frank peters show - review

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The Frank Peters Show - 20 Jul 2011”Angel Admin” - NOTES



Nome Tech CoastAngels

Huston AngelNetwork

Mid AmericanAngels

Vantec Angeltechnologynetwork

Alliance of Angels

Speaker Kim Wiig Kala Marathi Rick Vaughn

Theazel Lee Greg Huey

Position OC NetworkDirector

ManagingDirector

ManagingDirector

Managing DirectorManaging Director

Based Los Angeles Houston Kansas City Vancouver Seattle

Members 250 75 40 100

Investments 175 11 in 2010 34 160 firms

$ Invested 112 mil + 1.2bn indeals from others

3 mil in 2010 8.2 mil 60 mil

Founded 1997 2001 2006 1999 1997

Participants



Alliance of Angels: in 2008 they had 5 positive exits by acquisition.

TechCoast: in 2010 had 5 exits. The most successful was 110x and another profitable

one was 85x, both acquisitions.

Vantec: 2005 was a very good year for them, they had a big exit in pharmaceutical thatwent IPO and another “Creo” bought by Kodak. After that everything has been veryquiet.

Mid American angels: they had just one single positive exit in 5 years.

Huston Angel network: 4 exits in the last 2 years. All of them by M&A.

Frank Peter : Since 1999 he hasn’t had a lot of exits. “It’s patience capital.”

Exits: M&A vs IPOs



Screening processVantec: they use Angelsoft quite extensively. It’s a good initial screening. From thedescriptions from the entrepreneurs you can understand if they fit or not. From thatthey are selected to present in front of a pre-screening panel. The pre-screeningpanel will decide who will present the project in front of the angel meeting. Themeeting is held every single month. One month will be life science based and thenext general tech based. Pre-screening analysts are specialized. “It’s unfair topresent an internet company to drug development.”

Tech coast: similar but instead of “angelsoft” they use an online application. Fromthat it goes to pre-screening analysts divided into industry based groups. They have

6 panels: hardware & software, life sciences, consumer, financial, digital media,cleantech/industrial. They decide which goes through the screening or not.Screening: 15 minutes of power point presentation,15 minutes of Q&A and a finalinvestors-only discussion. Than one investor will take care of the due diligence. Lastappointment is a short dinner in which they’ll present a term sheet and they’llbasically close the deal there.



Prescreening

Alliance of Angels: Frank Peter: ”In the north regional meeting your point was tomake sure the companies fit properly before they get in front of the members”.

They have around 20 companies in a month that apply and they meet everyone.There are some of them that not fit and other else that are “on/off” for over 24months before presenting. They spend a lot of time around the companies. Theyused to meet at least 2 or 3 time before meeting for a dinner and having the formalpitch. Even the most experienced entrepreneurs have problem in presenting infront of 75-100 business angels.

Frank Peter : it’s different to present to VCs because they don’t care about how“cute” is your power point, on the opposite side there are angels that arecompletely different among each other for hobbies and interests.



Bozo FilterWhat is the “bozo filter” you apply in Seattle?

Alliance of Angels: Because they are an entrepreneur friendly firm, they didn’t

want to charge any fees on them. 7 years ago they were flooded by business plansto analyse. In order to leverage their resources and eliminate entrepreneursinterested in receiving just a feedback they applied a fee of $95 and it eliminated allthe people not very engaged on their own project.

Huston Angel Network: They do have a 2 bozo filters, the managing director andan application fee. Cross referring interesting company from partners, contacts,incubators, university(60%) and 40% from their fellow angels. Sometimes thereferred BPs skip the pre-screening process but it depends on the case.



SyndicationHuston Angel Network: They syndicate often with other partners angel groups in Austin,Dallas and Baylor Angel network, but they also syndicate outside of the state likeCalifornia, Boston. As long as a company has a lead investor in the state they can coinvest.

Mid America Angels: Their typical investment is $250k whereas the typical demand isaround 1/1.5 million. There are three other groups in Kansas City they work close with.They are: Women capital connection, Show me angels, Mid West venture alliances.

Issues in taking a deal coming from another group?Mid America Angels: They try to have a sharing agreement about due diligence in order tobe entrepreneurial friendly.

Tech Coast: They syndicate a bit with Golden Seeds (San Francisco), Pasadina Angelsand Life Science Angels but they’ll do more. Some Pasadina Angels are also members of TechCoast. It’s a sort of TRUST between the groups.

Vantec: They try to share as much as possible with the other angel groups.



Dues and SponsorshipsVantec: At the beginning there was a strong opposition to the introduction of duesbut finally they introduced them as a guarantee to the entrepreneurs to meet peopleinterested in investing and not going there just to socialize.

Tech Coast: It varies from the network. The top is $ 1,750-1,600 and $ 500 for thesmaller network

Huston Angel Network: $ 1,500

Mid America Angels: $ 1,000

Alliance of Angels: $ 1,250

Vantec: $ 300 but they have also few corporate sponsors: Fasken Martineau,Seamon Fraser University, Ernst & Young, Rocket Builders, KPMG, UBC. Sponsorsbasically buy a seat at pre-screening table



Due Diligence

Frank Peter : “I went to the Angel capital association leadership conference inPhiladelphia last November and some groups stressed the fact they were going todistinguish themselves by doing very good due diligence.”

Alliance of Angels: Looking at the statistics, the number 1 or number 2 factor related to high returns is the amount of diligence done. Probably in angel investingthey do less diligence than a venture capital fund which is paid for that. It’s importantto pay attention to same basics like: check on the team, calling customers or potential customers to make sure that the value proposition works, competition,

technical aspects. Sometimes they ask lead investors to present instead of entrepreneurs. In addition they check from something abnormal like a fund manager presenting his brother’s business.



Deal Leads and mentoringAlliance of Angels: They try to push members to lead. Their priority is to get the members activeand than to lead a deal, sit on the board and tell the group how the company is doing.

Frank Peter : the more your experienced members get in boards the less time they’ll have for other companies. “I was assigned to pre-screening. I didn’t know anything but I enjoyed a lot and I’m still

in touch with my first mentor.”

Mid America Angels: They organize workshops and try to engage new members in due diligencesto show how it works. The very active members are around the 20% of the total.

Huston Angel Network: They recruit new leads. They invite some experienced leaders and pushnew members to co-lead the deal. It has been successful. It’s important to overcome the fear of

been compared with more experienced members.

Tech Coast: Deal leaders are not supposed to have all the answers. Tech Coast assign to eachnew member a mentor that help him through the process.

Vantec: Same problem. Recruiting members, retaining and engaging them. They had someadministrative changes related to that.



Funds

Should everybody who joins the group also join the fund ?

Alliance of Angels: “Yes, it helps to diversify the portfolio”. They have a $4.4million seed fund which co invest with the individual members.

Vantec :They have a number of different funds.

Tech Coast: Funds as a way to recruit new members.



Women ParticipationVantec: “I tend to be gender blind but we are just 3 women in the province.”

Tech Coast: “We are partners with Golden seed which is composed mainly by women

and invest in women.”

Huston Angel Network: Only 3 out of 75 and it didn’t change through the years. “I thinkwomen make good in board table because they offers different perspectives”.

Mid America Angels: They help “Women capital connection” that are more than 30women. Women have a different approach, sometimes they tend to socialize a little bit

more, they bring different perspectives.

Mid America Angels: “10% of us are women. We are trying to expand from the whitemale stereotype”.

frank peters show - review

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