october 14, 2015 - angel capital association · 2015-10-16 · 10/16/2015 1 structuring exits for...
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10/16/2015
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Structuring Exits for
Competitive Returns
October 14, 2015
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10/16/2015
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• Mission: Fuel the success of angel groups and accredited individuals
active in in the early-stage landscape
• World’s largest trade group for angel investorso 220+ angel groups
o 13,000 accredited investors
o Voice of accredited individuals, portals, and family offices
• 50 US states + Canada
• Research/ education partner
MEMBER GROUPS & ACCREDITED PLATFORMS
New Dominion Angels
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ACA PARTNERSGOLD
OUR MODERATOR
Alexandra LaForge
Director of Strategic Programs, Investors’ Circle
• Evangelist for Impact Investing since 2009
• Co-chair, Young Women Social Entrepreneur,
San Francisco
• University of Notre Dame
Add Photo Here
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OUR SPEAKERS
David Gitlin
Co-leader of the Emerging Technology Practice and
Shareholder with Greenberg Traurig, LLP
• Recognized nationally as a leading M & A attorney
and a leading Venture Capital Attorney
• Internationally recognized for his work across
borders
• Philadelphia, PA and Tel Aviv, Israel
OUR SPEAKERS
Aner Ben Ami
Co Founder and Managing Director
Pi Investments
• Committed to investing 100% of its assets in support of a more sustainable and just economy, including investments in clean energy, sustainable food and global supply chain
• San Francisco Bay
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OUR SPEAKERS
Dave Bisson
CEO
Big City Farms, Inc.
• A Baltimore-based urban farming venture that
creates good jobs for worker-owners,
revitalizes urban landscapes, and produces
ultra-local, sustainably-grown food
• Baltimore MD
TOPICS WE’LL EXPLORE TODAY
• Why Structured Exits are Attractive to Angels
• Which Types of Businesses and Investors Benefit Most
• Standard Terms for Structured Exits
• Approaches to Consider
• Challenges and Opportunities
• From the Entrepreneur Perspective: Big City Farms, Inc.
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STRUCTURED EXITS DEFINED
Investment structures designed to achieve a
desired investment return without reliance on a
traditional exit.
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• Suitable for:
o impact investments.
o revenue generators but not exit candidates.
o exit candidates but ownership interest in long term play.
o geographies with few exit options.
o traditional investments where parties view structure as win-win.
WIN/WIN
• Little or no dilution to entrepreneur when valuation is
low in exchange for growth capital.
• Safer return to investor without risks associated with the
need for a significant exit.
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TYPES OF STRUCTURES
• Redeemable Preferred
• Demand Dividend
• Cash Flow Loan
Coupled with Exit Warrant:
• pay now for nominal exercise price later.
• pay nothing now for today’s FMV price when exercised.
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FLEXIBLE NATURE
• Flexibility is Key:
o Can be tied to immediate or future cash flows.
o Return can be partially fixed and partially variable based on cash
flow.
o The return multiple can be fixed or progressive – can be tied to x
times investment or IRR.
o Can be capped or uncapped.
o Can be equity or debt.
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Big City FarmsBaltimore, MD
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Big City Farms Value Proposition
• 3 full-year growing cyclesOperating track record
• 80-90% lower CAPEX per sq. foot vs. hydroponic greenhouses
• $3.25 / sq. ft. when built at scaleLow CAPEX hoophouses
• Local restaurants, institutions, online & physical grocers
• Strong and growing farmers’ market presence
Strong, diverse customer relationships
• $2.50 / sq. ft. when purchased
• Free or nearly free when leased from CityAccess to affordable inner-city land
• >45% gross marginSolid unit economics
• COO: 15 years exp. with specialty veg.; 6 yrs. exp. managing 3,000 acres of organic citrus
• Front-line team: between 2 and 4 years experience each in sustainable veg. productionExperienced grower team
• First “network farm” partnership formed in 2012 with ex-offender assistance org.
• Talent recruitment partnerships with workforce/career development groups
Strong community & NGO relationships
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AMOUNT DESCRIPTION
$150,000 SALES of produce per unit
$80,000 COGS per unit
$70,000 Gross profit per unit
46.7% Gross margin %
$64,350 CAPEX per unit
$3.25 CAPEX per square foot of growing area
0.92 Avg. years to payback of CAPEX ([Unit CAPEX] / [Unit Annual Gross Profit])
115.8% 5-year IRR per unit
Unit = 19,800 square feet inside hoophouse greenhouses (approx. 1/2 acre)
Big City Farms Unit Economics
Why should entrepreneurs care about structured / alternative exits?
1. Improve chances of finding well-aligned investors & getting capital you need to grow
2. Flexible terms and realistic expectations increase chances of financial success
3. Maintain focus on original mission and impact goals
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AUDIENCE RESOURCES
Alexandra LaForge – [email protected]
• Investors’ Circle - www.investorscircle.net
Dave Gitlin - [email protected]
• Greenberg Traurig Law -http://www.gtlaw.com/
• http://www.gtlaw.com/News-Events/Publications/Published-Articles/187859/Structured-Exits-A-New-Universe-of-Potential-Funding-for-Companies-in-Undeserved-Markets
Dave Bisson - [email protected]
• Big City Farms, Inc. http://www.bigcityfarms.com/
Aner Ben Ami - [email protected]
• http://www.transformfinance.org/blog/2015/7/26/square-peg-round-hole-innovating-finance-for-social-enterprises
Forbes.com -http://www.forbes.com/
THANK YOU!
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Audience
Questions
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ADDITIONAL RESOURCES
Marianne HudsonExecutive DirectorAngel Capital Association
Christopher MirabileManaging Director, Launchpad; Board Chair, Angel Capital Association
http://www.angelcapitalassociation.org/news-forbes/
http://www.angelcapitalassociation.org/news-inc/
UPCOMING ACA EVENTS
• October 21, 2015: New England Regional Meeting – Boston, MA
• October 23, 2015: Southwest Regional Meeting - Tucson, AZ
• November 9 – 10, 2015: Angel Insights Exchange, New Orleans, LA
• May 9 – 11, 2016: ACA Summit, Philadelphia, PA
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