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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

Copyright 2011 - Ariel Southeast Angel Partners, LLC - V12


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

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

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

Copyright 2011 - Ariel Southeast Angel Partners, LLC - V12


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.

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The Money Supply Chain

Self

Friends & Family

Grants, Micro Finance Credit Cards

ANGELS

Venture Capital, Partnerships, Licensing, Merger, Buy-out IPO’s

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

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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

Copyright 2011 - Ariel Southeast Angel Partners, LLC - V12


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

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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

Copyright 2011 - Ariel Southeast Angel Partners, LLC - V12


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

Copyright 2011 - Ariel Southeast Angel Partners, LLC - V12


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

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Copyright 2011 - Ariel Southeast Angel Partners, LLC - V12


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

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Copyright 2011 - Ariel Southeast Angel Partners, LLC - V12


Relationships Southeast Angel Capital Groups

Deal Sharing and Syndication

Angel Capital Association

Ariel Southeast Angel Partners (ASAP) Members

Sponsors Entrepreneurs

Incubators

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

Cultivation

•Screening •Presentations •Business stimulation •Market research

Mentoring

•Board Members •Advisors •Market tracking •Observing

Copyright 2011 - Ariel Southeast Angel Partners, LLC - V12


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

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Sorting the Deals The Deal process Detailed Evaluation

Deals Submitted 100 Quick Reads

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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

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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

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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

Copyright 2011 - Ariel Southeast Angel Partners, LLC - V12


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

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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

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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

Copyright 2011 - Ariel Southeast Angel Partners, LLC - V12


Some of the ASAP Portfolio Advanced Liquid Logic Inc.

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Copyright 2011 - Ariel Southeast Angel Partners, LLC - V12


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

Copyright 2011 - Ariel Southeast Angel Partners, LLC - V12


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

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Angel Investing Powerpoint