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Atlantic Canadian Founders Deserve Better Than FAN (First Angel Network) (startupnorth.ca)
108 points by jmacd 1611 days ago | hide | past | web | 45 comments | favorite

There's no Google-cached copy of the page, but here's a summary from a news site:


- Despite taking public money from government agencies such as ACOA (which gave FAN $1.1-million between 2006 and 2011), FAN charges $3,000 to present each startup to its investor network.

- Startups that present are also required to sign a consulting contract with a private company owned by Finlay and Lowe. These services normally include helping the company prepare its pitch, negotiate a deal, and ensure due diligence by legal experts.

- In return for these services, the companies normally pay Finlay and Lowe a percentage of the capital they raise. (Crow quotes a standard fee of 8%, although Finlay says the percentage varies, and has been as low as 4%.)

It also quotes responses from the FAN partners, which you can judge the validity of for yourself. Getting up to 8% of the investment raised is a sweet gig for them, I think. Too bad they don't let the startup know about their "consulting fees" till it's almost time to present to the investors.</s>

Sorry I turned off SuperCache to find a CSS/JS error. Forgot to turn it back on. Have moved DNS to CloudFlare.

There are some serious conflicts of interest there.

Welcome to the Maritimes.

Ain't that the truth. Watching PEI politics, for one, makes me think I'm back in high school again...

Soooooo, that $3,000 to pitch is actually a deal when compared to what TechCrunch charges, or what DEMO charges for a booth..... Both are wastes of money.

I dislike the pay-to-pitch immensely. I think it is also the consulting fee and transaction charges on the capital raised. This is such a non-entrepreneur friendly way to facilitate early-stage capital. I can't believe that the "angels" or "members" are happy that 8% of the transaction goes to someone other than the startup.

Well, at Techcrunch I believe the main battlefield is free but the booth setups are paid for.

This is correct.

The site is loading slow under HN's load, here's the text content: http://pastebin.com/QKsXiAg3

It's Canada. This is standard operating procedure.

EDIT: To clarify, I mean modestly wealthy individuals attempting to take advantage of hopeful entrepreneurs is SOP in Canada. I've seen it on the west coast first hand, and have reports from the east coast about similar things.

It is most certainly not the standard procedure.

EDIT (for your edit): >To clarify, I mean modestly wealthy individuals attempting to take advantage of hopeful entrepreneurs is SOP in Canada. I've seen it on the west coast first hand, and have reports from the east coast about similar things.

Again, this is NOT the standard operating procedure in Canada. I'm sure there are individuals who have no qualms about squeezing entrepreneurs, but I can't imagine this is any different from US. The one problem I found is that, though Canada (Ontario at least) has a wonderful Angel network, and phenomenal government programs (e.g. FedDev, SRED), there is a lack of Series A (and later) VC money.

I have first hand experience in your quoted excellent programs. I'm using a temporary username as I don't want to link my comments to past identifiable use of this website.

SRED is a dirty game where consultants will elaborate on your less than applicable research to boost your chances of getting grant money. And hey, the consultant will get paid, the company will get paid and the tax-payer with the actual developer who's SIN and identity is used gets chucked on the hook for it. It's absurd. Both of the programs you have mentioned get people that I know very rich, tax-payers poorer and regular workers adding to it by paying on average 33% - 37% taxes.

Sometimes, I wonder if playing by the rules without leeching off the system is worth my while. And as long as I have enough to keep a roof over my family's head, I just might stay on the right side of this debacle of a ruse.

>SRED is a dirty game where consultants will elaborate on your less than applicable research to boost your chances of getting grant money.

It's as dirty as you want it to be. If you want to lie and cheat, you can try, and you may be able to get away with it. Or you can honestly approach the process, and sleep better at night.

>I wonder if playing by the rules without leeching off the system is worth my while

Playing by the rules? These are federal and provincial programs. There's nothing shady or illegal about them. I think the startups that qualify do benefit from them immensely.

I've been advised many times to pursue SRED rebates but have zero interest in spending my time on all that onerous paperwork. I suspect that a willingness to jump through government hoops to pursue government money is inversely correlated with being the kind of innovator the money is supposed to be for.

Having also gone through the SRED (as well as Arts grants) process, I concur. But, this is the "grant" game in Canada.

Really? $3k to pitch is standard procedure? I have a hard time believing it...

I've never heard of this. What's your experience raising money in Canada?

I'm biased. Been a early team addition at a company that raised $500k from Celtic House in mid-00s. No fees on that raise. I have also raised from IAF, and from larger angel groups in the US. No fee as percentage of the transaction taken.

Currently at a Canadian VC - we don't pay brokers for early stage deals.

I don't doubt your experience, Dave, I was questioning spitfire's.

"Forget it, Jake. It's Chinatown."


I've never seen the movie but that extended quote just seemed outright racist

Not sure about the rest of Canada but definitely standard operating procedure for the Maritimes.

Not anymore it isn't.

There are good alternatives in the area. LightSail had very good experiences with Innovacorp. Quick and reasonable -- no crazy expenses.

We would all be wise to remember that when a lot of money is being thrown around, some con artists will arrive. Scammers will haunt the edges of any scene where people are giving out something valuable. Those of us who read Hacker News are aware of the reputable investors who mean well, and who clearly want to help facilitate the creation of wealth. Anyone who reads this site can name at least a dozen investors and/or incubators that are honest. But we should not be innocent: whenever there is a gold rush, there will be liars and cheats.

I have written about this before, but in 2009 I was hired by a small startup in New York City. At that time I lived in Virginia but I had wanted to move to New York, and this job offer was the perfect chance. So I moved to New York. I had worked with startups in Virginia, and I had high hopes about the startup in New York.

All the same, what I saw at the startup was disturbing. The financing seemed questionable. The central figure ran what he called an investment firm. That meant he reached out to potential investors and he tried to get them to invest small amounts in his various projects. At any given time he had 10 to 12 projects that he was raising money for. He would raise $100,000 or more to get a startup going. Each project might have 10 investors.

I worked at that place for a few months, and then I was told that they had to close down because all the money was gone. The project manager/COO told me that they'd spent $80,000 of the $100,000. I was not clear why things were closing down. He told me to send in my final invoice. I did. They never paid me. 2 months later I was told there was no money to pay me. I had long (sometimes angry) conversations with the COO about the money. He gave me some reassurances about the money, how much had been spent, how much had been raised, how much there was. But he also said that the main figure had never granted him (the COO) access to any of the financial statements, so he was not able to speak with 100% confidence about how much money there had been, or still was.

It is possible that all of this can be put down to the normal chaos of startups. But it seemed like the main figure here was raising $x amount for a startup, spending 80% of the money, and then telling investors that, sadly, the project had failed, they had not gotten enough momentum, these things are very risky, etc.

Maybe he had an understanding with the investors, but I very much had the impression that he kept 20% of the money for himself. And he was doing this constantly for 10 to 12 projects. He went to dozens of events in New York and in Boston, he was constantly pitching, constantly raising money. He was very good at getting people to hand him money. But I have my doubts about whether the money was being spent the way the investors would assume it was spent.

The normal chaos of startups can hide a lot of corruption. You can use the riskiness of startups as a cover for fleecing investors and delivering very little. In the end, all you have to say is "I am very sorry, these things are very risky, I'm sure you knew this was risky, we did our best but we failed to get momentum." And of course, startups are risky, that part is true, but the investor has the reasonable expectation that if they give you money, then you did everything possible to make your startup a success.

Here is a bit of age old wisdom: let the invest beware. (And likewise, beware of the exploitive investor pitch.)

The fact that there are some famous investors whose integrity is well known should not distract anyone from the fact that there are scam artists in every walk of life.

This reminds me of the musical "The Producers". Raising money for ventures that often fail leads to intentionally raising money for something that you hope will fail to hide corruption.

The information asymmetry you highlight is why directors of Canadian (CBCA) and Ontario (OBCA) corporations are personally liable for the wages of their employees.

This is a strait up scam. NEVER pay to pitch.

Agreed. 100%.

It prays on desperate entrepreneurs that will do anything to keep their businesses alive. And it's wrong, for so many reasons.

ERANYC might be a worse deal - they don't charge to pitch them, but they want 8% and anti-dilution, for $40k investment.

How is that worse? Thats similar to most incubators.

Including the anti-dilution part?

Disclosure up front.

This reminds me of an old dilbert cartoon in which they play the game "Trust". You fall backwards, into your teammates' arms. You can imagine how it goes, but the key lesson learnt is, essentially: Don't trust anybody.

What a bummer. I post something half interesting and the site goes down. . .

Sorry, I messed up. My configuration was substandard this morning. Upgraded the memory available to the WP & MySQL instances. Turned on WP-Supercache. And adding a Varnish layer in front.

Try W3 Total Cache, they have super-tight Varnish integration.

Working on it with vmfarms guys (we got 10x our high point traffic using hourly measure on this post) updating our infrastructure to be more resilient.

I recommend replacing super cache with W3TC. It has a lot more features, including minifying your CSS and JS. If you need help with it email me, dan at driverdan dot com.

Sometimes it seems like Atlantic Canada can never win.

It's hard work but things are changing. Exits here are growing and early stage startups have good access to capital

Found it hilarious i can't connect to the site.

The site you can't connect to is startupnorth, a blog about canadian startups. the fund in question is First Angel Network (according to the slug, as that's all i can see too.)

Sorry, see previous comments about system configuration. I had removed WP-SuperCache. Have also upgraded memory and adding a varnish caching layer for future.

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