idcee 2013: angel investing - john ason (business angel)

10/10/2013 Copyright 2013 - John Ason 1

Angel Investing

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Personal Background

25 years AT&T Bell Labs experience

Successful in stock market Angel investor last 17 years

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Angel Investments

Xlibris.com Scoople.it DoodleDeals.comKoding.com EndlessTV.com ERAnyc.com

Centrak.com OffTrackPlanet.com Ology.comDiapers.com HotList.com Imbookin.com

CallunaVineyards.com Tips.by Spling.comWeHostels.com LiveLook.com Bikini.com FulcrumGallery.com Geometrix SpatialLabs

AdPilot Hooja MotionMathGames.comAppyCouple.com PhlatBall.com Monaeo.com

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What is Angel Investing ?

Source of funds for early stage companies

Typically first “professional” level Typically $100,000 to $500,000 Experience / assistance provided

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Angel Profile

Usually private Ability to accumulate capital

Retired professionals Entrepreneurs

Financial return secondary concern

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What do Angels Want ?

A pleasant experience Excitement of growing a company Financial return

An environment to contribute / participate Management / oversight Contacts

An exit strategy

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Exit Strategies (descending order)

Chapter 11 / Disbanding Life style (put option) Buyout / Merger Venture Capital round IPO

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How to Find Angels ?

Networking Venture groups Venture fairs Internet Accelerators University lectures

Intermediaries

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What do Angels Want to See ?

Short focussed business plan Quality management / people Reasonable valuation (20-30%

equity) Market validation

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Negotiating with Angels

Must be win / win Process is asymmetrical

Valuations fuzzy Angel contribution fuzzy Angels timeframe is casual / slow Angels do not HAVE to invest Angels can walk away at anytime

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Financial Returns

Ten times investment in 3 to 5 years

50% IRR per year Lifestyle companies do not

qualify

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Company Culture

Speed, speed, speed Outsource everything Leverage / margins Compete / cooperate Open non-secretive

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Angels VS VCsMoney Own Other people’s

Revenues None $2 – 5 million

Management Partial Complete

Stage Early Expansion

IRR 50% 30%

Multiples 10X 2X – 4X

Risk High Low

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Evaluation Process Clear, concise, compelling,

coherent one page executive summary

Very large potential (10X) Intellectually stimulating Marketing/sales skills Execution capabilitiesWhat’a missing???

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Exploding Angel Market Starting a company close to zero Validating a company close to zero Emergence of accelerators Emergence of Super Angels (Micro

VCs) Emergence of AngelList

Dramatic increase in speed of angel investing

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International Activity Foreign startups looking for funding Foreign governments looking to build

angel and startup ecosystems VCs getting active Accelerators going international International conferences/hackatons

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How to seduce an early seed stage angel

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Investors Want

Detailed market data

Detailed ROI analysis

Explicit problem statement

Prior successes

Industry experience

Complete management team

Business plan

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WRONG!!! (sorry!!)

This is for a later stage expansion company

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Available Data

%

Angel Expansion VC

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Angels Want

Explicit statement of what you do Rationale for market size Bottom up market forecast Quality management team

Prior failures acceptable Prefer outside of industry

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To be sold EQUITY in your company and

NOT a product or service

Angels Want

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First encounter

EntertainImpressInform

Only one chance to make first impression

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Less Words

Less Data

More Pictures

More Action

How??

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The sale is

Emotional not data driven

26Copyright 2013 - John Ason10/10/2013

Thank You

John Asonwww.JohnAson.comAson@comcast.net