At the time of publication, FAN’s website was already down, with only a “service temporarily unavailable” notice posted.
First Angel Network has been strongly criticized in the past for some of its practices.
Lowe sent the document, on behalf of himself and Ross Finlay, FAN’s fellow co-founder and director. The two launched the not-for-profit in 2005 with the mission of “bridging the capital gap” between Atlantic Canada companies and private investment opportunities.
“We are very proud of the First Angel Network’s legacy of investing, mentoring, networking and educating SME’s and investors. We created and built the very first organized angel network in Atlantic Canada and we have vastly increased the awareness and amount of angel investing in our community,” the statement noted.
In the past, FAN has received funding through ACOA, and IRAP. The organization touts itself as space for education and networking opportunities, as well as an angel investor that “provides entrepreneurs and investors with a confidential, disciplined, high-quality private equity investment experience.”
However, FAN has been strongly criticized in the past for some of its practices. In a 2013 blog post published by David Crow, the co-founder of Startup North, (who was working as the director of OMERS Ventures at the time), referred to FAN as “a backwards and ill-conceived entity.” Specifically, Crow pointed to FAN’s ‘pay-to-pitch’ framework, calling it crony capitalism, noting, “Atlantic Canadian entrepreneurs and startups deserve better than this.”
“Atlantic Canadian entrepreneurs and startups deserve better than this,” according to David Crow, co-founder of StartupNorth.
According to Crow, the network essentially would ask startups to apply to pitch, and if selected, the startups then had to pay the not-for-profit $3000 to pitch. Startups were also allegedly required to sign a consulting contract with a private, for-profit company owned by Finlay and Lowe. In return for services provided by the consulting contract, such as helping with pitch prep, deal negotiation, and legal advice, the startups had to pay Finlay and Lowe a percentage of the capital it raised.
Crow called out this pay-to-pitch process and accused FAN of “using federal funding to source their own deals and cover expenses and salaries.” He expressed that FAN’s process was not clearly stated on its website and he felt that startups should not pay angel investors or angel networks to pitch.
This story received national coverage in the Financial Post, and the two co-founders defended their organization, saying that Crow just didn’t understand the challenges of investing in early-stage startups in Atlantic Canada.
They defended their process and the $3000 pay-to-pitch, calling it a presentation and commitment fee. Finlay told the Financial Post that FAN had adapted the typical angel investment model to serve the local community, positioning the fee as “a way to ensure the entrepreneur sticks with the process while FAN racks up consulting, travel, and event costs.”
Since the allegations, FAN has continued to invest in startups, most recently in New Brunswick-based Beauceron Security, which raised $1.5 million in a second seed round led by the New Brunswick Innovation Foundation (NBIF) in late 2018. Lowe’s statement announcing the closure of the organization also claimed that since 2005, FAN had brought together more than 200 angel investor members to invest in 40 Atlantic Canada companies, with a total capital commitment of $16 million.
BetaKit has reached out to FAN and its founders for comment.
With files from Douglas Soltys. Developing…