UnderstandingAngel Investor

GroupsHow to Play the Game

The League

The Players

Paul Neeb,First Angels

Kalamazoo, Mich.

Ken Kousky,Bluewater Angels

Midland, Mich.

Loïc Couraud,Capital Community Angels

East Lansing, Mich.

The Game• Deals & Business Plans• Filtering & Screening• Initial Selection• Validation & Due Diligence• Negotiation • Investment (1st Cycle)• Monitoring & Nurturing• Follow-on Investment • Payoff

Get Deals, Business

Plans

Filtering Deals and

Plans

Interested in

Investment

Validate Business for Investment

Negotiate Terms of

Investment

Investment(1st Cycle)

Monitor and Nurture Business

Follow-on Investment

Payoff

Get Deals Business Plans

• Online– Angelsoft.net– Company web presence

• Events– Universities– PR Campaigns

• References– Member contacts– Entrepreneurial Support

Organizations

,

Filtering Deals Plans

• Quick Initial Review – 5 minute look– Executive Summaries!

• Venture-backable?– i.e. Fit for Angel

investment model– Not lifestyle business

• Group’s preferences– Industry Considerations– Regional Considerations

,

Filtering Deals Plans

• Business (50%)– What product/service?– What benefits to target

market?– What are competitors? – Marketing strategy?– Stage of development?– Scalability?– Barriers to entry? Long term

competitive advantages?– Intellectual Property?

• Entrepreneur (50%)– Phone meeting– Live meeting

,

Interest in Investment

• Members’ Meetings– 30 Minute Presentations

by Entrepreneurs– Discuss with Members– Call for a Champion– Form Committee to

Perform “Due Diligence”• Definition: An audit or

investigation of a potential investment.

Validate Business for Investment

• Verify Business Plan– Check Sources– Estimate Optimism of

Predictions– Verify Conclusions

• Due Diligence Checklists– Angelsoft.net – Angel Capital Association

• Risk Assessment– Development Risk– Manufacturing Risk– Marketing Risk– Management Risk– Growth Risk

• 100+ Hour Process

Negotiate Terms of Investment

• Funding Negotiation Converges with Final Due Diligence

• Outside Legal Help Brought In

Funds Released

• Milestone-Based• Majority Control

Required for Most Deals

Monitor and Nurture

• One Board-Seat Reserved for Angel Group Member

• Use Network and Experience to Support Management

Follow On Investment

• Milestone-Based• Make Investment

Attractive for Purchase or VC-Backing

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Payoff

• Sell Company to a Bigger Company

• Recently Less Focus on IPOs

Candy Castle