Insights and Observations on Angels

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Spencer Trask (1844 - 1909). Not only was he a trailblazer in supporting new ideas

and companies (including Thomas Edison), but his natural philanthropic inclinations set

an example of how angels can - and do - combine both economic and altruistic

motivations as they use their capital to define their personal legacy.

Henry Hillman (1925 – present). He followed his father's business and philanthropic

lead as one of the most prominent and generous benefactors in Pittsburgh, PA. He was

an early investor with Kleiner Perkins and KKR while simultaneously expanding the gifting

program of the family foundation - another angel incorporating both early stage investing

and benevolence to further the family legacy.

Hans Severiens (1930 – 2004). He was the co-founder of the Band of Angels (the beginning

of the modern era of ‘business angel’ investing), and was a Managing Director of the Band of Angels

Fund, L.P. He was named "2003 Dealmaker of the Year" by the SF Business Times, and the ACA has

named the ‘Angel of the Year’ the Hans Severiens Award.

History of Angel Investors

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8 Mil. Accredited Investors in US Today*

290,000 active accredited

investors in 2014;

The Innovators (AngelList,

angel groups)

*Pre Jobs Act/Dodd Frank Definition eliminating home equity from qualification criteria. Number is expected to be ½ this or 4 mil post Jobs Act/Dodd Frank

3.8M angels expecting

proper engagement

MARKET SIZE

Jeff Sohl at the Center

for Venture Research

has identified the number

of potential total angel

investors, not just

‘business angels’

Angel Adoption Curve

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MOTIVATIONS Who is Active

AngelList

Crowfunding

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QSB 1244: Favorable Tax Treatment on Losses

• First $1M of capital from outside investors (individuals only) can deduct

losses from ordinary income.

• Losses are an ‘above the (AGI) line’ deduction

• More favorable than if an equivalent were donated to Charity

Approx. 3x more $’s donated to charity than is invested in startups

annually.

Tax Laws Help De-Risk Your Deal

QSB 1202/1045 Exchange: Favorable Tax Treatment on Gains

• Profits from successful liquidity events can be re-invested pre-tax into new Qualified

Small Business

• C Corp domiciled in US, less than $50M in assets at the time of investment

• If investment held over 5 years, ½ of profits can be excluded from taxes

• Proceeds rolled over within the 5 year window can extend the holding period

Approx. 3x more $’s donated to charity than is invested in startups annually.

Tax Laws Help De-Risk Your Deal

Foundations Can Invest in Startups

• As long as the startup is pursuing a solution to a problem/cause consistent with the

foundation’s Mission Statement

• e.g., Family Foundation donating to Komen Foundation can invest in a startup

solving breast cancer

• PRI’s protect the Foundation Trustees from violating their fiduciary duty in investing in

otherwise risky ventures

• Investment does not run counter to the ‘prudent man rule’ trustees are required

to adhere to

If you have a meaningful ‘Why’, there is vas amounts of capital available that will

care about your success!

Program Related Investing

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MOTIVATIONS Understand Your ‘Why’