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Angel Investing

Add by Max Semenchuk | Jun 13, 2017 09:46  42 |  0
Angel Investing
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Angel Investing
1 1 Basics
1.1 25% of annual return
1.1.1 Long-term view (years)
1.1.2 Strong economic base and ability to tolerate losses
1.1.3 Hight tolerance for risk & failure
1.1.4 Even temperament
1.1.5 Strong people skills (to deal with Type-A entrepreneur)
1.1.6 Self-discipline
1.1.7 Willingness to learn
1.1.8 General love and respect for entrepreneurs and startups
1.2 Nonfinancial Rewards
1.2.1 Keeping Up with the World
1.2.2 Social Influence
1.2.3 Personal Perks
1.2.4 Good company
1.2.5 Mentoring
1.3 Angel Portfolio Theory
1.3.1 Most startups fail
1.3.2 No one knows which startups are NOT going to Fail
1.3.3 Investing in Startups is a numbers game
1.3.4 J curve
1.3.5 All comanies need more money
1.4 The financial fit in startup life
1.4.1 1. Own money
1.4.2 2. FFF
1.4.3 3. Start Fundraising
1.4.4 4. Apply to Accelerator
1.4.5 5. Enter the angels
1.4.6 6. VC series A
1.4.7 7. Growth B+
2 2 Nuts & Bolts
2.1 Develop your deal flow
2.1.1 Personal connections
2.1.2 Angel Groups
2.1.3 Meetups
2.1.4 Business Plan Competitions
2.1.5 Startup Conferences
2.1.6 Accelerator Demo Days
2.1.7 Online Deal Sources
2.1.8 Deal Brokers
2.2 Bet the jockey not the horse
2.2.1 Integrity
2.2.2 Passion
2.2.3 Startup Experience
2.2.4 Domain Expertise
2.2.5 Operating Skills
2.2.6 Leadership ability
2.2.7 Commitment to the venture
2.2.8 Long-term vision
2.2.9 Realism and pragmatism
2.2.10 Flexibility
2.3 want to know answers
2.3.1 How much energy does the entrepreneur have?
2.3.2 How technologically up to date is the entrepreneur?
2.3.3 Can he put in the 24/ 7 work day I expect from my CEOs?
2.3.4 How much of a meaningful cash commitment has been made?
2.3.5 How much of a salary does she expect during startup time?
2.3.6 How willing is the entrepreneur to take advice?
2.3.7 How much optimism and enthusiasm do I see?
2.3.8 What does the previous life/ work/ startup experience show?
2.3.9 What do I learn when checking personal references?
2.4 Listening to the pitches
2.4.1 Is the game worth the candle?
2.4.2 Is operating plan realistic?
2.4.3 Is revenue plan realistic?
2.4.4 How much more capital before breakeven?
2.4.5 What do the margins look like?
2.4.6 How does budget compare to industry?
2.5 Lead a deal
2.5.1 Get Due Dilligence Materials
2.5.2 if spend >20 hrs – chances are way better
2.5.3 funding
2.5.4 validation
2.5.5 negotiation
2.5.6 Sherpa-ing
2.5.7 Cheerleading
2.5.8 Mediating
2.5.9 Communicating
2.6 Expexctations
2.6.1 IRR – internal rate of return
2.6.2 not more than 10% of free annual cash
2.6.3 minimum 20-25 companies
2.6.4 5 year, 4-5 deals per year
2.6.5 50% reserve for the follow up
2.6.6 so 500k fund (of 5M) = $13k initial x 25 comps + follow ups
2.6.7 average is $25 / angel incl. follow ups
2.6.8 avg. return is 2.6x in 3.5 years (27% IRR)
2.7 Valuation
2.7.1 Scorecard method: multiplier by norm x $1,5M av. price
2.7.2 VC method: postmoney val = terminal value / anticipated ROI
2.7.3 Dave Berkus Method
2.7.3.1 premoney + $0.5M for management team;sound idea; working ptototype; board; sales
2.7.4 Cayenne Valuation Calculator
2.7.4.1 http://www.caycon.com/valuation.php
2.7.5 The Risk-Factor Summation Method
2.7.5.1 Management risk, Legislation risk, manufacturing risk etc
2.7.5.2 score -2, -1, 0, +1, +2
2.7.5.3 +$250k per point
2.7.6 use at least 3 at once
2.7.7 scorecard is the best in authors opinion
2.7.8 out of 10: 5 fail completely, 2 get back same money, 2 x2-3, 1 x30
2.7.9 invest in 1.5M, typical acquisition 30-50M
2.7.10 invest at reasonable amount in 1-digit M to gain strong returns
2.8 stock class
2.8.1 common (founders stock)
2.8.2 preffered stock
2.8.3 discounted convertible note
2.8.4 Y-Combinator SAFE
2.8.5 simple debt
2.9 Negotiating Win-Win
2.9.1 Integrity first
2.9.2 Relative power position
2.9.3 Shareholders' agreement controls seats on board
2.9.4 equity not= control
2.10 Term Sheets
2.10.1 there're various templates from Gust, NVCA etc
2.11 Exits and Unicorns
2.11.1 Unicorns 0.1%
2.11.2 20-35% Acquisition / Acqui-hire
2.11.3 ~50 goes out of business
3 3 Your Place in the World of Angels
3.1 Fin Ecosystem
3.1.1 Goverment Grants
3.1.2 Economic Development Agencies
3.1.3 BizPlan Competition
3.1.4 Accelerators
3.1.5 Funding Platforms
3.1.6 Intermediaries
3.1.7 Super Angels
3.1.8 Angel groups
3.1.9 Venture Funds
3.1.10 Venture Debt Lenders
3.1.11 Private Equity
3.1.12 Corporate Venture Groups
3.2 Building the Reputation
3.2.1 Create profiles
3.2.2 Write blog
3.2.3 Answer questions online
3.3 Joining the angel group
3.4 Impact investing
3.5 Invest through seed and VC funds
3.6 Crowdfunding

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