How to Pitch to Angels

DonMorrisonChairmanofDealFlowBlueTreeAlliedAngels

AccidentalRetailer

RecoveringEntrepreneur

How to Pitch to Angels Beforeyoucanbegintoputyourpitchtogether,itisimportanttounderstand:•  Whoangelsare•  Thefundingprocess•  Angelsplaceinthefundinglandscape

Who are Angel Investors? •  O6ensuccessfulentrepreneursorre7red

professionals•  Accreditedinvestors–SECdefini7on•  Investtheirownmoney(notmoney

managers)•  Generallyinvestinlocalcompanies•  Investinbusinessesnotrunbyfamilies•  Investindividuallyoraspartofanangelgroup

Why Angel Groups? •  ThePowerofAggrega7on• Mi7gateRisk•  HigherQualityDealFlow•  GreaterInvestmentClout•  PorNolioManagement

Advantage of Angel Groups for Entrepreneurs

•  Diversifiedbusinessexperience•  Extensiveindustrycontacts•  Opportuni7estosyndicate

Growth in Number of Angel Groups

Sources: Center for Venture Research (pre 03 data) and Kauffman Foundation/ARI (04-13 data)

050

100150200

250300350

400

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

The Funding Landscape

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TechnologyDiscovery

Proof-ofConcept

IniEalDesign

Develop&Test

Build&Deliver

Pre-seedFunding

SeedFunding

ExpansionMezzanine

OperaEng&Growth

Start-upFunding

$25K$100K$500K$2M$10M$50M

$100K$500K $2M$10M$75M$250M

Company - Product

Stage

ScaleUp

FundingStage

Friends&Family

SeedFunds

VentureFunds

Founder

InsEtuEonalEquity

Loans/BondsGov.EconomicDev.

SBIRPhase1&2

IndividualAngels

AngelGroups

Sourceof

Funding

InvestmentNeeded

CompanyValuaEon

BusinessIncubators

Angels Fund Majority of Startups in USA

Sources: Center for Venture Research/ UNH; NVCA 2014 Yearbook; PwC MoneyTree

• $24.8billion• 71,000deals• 32,000seed• 29,000earlystage• 9,200expansion• >298,000individuals

AngelInvestors(2013)• $29.6billion• 4,050deals• 120seed• 1,375earlystage• 2,550later/expansion• 548ac7vefirms

VentureCapital(2013)AngelsProvide~90%ofOutsideEquityforStartups

Angels Fund Nearly All Seed/Early-Stage Deals…

Without angels few startups would make it to VC, PE or IPO funding

VCTotal=1,495

AngelTotal=61,000

Number of Deals in 2013: Angel Investment and Venture Capital

Source: Jeffrey E. Sohl, Center for Venture Research and 2013 NVCA Yearbook

32,00029,000

9,200

1201,375

2,550

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Startup/Seed EarlyStage Expansion/Later

VentureCapital

AngelInvestment

Telling Your Story (Elements of the Pitch)

Togetfunded,entrepreneursneedtotellacompellingstory.Yourstory,or“pitch”,mustcontainseveralimportantelements:•  Product/Service•  Market•  BusinessPlan•  Sales&Marke7ng•  Financials•  ManagementTeam•  Exitstrategy 10

Product or Service (Elements of the Pitch)

Yourproductslidesshouldexplainwhat“problem”or“pain”youareaddressing:•  Howbigistheproblem?•  Whoisyourtargetcustomer?•  Whoareyourcompe7tors?•  Whatisyourproductdifferen7a7onorcompe77veadvantage?Howdoesitwork?

•  Whatisyourvalueproposi7on?•  Whatarethebarrierstoentry?(Patents,tradesecrets)

•  Whataretherisks?(Technology,regulatory) 11

Market (Elements of the Pitch)

YoushouldaddressthefollowingquesEonsaboutthemarketforyourproduct:•  Whatisthetotalmarketsize?•  Whatistheaddressablemarketsizeforyourproduct?

•  Whatistheprojectedmarketgrowth?•  What%ofmarketsharewillyouhavein5years?

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Business Plan (Elements of the Pitch)

YourBusinessPlanslidesshouldaddress:•  Whatisyourrevenuemodel?•  Whatassump7onsareyoumakingregarding:•  Pricingandmargin?•  SG&A?•  Supplychain?

•  Howwillyouscale?•  Whatisthelong-termprospectforproductormarket

extension?

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Sales & Marketing (Elements of the Pitch)

EventhebestideasgonowherewithoutasoundsalesandmarkeEngstrategy.YourSales&MarkeEngslidesshouldaddress:•  Gotomarketstrategy:•  Directsales?•  ChannelPartners?•  Licensing?

•  Costofcustomeracquisi7on?•  Lengthofsalescycle?•  RegulatoryDrivers(orBarriers)?

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Financials (Elements of the Pitch)

Aspartofthestory,theFinancialsshouldconvey:•  5YearP&LProjec7on

•  Revenue•  Expenses•  EBITDA

•  Howlongandhowmuchwillittaketogettobreakeven?

•  Howmuchareyouraskingfor?•  Useoffunds•  Howmuchhaveyouraisedtodate?•  Howmuchaddi7onalcapitalwillyouneed?•  PMV?

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Management Team (Elements of the Pitch)

YoumusttalkabouttheteamthatwillberesponsibleforexecuEngthebusinessstrategy.

YourManagementTeamslideshouldaddress:•  WhatistheCEO’sstart-upexperience?•  Whoaretheotherkeymanagementteammembersandwhatistheirexperience?

•  Istheteambalanced?•  Whoisonthecompany’sboardofadvisors/directors?

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Exit Strategy (Elements of the Pitch)

Everyinvestorwanttoknowhowtheymightgettheirinvestmentback.ThistypicallyhappensbywayofanacquisiEonormorerarelyviaanIPO.YourExitStrategyshouldaddress:•  Whomightacquireyou?•  Whatothercompanieshavebeenacquiredinthisspace?

•  Whatweretheexitmul7ples?(EBITDA,revenue)•  Howlongwillyoutaketoexit?

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The Pitch

HerearesomeEpsonpresenEnganeffecEvepitch:

•  Planona20Minutepitch•  Prac7ce,prac7ce,prac7ce•  “Lessismore”onyourslides•  Avoidthe“beau7fulbabysyndrome”•  Getfeedbackbeforeanda6er•  Beexcitedandpassionate

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Information, Resources, and Support

•  KauffmanFoundaEonwww.eventuring.com•  AngelCapitalAssociaEonwww.angelcapitaleduca7on.org

•  Books– EarlyExitsbyBasilPeters– TermSheets&ValuaEonbyAlexWilmerding– TheArtoftheStartbyGuyKawasaki

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TheWiltonE.ScoqIns7tuteforEnergyInnova7onatCarnegieMellonUniversityisfocusedonusinganddeliveringtheenergywealreadyhavemoreefficiently;expandingthemixofenergysourcesinawaythatisclean,reliable,affordableandsustainable;andcrea7nginnova7onsinenergytechnologies,regula7onsandpolicies.TheCenterworkswithitspartnerstoservetheen7reCMUcommunity—departments,colleges,centersandcampuses—toacceleratebringingresearchinnova7onsandpromisingideastotheglobalmarketplaceandhelpingallentrepreneurialstudents,faculty,staffandalumnitapintothe'innova7onecosystem.ProjectOlympusencouragesandsupportentrepreneurshiponcampusbyhelpingfacultyandstudentsturntheircuvng-edgeresearchandgreatideasintostartups.