angels vs vc\'s ishai green forum mit israel

Angel VS. VCAngel VS. VCIshay GreenIshay Green

Angel VS.

Venture Capital(And some tips about both…)

DisclaimerDisclaimer

Entrepreneurship is a game of imagination – The following are my

opinions

TERMINOLOGYTERMINOLOGY

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TerminologyTerminology

• Valuation• Shares• Dilution

ANGEL VS. VC ANGEL VS. VC MONEYMONEY

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Angel VS. VC MoneyAngel VS. VC Money

VC’s are professionals who invest other people’s money

Angel VS. VC MoneyAngel VS. VC Money

Angels are private people investing their hard earned money

ANGEL VS. VC ANGEL VS. VC PROFIT EXPECTATIONSPROFIT EXPECTATIONS

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Profit ExpectationsProfit Expectations

VC’s look for double digits profit multipliers(10 Times)

Profit ExpectationsProfit Expectations

Angles would usually be happy in low end of a single digit(3 Times)

ANGEL VS. VC ANGEL VS. VC INVESTMENT RISKSINVESTMENT RISKS

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Investment RisksInvestment Risks

The Angel is risking their own money

Investment RisksInvestment Risks

The Angel is usually less knowledgeable than a VC in most aspects

Investment RisksInvestment Risks

The Angels tend to follow their gut feeling

(So you better be damn sure you know what you’re doing…)

Investment RisksInvestment Risks

The Angel knows where you live

Investment RisksInvestment Risks

The VC risk is divided through a larger

portfolio

ANGEL VS. VC ANGEL VS. VC EXCEPTED HOLDINGSEXCEPTED HOLDINGS

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Excepted HoldingsExcepted Holdings

VC’s expect a minimum of 20%-25%

share holdings(They will ask for much more)

Excepted HoldingsExcepted Holdings

Angles are agnostic.

TIMINGTIMING

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TimingTiming

Angels can afford investing in the scenarios of:1.Seed2.Down-round* Angels will usually not execute their preemptive right

TimingTiming

VC will usually require a more mature company,

and even a proof of concept before

investing

TimingTiming

Angel money is faster(For most Angels a meeting or two is

sufficient to decide)

TimingTiming

“Some VC’s will yes you to death”

- Adi Pundak-Mintz

WHY DO ANGELS EXIST?WHY DO ANGELS EXIST?

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Why do Angels Exist?Why do Angels Exist?

Potential for large multipliers on their

investment outside of the stock markets

Why do Angels Exist?Why do Angels Exist?

The investment is not liquid – When it is gone

it is gone

Why do Angels Exist?Why do Angels Exist?

The Google – Facebook – The Marker Effect

Why do Angels Exist?Why do Angels Exist?

Tax Benefits

Why do Angels Exist?Why do Angels Exist?

It’s Fashionable& Cool

VC TYPES – ENTREPRENEUR POVVC TYPES – ENTREPRENEUR POV

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VC Types – Seed FundsVC Types – Seed Funds

Invest small amount of money in early stage, with no promise for recurring investment

VC Types – Israel Top Five VC Types – Israel Top Five

- Has more then $100M fund- Known for its smart and

beautiful partners*

* Yaron from Giza VC is a great example

VC Types – InternationalVC Types – International

Enables you to tell everyone you now have direct access to Steve Jobs, Balmer and God

VC Types – Famous VC Types – Famous

Proven winners - Index Ventures invested in

VC Types – Top TierVC Types – Top Tier

- Sequoia- Draper Fisher Jurvetson

ANGEL TYPESANGEL TYPES– ENTREPRENEUR POV– ENTREPRENEUR POV

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Angel Types IAngel Types I

Rich Industry Expert / Entrepreneur

(Eduardo Shoval)

Angel Types IIAngel Types II

Super Angel(Yossi Vardi / Paul Grahm)

Angel Types IIIAngel Types III

Richie Rich

Oil / Real-estate / Diamonds / Weapons

Angel Types IVAngel Types IV

The Gambler

Angel Types VAngel Types V

Family

BOARD OF DIRECTORSBOARD OF DIRECTORS

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Board Of DirectorsBoard Of Directors

The board represents the share-holders

(investors)

Board Of DirectorsBoard Of Directors

The board devises tactics and strategies for

the company

Board Of DirectorsBoard Of Directors

The CEO is responsible for executing board

decisions

Board Of DirectorsBoard Of Directors

Entrepreneurs & CEO keep the board up-to-

date

Board Of DirectorsBoard Of Directors

An effective board:• Smart and self-conscience members• One member+ is an industry expert

INVESTOR RIGHTSINVESTOR RIGHTS

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Investor RightsInvestor Rights

Voting Rights Are Dangerous

(Try to avoid them)

Investor RightsInvestor Rights

Veto Rights Are Lethal (Unacceptable)

ANGEL-MAINTENANCE ANGEL-MAINTENANCE TECHNIQUESTECHNIQUES

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Angel-Maintenance TechniquesAngel-Maintenance Techniques

Angel turns into Devil:• Conflict of Interest • Disappointment• Greenmail • Ignorant / Boarder Line Disorder

Angel-Maintenance TechniquesAngel-Maintenance Techniques

Proxy Mechanism -• Protect the company from its investors• Protect the investors from themselves• Protect the individual investor from himself

Angel-Maintenance TechniquesAngel-Maintenance Techniques

Define a board representative for the

angels with past experience

ANGEL VS. VC VALUATIONANGEL VS. VC VALUATION

1212

VCVC

• VC allocates ~$10M total for an investment• The money is divided between rounds• The VC needs to maintain 25% holdings in the company – unless you go to huge valuations. (*)

AngelAngel

The Tomer-Ishay Method™• Find a prominent lead investor and then negotiate • Talk to the rest of the investors only after valuation was set• Raising money in chunks

AngelAngel

What should you tell the Angels before closing

• Make sure they understand the business plan• Tell them they need to consider the money as gone.• Say that you do not take money from widows and orphans.

SUMMARYSUMMARY

&&

SummarySummary

•There are not definite pros & cons•Angels are a great way to start•Do you believe in Angels?

I doI do

THANK YOUTHANK YOU

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