Angels in British Columbia Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Question 1:

Are all angels alike? What is the rationale for angel networks and angel funds? How are angels different from VCs? Do angel investors complement or substitute venture capital firms?

Angel investors are wealthy individuals who provide capital for business start-ups. However, all the angel investors are not alike. Some invest in strangers, some invest in for personal acquaintances, some invest large amounts, some invest small amounts, some spend their full time, some spend their little time, and some invest on their own while others invest in the form of an angel group.

Angels operate in Canada and many countries in the form of angel funds and angel networks. The rationale behind the creation of the angel networks was to basically bring all the angel investors on a single platform, so that knowledge could be shared. Workshops were also organized by these networks to cover many major topics such as how to plan the exits or structure the deals. Furthermore, the rationale behind the creation of the angel funds was to bring the smaller angel investors to invest alongside with the active and larger angel investors.

Angel investors are completely different from venture capitalists, as these are wealthy individuals who only provide the seed financing whereas, the venture capitals manage venture capital funds on the behalf of other partners and they provide the financing to the companies over all the way to their exit. Furthermore, unlike venture capitals, angels require less formality, they invest at earlier stages and with smaller amounts usually. Therefore, we can say that angel investors basically complement the venture capitalists.

Question 2:

Should the government support angel investors? What are the strengths and weaknesses of the BC equity tax credit programs?

The governments should support the angel investors. Angel investors provided the seed capital to the smaller start-up companies and many of the angel investors had also argued that it is because of the angel investors that the companies were able to rise the required venture capital funding. Venture Capitals usually manage venture capital funds which are formed with the accumulation of the funds from a limited number of the partners.

Venture Capitals cannot lend money to anyone; however, they invest in only credible companies. Therefore, when angel investors provide the necessary financing to these small companies they bring credibility to the company. As a result, the governments need to support the angel networks and the angel investors. It might also seem that there is a lot of friction between the angel investors and the venture capitals; however, they both need one another.

The strengths of the BC equity tax credit programs are that is supported the Canadian venture capital markets and helped all the innovative companies in their financing. These funds provide the dedicated investment that could be used to invest in the most eligible companies. Investors could use the tax credits to offset their taxes on personal incomes

The weaknesses of the BC equity tax credit programs was that it had crowded out the private and the independent venture capitals as these were sponsored by the government. Furthermore, the performance of the LSVCC was poor and the cost was very high for the government. Due to the crowding out impact, there were not equity tax credits available for the investors after the global financial crisis in 2008-2009.

Question 3:

Which option should Todd go for? Be specific in terms of why you support that option, what exactly you want to do, and how realistic it will be? Also explain whose perspective you are taking in this debate?

The equity tax credit program needed to be evaluated in the year 2010 and Todd had several options available which included changing few tweaks to enhance its value, grow the program further, simplify the program or redesign the program. The first option allows for the modification of the investment limit to increase it to $300k, however, according to the survey 60% of the respondents indicated that they never crossed the current limit of $200k. Therefore, this option is not advisable at all.

The second option is to grow the current program through the increase in the rates of the equity tax credits above 30%. According to the survey, 60% angels said that they would adjust their investment amounts as a result of this change. This would have a significant impact upon the cost of government for paying tax credits. Furthermore, there is also a risk that there might be an oversupply of capital as compared to the available opportunities.........................

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.