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Do Angels Make Money?
Do Angels Make Money?
Angel Data Shows 2.5x Returns Overall Source: Kauffman Foundation, NESTA (a UK-based entrepreneurship foundation), the University of Washington, and Willamette University Really, they do
Survey Says Angel investors’ internal rate of return (IRR) is between 18 and 38 percent…
Any ONE investment is likely to lose money. 6 investments increases the chances of a return greater than 1X. But, there is a catch
Your Active Bring Something to the Table Build a Portfolio Differentiate
Kaufman studies have shown that active investors are 3x more likely to realize a return than passive investors. Being Active
When you add value… What is active?
Domain expertise Hiring better talent Acquiring more customers Developing greater operational expertise Introductions to industry players or follow on investments Adding Value
Bring Something to the Table
Can you help this business scale faster & smarter? Why you?
How can you actually differentiate? Sell something else, of course. The Business Angel
Your expertise, Your portfolio’s network effect, Your history of success, or…. Sell your personal brand
Focus on a specific sector and stage of investment… Focus
Early stage startup versus a growth-stage business ready to scale. Challenges will be different. Market opportunities will be different. Expertise gaps will be different. Different Needs
Deliver relevant insights, ideas and advice. Identify opportunities within the niche. Create a team capable of delivering on those opportunities. Deliver
To develop a portfolio strategy Rinse & Repeat
Build a Portfolio
Do You Have the Money? Portfolio of 10 Deals Initial investment - 10 x 50,000 = 500,000 Dry powder – 10 x 25,000 = 250,000 Investment Pool 750,000
Do You Have the Deal Flow? Angel Clubs Online – AngelsList, Gust, Angels Den Personal Network
Do You Have Selection Intelligence? Do Your Homework - Each investment has to be done as though it’s your only one.
Term Sheet Basics Valuation considerations Securing the opportunity to invest further in their winners Protecting yourself from being diluted if a company begins to falter The connection between the term sheet and an investor's control over a company
Do You Have a Team? Legal – Don’t know what a drag along right is? Get Help Financial – Tax Credits, Capital Gains Others – Governance, Technical or Operations
Can You Make Introductions? Mentors, Vendors, Personnel Other Investors – Can you help raise the next round? Introductions to their first customer or strategic partner Help find an exit
Your founders will Build better companies, Have more successful exits. If Yes, then…