For the past six years, Kate Tomen has been a constant presence in the angel investment ecosystem in Ontario. As VP at Angel Investors Ontario (AIO), she has a front-row seat to the early-stage funding ecosystem in Canada. In this ‘Women in Tech’ interview, The Tech Factor catches up with Kate on her background, angel investors in Canada, and the role of women in it.
Six years can be a lot or not enough, depending on who you ask. But for Canada’s relatively young startup ecosystem, it’s more than enough to understand the nuts & bolts of how it moves. Kate Tomen joined Angel Investors Ontario (AIO) in 2018 right out of her master’s, and has been at the centre of action with angel investors in Canada since then. As part of The Tech Factor’s ‘Women in Tech’ series, we find more about Kate and break down angel investing in Canada.
Kate Tomen: An early interest in entrepreneurship
Born and raised in Canada, Kate Tomen grew up in a small farming community in southwestern Ontario – Chatham. Since then, she’s lived all over the province, including in Windsor, Waterloo, Kingston, and Toronto. Kate graduated with honors from the University of Waterloo (Bachelor of Science) and the University of Windsor (Bachelor of Commerce). She started working at AIO while pursuing her Master of Management Innovation and Entrepreneurship (MMIE) at Queen’s University’s Smith School of Business. Growing in responsibility over time, Kate now is in charge of AIO’s operations and new program creation in her role as Vice President of Business Development & Operations.
We asked Kate how it all culminated in supporting entrepreneurs. She said – “I always liked to build things. I was never satisfied with the status quo and where I saw an opportunity to do better or to create, I took it. I started a ‘Halloween for Hunger’ campaign at my high school, then I created a mental health program during my undergrad. Also, I helped my mom with the marketing for her business, and worked at a startup coming out of university. At the time I wouldn’t have called these things ‘entrepreneurial’ and it really wouldn’t click until I was in grad school.
I attended Queen’s and completed a Master’s in Innovation and Entrepreneurship. The agile and creative thinking that the program is based on really spoke to my ethos and led me to my current role. Entrepreneurship is our great equalizer – you don’t need wealth or a fancy degree. Whether you are a farmer or building the next billion-dollar software company, entrepreneurship is about the opportunities to create the future we want to see. It’s really the people and stories behind those companies that keep me going day to day.”
A collaborative spirit in Canada’s ecosystem
In 2018, when Kate Tomen entered the ecosystem, VC funding in Canada was CA$3.8 billion. Since then, we have seen startups struggle with pandemic, then the mad rush of 2021 with CA$15.1 billion funding, and the bearishness thereafter. So what has Kate found endearing in the ecosystem through these highs and lows?
She says – “There is a real collaborative spirit here in the Canadian tech ecosystem. It takes a village to raise a child but a community to raise a company. And I really think that sums up the tech ecosystem here. I have had the privilege to watch the angel ecosystem evolve over a pandemic, founder-friendly markets and tumultuous markets. It’s been a wild ride for sure! The angel groups have always been collaborative in nature – again they are small so there is a need to work together, to share and syndicate deals to get the job done so founders can go on building their business.
In recent years, there has been this increased attention to women’s issues and race issues. And the drive for diversity, equity and inclusion have reshaped conversations within the angel community. Recognizing the importance of addressing the unique challenges faced by women entrepreneurs and entrepreneurs of colour is crucial for fostering an inclusive and diverse innovation ecosystem. There have been a lot of great initiatives like The Firehood to involve more diverse angels in our community. There has been this ripple in the ecosystem and the needle is moving slow but surely.”
Catalyzing angel investors in Canada & challenges
Angel Investors Ontario (AIO) is a non-profit that supports 19 non-profit angel groups and investment clubs across Ontario. Kate shared that in Ontario, there are roughly about 1,600 members across the 19 groups, which make about CA$60M investments per year. Over the past 1.5 decades, AIO claims to have enabled over CA$800M investments into over 800 startups, creating over 15,000 jobs.
Kate Tomen shares how she got started – “I started with Angel Investors Ontario while I was completing my masters. A previous board member taught in the program and my role evolved from part-time student to full time. Angel Investors Ontario is an umbrella organization for the angel groups here in the province. Our mandate focuses a lot on recruiting and retaining angel investors. So our activities are a mix of advocacy, education and programming for both angels and founders.”
Now, the way the US angel ecosystem moves is a testament to driving innovation. When asked to compare angel investor ecosystems in Canada and the US, Kate found it a bit tough. “The US is a behemoth, and it is hard to compare Canada to the US. Admittedly, there is a lot of good here in Canada – we have great science, engineering, higher education and R&D. However, investment at early stages is still difficult for founders to find.”
Why is this so, though? Kate highlighted the lack of founders with exits – “While there have been some Canadian success stories, we have not had a lot of exits yet. Exits create angel investors, and angels who have created their wealth from a liquidation event understand the game. Not to say that others cannot be great, but founders certainly create the best angels.”
Speed separates angel investors in Canada & US
Of course, identifying angels is tough as not all investments are reported/organized. According to BDC, between 20,000-50,000 Canadians or organizations actively invest in startups. This is about 0.05-0.13% angel investors in Canada of the population (~39M). Simultaneously, according to the Center for Venture Research, there were 363,460 active angels in the US in 2021. This represents 0.11% of the US population (~333M). So population-wise, we seem to have sufficient angel investors in Canada.
Further, US angels invested US$29B in 69,060 startups in 2021. This would mean about 0.19 investments per investor and average US$420k per deal. As per National Angel Capital Organization (NACO) of Canada, its 4,200 members invested CA$166M in 379 companies in 2022. This is about 0.09 investment per investor at CA$438k per deal. So, prima facie, it seems that an active Canadian angel has half the investment rate of a US angel.
Kate added her thoughts on the disparity – “The biggest difference between Canadian and US angel investors is simply speed. There’s also a lot of money in the States. Without a doubt, the US, particularly the Bay Area, just operates on a different time scale. Silicon Valley pumps out companies at an incredible speed and with so many startups, investors have very little time to decide. You will see rounds in the US close in weeks vs in months here. I feel incredibly privileged to sit in the middle – between startups and investors.
So, I hear feedback from both. Writing an angel cheque is risky and you absolutely need to do your own due diligence. I hear from founders how cautious angels here are but, yet, they went to the US and angels hopped on board quickly. When we are afforded time, we find more and more reasons to say no.”
Kate Tomen has some tough words for Canadians
Kate Tomen also has some tough words – “I’ve worked with Americans and this speed isn’t just limited to funding. As Canadians, we like to do our research, take our time and ensure we’re making the right decision. In contrast, Americans move quicker and experiment more. There’s more “try-before-you-buy” attitude. When you’re in this cycle of “try, evaluate, move on” and not working for a particular milestone, you’re more open to feedback.
Due to lack of exits, we now have a preoccupation with them. I don’t blame anyone – I’d love to see more exits too! But when you try to overly plan towards exits, you create meaningless checkpoints. You find yourself trapped in that cycle, instead of focusing on building.
To be blunt, Canadians suck at accepting constructive criticism. We simply don’t communicate in a direct way – we can talk in circles about a potential solution and then never implement anything. Canadians have a reputation of being polite, but we shouldn’t let this hold us back from accepting and giving feedback.”
So, how do we fix this and add more bullishness to angel investors in Canada?
Kate adds – “It’s a bit of a chicken-and-egg problem we have here. You need good startups to create angel investors, but you need angel investors in Canada to seed companies. And ecosystems are, well, a system. You need all the cogs moving together at the same speed. Canada is still a relatively young ecosystem, and we have a lot of great ingredients. I think there is an exciting opportunity to build on our collective strengths. Canada is small and we tend to spread ourselves too thin. If we take a step back, focus on our strengths and knit together the provinces with more interprovincial collaboration, we can build something special and uniquely Canadian.”
Participation of women as angel investors in Canada
There seems to be a lot of positive movement in terms of participation of women in Canada’s angel investor ecosystem. According to NACO, the percentage of female members of angel organizations has been rising annually. In 2022, women made up 37% of angel organization members, up from 27% in 2021. Overall, since 2017, this share has more than doubled from 14%.
Kate agrees – “There has been a lot of encouraging progress on the diversity, equity & inclusion (DEI) front. There has been a rise in investment in women-led companies, and this is a positive shift and reflects the commitment of various angel groups to enhance diversity and inclusion. Like invests in like.”
But we need to continue on this path. We asked Kate Tomen for additional initiatives to encourage more women angel investors in Canada. She suggested a variety – “We need more women and investors of colour to invest in their counterparts. To cultivate a tech ecosystem that is truly inclusive, a deep and nuanced understanding of the specific challenges encountered by women and women of colour is essential. It takes grassroots movement and tailored solutions to address the unique challenges of women and women of colour entrepreneurs.
We need to take a collective approach and unite our efforts and intentionally implement strategies that break down barriers. Sometimes the breakdown barriers need to start in elementary school – access to mentoring, coaching and education is crucial. Drawing from successful models, particularly from the US, procurement policies, capacity-building programs, and targeted financial investment initiatives should be adapted and applied in Canada.”
Advice to women & founders from Kate Tomen
Against this backdrop, we asked Kate Tomen for her advice to other women who are just starting as startup founders or angel investors in Canada. She recommended – “Angel investing is a team sport! Leverage your network and get involved with an angel group. Investing with other people can lead to better outcomes – and a more enjoyable experience along the way. Diverse perspectives lead to better investment outcomes. I think that goes for founders too – there is power in your network!”
And finally, what are her quick tips for founders approaching angel investors in Canada for funding?
She signs off – “Be open, genuine, and honest about the current state of your business! It can be tempting to paint a perfect picture but that is often not the case! Building a company is hard – be open with your struggles and your successes. More often than not, I find people here are very solution oriented – you never know what conversation might spark a new idea or alter your perspective.”
