Angel Investing Powerpoint by College Hill Alliance

Angel Investing and Ariel Southeast Angel Partners, LLC. Opportunities, Risk Management and Entrepreneurial Development Raymond Wenig President and Chief Operating Officer Ariel Southeast Angel Partners, LLC

rpwenig@gmail.com

www.savannahangelpartners.com 1

Brief History of Southeast Angel Partners  Started in 2005 with a team of 8 interested

investors  2005/2006 promote the concept and gather members  2006 merge Savannah and Hilton Head startup ANGEL groups  Achieve critical mass (25 members)

 Late 2006/2007 Begin deal processing & investing  2008 refine processes grow members  2011 change name to Ariel Southeast Angel

Partners to reflect area served 2

Angel Investing  Angels = supporters & investors  Active participation, advising,

mentoring  High Impact entrepreneurial ventures  Board or advisory group involvement  Multi-round funding support 3

Angel Investor Types  Independent Angels = may do the

whole deal (Warren Buffet)  Angel syndicates = 5-10 angels share a deal (Movies, Music, Arts)  Angel groups = smaller investors with several hundred often networked together  Small units, many people = significant

capital  50 investors @ $5,000 = $250,000.

The Money Supply Chain

Self

Friends & Family

Grants, Micro Finance Credit Cards

ANGELS

Venture Capital, Partnerships, Licensing, Merger, Buy-out IPOâ&#x20AC;&#x2122;s

Idea ------Proof Concept----Prototype----Customers/Revenue----Cash Flow Positive ---SEED Stage ---------START UP -------- EARLY-------------EXPANSION----LATER

WHY Angel Capital??  Filling a funding gap for Startups with

temporary capital for equity investment  Angels use various exit strategies:  handing-off to other capital resources  buy-outs, mergers & acquisitions  IPO’s are returning as a possibility

 Risks are higher so returns must also be

higher (5-10-100 X) or 20-30-80 % return  Typically 3 to 7 years for an Angel investment to reach exit (National average 3.5 years to achieve 2.6X returns)  Equals 31+% Return 6

Angel Groups  Over 300 Angel Capital Groups in

North America  Local/regional focus on companies & investments  See, touch, feel, advise, track the investment

 Collective cooperation and networking

between groups

 Syndication of deals

 27 groups in Southeast Region of the

Angel Capital Association (ACA) 

GA = 4, SC = 3, FL = 5, NC = 4, +++

 www.angelcapitalassociation.org  Most Angel groups focus on ventures

that match their member knowledge

Types of Angel Groups  Network / pledge model  Each member decides on each deal and invests with

their check.  Group consolidates $$ and invests as a single entity

 Fund Model  Members commit fixed amounts of capital in advance

 Management selects deals with member voting  Allocate $$ to deals with time limits

 HYBRID = Network + Sidecar Fund  Active members vote on deals and subscribe  Fund members vote to allocate $ to network selected

deals

 Angel groups can be for profit or not for profit 8

Angel Group Variations  Most are independent groups – member

subscription based  Some groups are part of an Economic Development initiative  BizTech Huntsville, AL

 Some are Quasi Government  SC Launch - SCRA

 Some are focused on specialty interests  College/University Alumni

 Health Sciences Angels

 Some reflect special communities  Minority Group Investors investing in Minority

Entrepreneurs (3) 9

ANGELS – 2010 Results  Report from the CENTER for

VENTURE RESEARCH – University of New Hampshire  265,400 individual angel investors  61,900 Ventures received angel funding  $20.1 Billion invested – UP 14%  18.4% of applying ventures received

investments

 370,000 new JOBS created  6 jobs per venture

Angels Similar to “Investment Clubs”  Differences:

 Similarities: Reviews Due Due Diligence Diligence Investment Club Group Decisions

Personal Investing

 Higher Risk Situations  Non-public Companies  More time required  Structured EQUITY Investments  Differing types  Convertible Preferred  Some convertible NOTES  Dilution Protection  Exit Preferences  Proactive Involvement  Active advising

Relationships Southeast Angel Capital Groups

Deal Sharing and Syndication

Angel Capital Association

Ariel Southeast Angel Partners (ASAP) Members

Sponsors Entrepreneurs

Incubators

•STI •ATDC •LCBI •Midlands Tech •USC-BI •SC Launch

Cultivation

•Screening •Presentations •Business stimulation •Market research

Mentoring

•Board Members •Advisors •Market tracking •Observing

Locating Deals  Members inputs, contacts and pursuits  Local contacts via our website  www.savannahangelpartners.com  Internet capital connectors 

GUST, BreadStreet , Angel List etc.

 Networking from other Angel groups 

Monthly communications - ANGELpool

 Business development connections  

SCORE/SBA/HUB/Chambers of Commerce Economic development organizations

 Venture forums, Regional business plan competitions,

brokers, Venture Capital groups, etc. 13

Sorting the Deals The Deal process Detailed Evaluation

Deals Submitted 100 Quick Reads

Pass Detailed Pass Pass Receive Screening Member Pass Initial Due Funding 25 Meetings Screening Diligence 6 18 40 9 Screening Member Money Review and Rate Presentation Presentation Transfer

Timing = A deliberate, methodical process  A structured process done by

trained member volunteers:  Screening = 30 – 60 days  Member meeting = 30 days  Due diligence = 30 – 60 days

 Funding = 30 – 60 days  EXITing = 3 – 5 - 7+ years

 SLOW ROASTING like  GRANTS  Bank Loans  Patents  Customer sales cycles 15

Due Diligence  Detailed Evaluation and Scoring –

Use ACA Best practices:         

    16

CEO Competency & Experience Marketing Initiatives Deal Terms & Pricing Management Capabilities Competition & Competitive Advantage Market Opportunity Business Plans/Financials Product-Service Attractiveness Intellectual Property Legal Exit Strategy Investor Base Overall assessment of opportunity Copyright 2011 - Ariel Southeast Angel Partners, LLC - V12

Proactive Member Participation  Angel groups are membership based  Most follow the SEC accredited investors rule

 Member committees do screening and deal

selection for member review  Members review deals & vote to go to due diligence  Volunteer teams do the due diligence and make formal reports & recommendations  Individual funding or passing on any member voted deals ($5,000 increments)  Can raise $50K - $500K plus multi-group

syndication 17

Members Are the Key  Members are our KEY focus  Professionals – active and semi-retired o o o o o o o o

Executives Scientists/Engineers Consultants Developers Entrepreneurs/technologists Accountants/Lawyers Financial advisors Educators

 Friendly, active, interesting group  Always learning new ideas, innovations, leading edge

 Monthly meetings – interesting & interactive  Spouses welcome as a member teammate

 Regular communications: e-newsletter, deal reports, Internet

Member Time & Involvement  Member training is provided:  New member handbook  Due Diligence  Valuation, Term sheets  Post investment relationships

 Time involvement is variable and

optional  Meetings, some reading and active decision

making  Team efforts – perform what’s reasonable & comfortable

 Keep it enjoyable, interesting & FUN 19

ASAP Portfolio  Investments from Six years of

activity: (20 Companies)  Health/Life Sciences = 10  BioTech = 2  Specialty Products = 3  Software/Digital Media = 2  Accelerator = 1  Consumer products = 2

 >$4 million invested  Over 100 NEW jobs created  3 exits  6 new additions in 2011 20

Some of the ASAP Portfolio Advanced Liquid Logic Inc.

Ariel Southeast Angel Partners  Formed 2005 – HHAP merged in 2006  50+ members

 Dues = $1500 per year membership = 

  

  22

$125/month Dues treated as a “capital contribution” on K-1. Portfolio of 18 active companies 6 – 8 new deals per year Leader in syndication & ACA support Portfolio of small investments in high risk – high potential deals Working proactively for tax incentives for Angel investing – (GA, SC, National) Copyright 2011 - Ariel Southeast Angel Partners, LLC - V12

Follow-On Opportunities  Consider membership in ASAP or start a group  Learn more about Angel Investing:  www.angelcapitalassociation.org  Directing prospective entrepreneurial companies to

Angel groups  Follow our progress on:  www.savannahangelpartners.com

 Arrange to visit a member meeting as a guest  Contact rpwenig@gmail.com

 Track the growth of Angel Investing  Call with any questions: Ray Wenig 843-342-9642  Thank you for your time and attention. 23

Starting an ANGEL group  Assess the interest and commitment level  Establish a “leadership team”

 Identify a core of active participants (25-35)

 Review the local space for deals and

entrepreneurs  Identify some likely industry clusters

 Promote the concept (ACA Help)  Seminars & open meetings

 Set format and procedures  Recruit charter members  Trial presentations of deals 24