A Snapshot of Angel Investing

In America--------------------------------------------------------------------

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• Regional Economic Development

• Technology Transfer • Development Finance

• Entrepreneurship• Venture Capital • Capital Formation

For over 15 years, our team has provided specialized products, management and training to development associations and entrepreneurial networks relevant to our expertise:

Our services enhance our partners' efforts to:

• Commercialize new technologies • Attract capital for business development • Invest capital in entrepreneurial ventures • Build communities with development finance and advanced

business skills

Our offices are located throughout the US.

DCNteam.com

DCN HistoryYear Program Launched

1997 National Association of Seed and Venture Funds

2002 Latin American Venture Capital Association

2002 WBTshowcase

2005 Technology Commercialization Services

2010 WBTangels

Important Things for Entrepreneurs

to Know about Angel Investors

HAIL TO THE JOB CREATORS

From 1980 to 2005, firms less than five years old accounted

for all net job growth in the United States.

Business DynamicsStatistics Briefing: JobsCreated from BusinessStart-ups in the UnitedStates, January, 2009.

Companies Backed by American Angels

Why Angels Matter:More than Money

A really great angel helps an entrepreneur:

1. See around the corner

2. Gain a sober second opinion

3. Network with people who can help build the business

4. By being an ambassador

5. Gain credibility in a field

Source: David Pecaut, Boston Consulting Group, 9/06 NAO

Investigation Feasibility Development Introduction Growth Maturity

Proof of concept

Pre-Seed Seed &Start-up

Early

TIME

VALLEY OF DEATH

Government Sources

Friends & Family

Angel Investors IPO, Banks

Self

The Capital Lifecycle

First, Second, etc...

Venture Capital

Sources of Early Stage/ Seed Equity Capital

How are Angels Different?FriendsFamily

$25K-$100K

Not accreditedUnsophisticatedInvesting in a friendPassiveOnly one investment (<$5,000)

Angels100K-$1 M

AccreditedExpertise and personal moneyActiveInvesting in entrepreneurPortfolio of angel deals

Venture Funds$3 Million +

Limited partnershipInstitutional moneyGen. Partners activeInvest in companyLarge portfolio History of building companies

Equity Capital Markets Large & Complementary

2009 Angel Investmentsource: UNH CVR

Early

St

age

Lat

e

57,000 deals$17.6 B

Mostly early stageAvg.: $310K

2009 VC Investment

source: NVCA/PWC/VE

2,917 deals$18.25 B

Avg.: $ 6.26MMostly later stage

MONTANA

WYOMING

IDAHO

WASHINGTON

OREGON

NEVADA

UTAH

CALIFORNIA

ARIZONA

NORTH DAKOTA

SOUTH DAKOTA

NEBRASKA

COLORADO

NEW MEXICO

TEXAS

OKLAHOMA

KANSAS

ARKANSAS

LOUISIANA

MISSOURI

IOWA

MINNESOTA

WISCONSIN

ILLINOIS INDIANA

KENTUCKY

TENNESSEE

MISSALABAMA

GEORGIA

FLORIDA

SOUTHCAROLINA

NORTH CAROLINA

VIRGINIAWV

OHIO

MICHIGAN NEW YORK

PENN

MARYLAND

DELAWARE

NEWJERSEY

CONNRI

MASS

MAINE

VTNH

ALASKA

HAWAII

>100 deals

25-100 deals

< 25 deals

< 10 deals

VC Deals by State

Avg. Yr.

Who Are These Angels?• “Been there and done that” entrepreneurs• Roughly 400,000 active angels in the US• “The Millionaire Next Door”• Average age: 47• 9 out of 10 investments are devoted to

small, start-up firms with < 20 employees• Accept roughly 3 deals for every 10

considered • Average investment <$40K ($25K to $250K)

Myths: Angel Investing• Investments are large• Done mostly in the form of equity• Terms Sheets are detailed and

complicated• Investments result in IPO• There is a shortage of Angel

capital• Angels are very wealthy people• Angels are mostly retired

Shane, Scott A. Fool’s Gold: The Truth Behind Angel Investing in America. 2009, NY: Oxford University Press

Financially Successful Angel Investors…

• Are Accredited Investors (rather than “informal angels”)

• Have Experience …– Starting Companies– Investing in Start-ups– Working in the Industries in which they invest

• Are Highly Selective• Look for Financial Deal with High Returns• Do Not Overvalue Companies• Diversify their Early Stage Investments

Shane, Scott A. Fool’s Gold: The Truth Behind Angel Investing in America. 2009, NY: Oxford University Press

Achieving Liquidity

Why Do They Do It?• “Psychic income”• Social responsibility• Networking among peers• Affection for Entrepreneurs• Fun factor• Return on Investment - from

one’s own account

Growth of Angel Market

• Number of active angels: 400,000

• Number of Angel groups: 340• Angel investments totaled $8.5

billion across 25,200 ventures in the first half of 2010

• Some states have enacted tax breaks for angel investors

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Growth in Number of American Angel Groups

Sector Activity

58% of 2011 angel group investments are in healthcare and internet.

60% of healthcare deals were in medical device & equipment companies.

Premise on Angel Groups• Creating new class of investor

– Entrepreneur-friendly– Developing sophistication/ excellent processes– Growing geographic diversity

• Market efficiencies developing– Entrepreneurs can locate more easily– Investors get better quality deal flow, while individuals maintain anonymity– Building partnerships w/ other angel groups & VC community for follow-on funding

• Beginning to close capital gap

Networks vs. Funds

Angel Networks

• More informal (e.g., dinner club)

• Individual decision-making

• Tend to be member-led

• Deal-making outside

Angel Funds

• More structured

• Group decision-making

• Can be member-led or manager-led

• Deal-making inside

Member-led vs. Manager-led

Member-led

• Share the work: finding, vetting, pricing, negotiating

• Relies on camaraderie• Leadership is elected• Admin tasks by

volunteers• Member involvement

can wane

Manager-led

• Manager does the work

• Relies on Manager• Leadership is

employed• Admin tasks by

Manager• Member involvement

can wane

New Approach - Facilitated

• Member-led but professionally-facilitated & administered

• Supports member-led collaboration with a more intentional approach

• Builds knowledge and skill

• Sustains long-term viability

WBTangels

www.wbtangels.com

Role of Facilitator

• Help the Fund Get Organized• Facilitate the Investment Process

– Methods and Disciplines

• Support Logistics– Communications, Website

– Administrative Services

– Templates

• Facilitate Network Linkages– Technology

– Capital

Recap:Characteristics of

Angel Investors• Business Builders• Prosperous• Give Back to Young

Entrepreneurs• Spend Time• Contribute Knowledge

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The Task of a Regional Economic Development

Strategy

is to Build an Entrepreneurial

Ecosystem

CommercializingOklahoma

Technology and Research

through

university-connected

angel funds

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Thank You

Jim TroxelTeam Leader

WBTangels, a unit ofDevelopment Capital Networks, LLC

jtroxel@dcnteam.com