June 13, 2017
25% of annual return
Long-term view (years)
Strong economic base and ability to tolerate losses
Hight tolerance for risk & failure
Strong people skills (to deal with Type-A entrepreneur)
Willingness to learn
General love and respect for entrepreneurs and startups
Keeping Up with the World
Angel Portfolio Theory
Most startups fail
No one knows which startups are NOT going to Fail
Investing in Startups is a numbers game
All comanies need more money
The financial fit in startup life
1. Own money
3. Start Fundraising
4. Apply to Accelerator
5. Enter the angels
6. VC series A
7. Growth B+
2 Nuts & Bolts
Develop your deal flow
Business Plan Competitions
Accelerator Demo Days
Online Deal Sources
Bet the jockey not the horse
Commitment to the venture
Realism and pragmatism
want to know answers
How much energy does the entrepreneur have?
How technologically up to date is the entrepreneur?
Can he put in the 24/ 7 work day I expect from my CEOs?
How much of a meaningful cash commitment has been made?
How much of a salary does she expect during startup time?
How willing is the entrepreneur to take advice?
How much optimism and enthusiasm do I see?
What does the previous life/ work/ startup experience show?
What do I learn when checking personal references?
Listening to the pitches
Is the game worth the candle?
Is operating plan realistic?
Is revenue plan realistic?
How much more capital before breakeven?
What do the margins look like?
How does budget compare to industry?
Lead a deal
Get Due Dilligence Materials
if spend >20 hrs – chances are way better
IRR – internal rate of return
not more than 10% of free annual cash
minimum 20-25 companies
5 year, 4-5 deals per year
50% reserve for the follow up
so 500k fund (of 5M) = $13k initial x 25 comps + follow ups
average is $25 / angel incl. follow ups
avg. return is 2.6x in 3.5 years (27% IRR)
Scorecard method: multiplier by norm x $1,5M av. price
VC method: postmoney val = terminal value / anticipated ROI
Dave Berkus Method
premoney + $0.5M for management team;sound idea; working ptototype; board; sales
Cayenne Valuation Calculator
The Risk-Factor Summation Method
Management risk, Legislation risk, manufacturing risk etc
score -2, -1, 0, +1, +2
+$250k per point
use at least 3 at once
scorecard is the best in authors opinion
out of 10: 5 fail completely, 2 get back same money, 2 x2-3, 1 x30
invest in 1.5M, typical acquisition 30-50M
invest at reasonable amount in 1-digit M to gain strong returns
common (founders stock)
discounted convertible note
Relative power position
Shareholders' agreement controls seats on board
equity not= control
there're various templates from Gust, NVCA etc
Exits and Unicorns
20-35% Acquisition / Acqui-hire
~50 goes out of business
3 Your Place in the World of Angels
Economic Development Agencies
Venture Debt Lenders
Corporate Venture Groups
Building the Reputation
Answer questions online
Joining the angel group
Invest through seed and VC funds
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