Angel investor has built up portfolio by investing in start-ups

By TIMIA Capital

Posted March 2, 2017

Article originally appeared on The Globe and Mail
Published Friday, Jan. 27, 2017

Mike Volker

Occupation
Angel investor and lecturer at Simon Fraser University

The portfolio
Holdings include Timia Capital Corp., Alterra Power Corp., Northland Power Inc., Telus Corp., Fortis Inc., CIBC and National Bank of Canada.

The investor
Angel investor Mike Volker has built up a portfolio of several dozen early-stage companies through involvements in a number of business entities. They include the VANTEC Angel Network, WUTIF Capital (a private angel fund) and Timia Capital Corp. (which finances small technology companies in return for a percentage of their future revenues).

How he invests
As mentioned in his Me and My Money profile of 2010, Mr. Volker likes investing in start-up companies because he gets information through direct communication with those who run the business. He can also become directly involved as a mentor or steward. With larger companies, he is removed from the action. Furthermore, information is usually only available with a lag and through the filter of analysts’ reports and company documents.

However, now in his mid-sixties, he is shifting more toward conservative “large-cap equities that people depend on, such as utilities and banks that grow steadily and pay dividends.” Since 2010, his weighting in early-stage ventures has dropped from 70 per cent to 50 per cent.

He is also lowering risk by investing more in young companies that are less risky. In particular, he prefers those that are “growing revenues substantially and able to pay a royalty on sales.”

His returns have been good. He reports better than 10-per-cent annual returns on his “mainstream TSX companies” and better than 15 per cent on his early-stage companies. The higher returns on the latter are “nice, but they take a great deal more time and attention.”

Best move since 2010
It was buying Premium Brands Holdings Co., a specialty food manufacturing and distribution businesses. “It went from $18 in 2012 to almost $72 in 2017,” Mr. Volker says.

Worst move since 2010
“The worst was GoPro Inc. [a maker of action cameras],” he discloses. “It was on a roll. I bought at just over $30 and it’s now under $10. Fortunately, it’s just one [stock] in a larger portfolio.”

Advice
Mr. Volker notes that studies have shown investors in early-stage companies can earn annualized returns greater than 20 per cent if they have more than 20 deals in place. A smaller, less diversified portfolio can be torpedoed by the firms that go out of business, so “build a large portfolio or invest in an angel fund,” Mr. Volker recommends.

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