25 January, 2011
Angel GroupsDriving Future Innovation
Niagara Venture Forum & Niagara Angel Network
Randall HowardGeneral Partner, VERDEXUS
Board member & Chair Selection, Golden Triangle Angelnet
VERDEXUS © 2010 2
Agenda: Vision of Angels
“Angel Networks are bridging an unprecedented
funding gap to accelerate innovative young
companies”
Who Is Randall? And why am I qualified to discuss this?
Where does Angel investing fit in?
Where has all the Venture Capital gone?
How is Angel syndication is filling the “Series A” gap?
What are the benefits of Angel investing?
What has been our experience with GTAN in Waterloo-Wellington?
Questions: responding to your needs“A person starts dying when they stop dreaming”
Brian Williams
VERDEXUS © 2011 3
Who is Randall? Why Should I Listen?
A passionate technologist & entrepreneurial serial executive
Who loves to build – innovative products and companies:
Directly involved with building a dozen technology based products
Involved with building a half dozen companies + 8 acquisitions
Involving lifetime revenues of almost $½ billion, millions of users
Now, with partners at Verdexus, investing using hands-on,
“Venture 2.0” playbook:
To date have raised or funded $80 Million of VC, IPO and/or Angel investment
Yet, it’s not all about me. It’s about assembling and empowering great
teams
And, by the way, I’ve made $10 million of mistakes
“Making the impossible, merely difficult”
Randall Howard
VERDEXUS © 2010 4
Where Does Angel Investing Fit In?
In order of increasing structure:Own money, friends & family and bootstrappingAlternatives to conventional investment:
Government programs – e.g. IRAP, HRDCCustomer funding – consulting, funded developmentPartnerships (e.g. Microsoft BizSpark), incubators, EIRs
Angels/high net worth (incl. Angel Networks)Institutional (highly structured):
Venture capital and private equityIPO and public marketsStrategic investors and corporate venturing
5
Where Does Angel Investing Fit In?
VERDEXUS © 2010, 2011
*Source: Paul Connor, National Angel Capital Organization (NACO)
6
Where Has the Venture Capital Gone?
Precipitous drop in Ontario VC fundingfrom $179 m Q3/2008 to $24m Q3/2009Extinction after 10 year decline/low returns:
LSIF model – distorted market, then policy reversalWrong balance of operational vs financial skillsFew LPs, even fewer global, chasing small asset class
Healthier globally (US/Europe), yet issues there too:Average US financings 2.5x larger than in OntarioIn Silicon Valley – “Series B is new Series A”
Current depressing situation: Ontario lagging world in funding innovative startups
VERDEXUS © 2010“Constraints breed creativity”
Sergey Brin, Google
7
How is Angel Syndication Filling the Gap
Angel Syndicates:GTAN: $200K-$500K per funding (& sometimes more)
Typically 5-7 investors (and up to 15)Individual investors range $25K to $200K
Syndication with 7+ other Ontario NACO groups:Remains an ad hoc process
Government and institutional:Fed Dev Ontario Investing in Business InnovationOETF, IAF, OCE CCER, BDC all aligning w Angels
VERDEXUS © 2011“Entrepreneur …has no safety net underneath
them”Henry Kravis
8
How is Angel Syndication Filling the Gap
Angel syndication = “Series A Replacement”Series A traditionally $3-5 million (or more)Example super-syndicated Angel Round $1-1.5 million
$500K Angel - typically in tranches & 5-10 individual angels$500K IAF – structure, tranching & diligence led by Angel T/SUp to $500K FedDev IBI + other government sourcesVersus Series A: 30-50% deal size with up to 10x the effort
Risk is co-leveraged with less dilution:Angel syndicate leaders are the unpaid centreFunding legal, accounting, etc. more challenging
VERDEXUS © 2011“Entrepreneur …has no safety net underneath
them”Henry Kravis
VERDEXUS © 2010 9
What are the Benefits of Angel Investing?
Benefits to the Investor:Collegial collaboration of talented investors in Angel networksDirect involvement in company, mentoring to help it achieve goalsMedium and long term financial rewards via exits, etc.
Benefits to the Company:Value add of smart, passionate people who can make a differenceA longer term mindset than many institutional alternatives
Benefits to the regional (& provincial) Economy:Innovative startups are the future economic engineSignificantly more job creation multipliers than alternatives
VERDEXUS © 2010 10
What is the GTAN Experience?
Key success factors:Select great companies, focus on Waterloo-WellingtonRecruit many “accredited investor” membersFocus on getting deals done with strong lead investorUltimately achieve exits to make cycle compelte
Process:>150 companies w 75 at Selection & 46 allowed to present to members10 meetings p.a. (15 so far) & 3 companies per meeting (46 so far)Investors versus “service providers” at meetings; “who’s in?”
Results: 50 members, on way to 100, 10 deals done
VERDEXUS © 2010 11
Agnel Networks – 3 Take-aways
1.
2.
3.
VERDEXUS © 2011 12
Questions?
“Turbulent times may well be the best time for an entrepreneur to start a new business”
Contact: [email protected]: http://slideshare.net/verdexus
Top Related