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Angel Investors

Grant Wing/Derek Mach, Western Investor, July, 2007

Local technology startups are pressing the global warming hot button in hopes of attracting investment dollars to their green technology business ideas. And the green-tinged interest extends into real estate pitches, where recreational projects are increasingly turning to individual investors.

Reducing global warming and lowering CO2 levels were common goals for several entrepreneurs pitching business ideas to potential investors at a recent Vancouver angel investment forum.

Energy Aware Technology Inc. hopes to increase homeowners’ awareness of their energy consumption.

Its presentation emphasized the environmental cost of wasting energy. The company claims its wireless home electricity monitoring system can save 20 per cent, or up to $360 a year, on household electricity bills. The PowerTab system provides homeowners with live feedback on electricity consumption and hourly cost. The company hopes to sell its technology to utilities, housing developers, electricians and environmental programs. Potential investors attending Energy Aware’s presentation were receptive to its presentation and its business plan.

Angel investor forum organizer Bob Chaworth-Musters noted the increasing green tinge to companies seeking investors and attributes their appeal to environmental issues being the “flavour of the month."

He said there were roughly 90 investors at the April 24 forum representing venture capital and private investors.

Chaworth-Musters added that “green” business presentations drew larger audiences than the sparsely attended presentations of more established companies in the software sector.

On the sustainable transportation front, FuelVapour Technologies Inc. drew a roomful of possible investors by displaying a prototype of its sports car. The Inconvenient Truth inspired presentation promoted the company’s low-emission gasoline engine technology.

FuelVapour’s Todd Pratt said the company is seeking $1 million to build a three-wheeled sports car featuring its “alé” fuel vapour system. The company claims the system, which replaces gasoline engine fuel injection, can achieve 92 miles (148 kilometres) per gallon efficiency, while reducing CO2 emissions by 30 per cent.

Pratt said FuelVapour hopes to produce the boutique car to highlight the company’s fuel vapour system to attract investor interest in the technology.

“I think that if you take a look at how people have been investing over the last 10 years, definitely there is a swing toward ‘Let’s try to make some money and make the world last a bit longer,’” said Pratt.

Offering energy efficient lighting, EnCore Manufacturing Ltd. president and CEO Eric Lee got the attention of potential investors by smashing lightbulbs and fluorescent lights to emphasize the end of the inefficient light sources. Lee’s startup company is a contract manufacturer of fixtures for LED (light emitting diodes) technology.

Lee believes investors will come to appreciate the advantages of manufacturing the LED lighting in Canada and is confident that funding will be available to fast-track production and meet rising demand for LED lighting products.

Real estate

As cap rates and competition mount for real estate projects, more real estate developers are turning to individual investors to get projects off the ground.

A number of B.C. and Alberta recreational real estate offerings allow investors to purchase a “share” of the development, which can be paid out when the project completes, or can be rolled into a physical unit of the finished project.

An example is Silverado Investors of Vancouver, which has projects underway in the B.C. Interior and the Kootenays. Investors, for instance, can buy $1,000 “units,” with a minimum of $25,000, for a chance to share in the eventual profits.

Angel real estate investors are typically experienced hands in the market with cash to invest in the next new project with promise. Anecdotal evidence suggests that they’re more active than ever as real estate maintains its hold on investors’ attention.

Calls from so-called angel investors have jumped from one to two a month five years ago to one to two a week today, said Rudy Nielsen, president of Niho Land and Cattle Co. Ltd. in New Westminster.

Nielsen said angel investors tend to scout opportunities through brokers like himself, making it known they’re available to support deals while keeping a low profile.

The lure for investors is higher returns. Indeed, most private financings will provide investors with 12 per cent annual interest. While that’s below the 18 per cent yielded in the past, it hasn’t made investors any less willing to get involved in deals.

Yet cheap debt is also making individual investors, or limited partners, more important to the success of some deals. Down payments have become larger, reducing loan-to-value ratios to 60 or 65 per cent from 75 per cent a few years ago. That’s created a need, a window for investors to provide startup backing.

But such angels will also want security, according to Vancouver-based Trez Capital Corp.

“There has to be a pretty well-defined exit plan, because we do stay on the short side of these deals,” said Jim Bogusz, the firm’s chief financial officer. “We want to know going into a deal pretty clearly how we’re going to get out of it.”