Table of Contents1.Is there a Bubble?2.Emerging Opportunities3.What do Angels Look For in A Startup?4.NDAs-Why they hurt you5.Counter Intuition6.Q+A

Jeff CarterThought leader. Co-Founded Hyde Park Angels in April 2007 (Angel #1), the Midwest’s leading angel group. Helped start other angel groups.

Successful. Has made over 19 successful early stage investments, many getting follow on rounds.

Highly competitive. Works. Knows how to win. Self employed since 1986.

Respected. Elected by peers to CME Board and ran several committees. Strategic Planning and Budget Committee

High integrity. Tells you straight, means what he says and follows through. BS University of Illinois and Chicago Booth MBA; Member of the National World War Two Museum Board

LinkedIn.com/in/jeffreyrcarter/enblogs every day at PointsAndFigures.com@pointsnfigures on Twitter

Why The TimeIs Now

“Startups are transforming our society. Over the past 100 years, we’ve gone from an industrial era to a post information era where the network is rapidly disrupting

the hierarchy and transforming the way we work and live.”

-Brad Feld, Foundry Group

Society is Rapidly Changing

Faster Bigger Better

Everyone connected all the time. Bandwidth and speed are getting exponentially faster allowing for more transaction volume.

Speed and Mobile

Sales In Mobile Growing

Slope of curves shows valuation up, But investors assume risk later

Angel/Seed Stage Unchanged

Average pre-money valuation is $2.5M

What Kind of Business Should

You Build?

Networks not HierarchiesOrganizations operate from top down. Software and technology enables them to be flatter, fleeter, and first.

Everything Will Be UnbundledOrganizations that are generalists will be disintermediated by focused competitors that engage specialized business silos

Everyone is a Node on the NetworkMobile technology makes everyone a node on the network they operate in. This has deep ramifications for companies and society

Software is Eating the WorldTechnological changes are changing the way we produce, interact and transact enabling flatter, customized chains of distribution and peer to peer networks.

“What’s different today is that we are seeing on a daily basis revolutionary new ideas, devices, and form factors, not evolutionary enhancements.”-Arvind Sodhani Intel Capital in the WSJ (Jan 1. 2014)

The MegaTrends

Government is ill equipped to keep up with rapid changeTechnological and social change is happening so fast, government bureaucracy is too large and inefficient to keep pace. 63% of the federal budget goes to entitlements today. (Uber, Airbnb)

Rise of the SolopreneurMobile technology makes everyone a node on the network they operate in. This has deep ramifications for the way we work, where we work, when we work, and how we work. It also has implications to how we raise and educate our children.(Food Trucks, Independent Consultants, RIAs)

Bitcoin and Mobile Paymentsnew technology is mobile enabled, closes loopholes and strings in internet technology, and provides a searchable, online, transparent accountability function

The Minor Trends

Math Sucks

Angel MathAngels need to invest in Gazelles, not Unicorns

Gazelles are 30xInvest in a 3M post valuation company, sells for $90M you get 30x. Most angel deals exit at $20M-$60M

Unicorns are Billion dollar plus firms. There aren’t many of them, although they are more prevalent

Angel MathAssume $1,000,000 to invest in 10 companies

Probability at seed is equal. All companies are Identical and Independently Distributed

Goal=27% IRR over 5 years

5=0% return2-4= Some return1=30xHence, Angels look for Gazelles!

Investment ThesisInvest in People first, that use technology to transform existing industries.

.

Risk Reward for seed stage startup investing beats risk reward for other asset classes in the current financial environment

.

Why We Say NoRed flag #1 is team. We bet on people first.

Red flag #2 is product. We bet on unique solutions to big problems.

Red flag #3 is structure. Risk vs reward.

.

Why We Say NoRed flag #4 is time. Sometimes it’s just too early

Red flag #5 is “coachability”. Can we work with this

Person over the long haul?

Red flag #6 Salesmanship. Can this person sell?

.

Why We Say Yes Product is Live

ValuationRoadmap

Adoption rate is growing, Or Product is sticky. For SaaS 40%

Monthly growth/low churn; If Social 30/30/10 Salesmanship.

Technical Co-Founder

Non-Disclosure Means

No Dough

Venture Capitalists and Angels Won’t Sign Them

1. Dealing with a Lawyer and paperwork is time consuming. Would rather talk to entrepreneur about their business2. Would have to keep track of all NDAs signed.3. Value is in execution and creating the thing, not the idea4. Starts “Trust Relationship” off on the wrong foot.5. Reputation Cost to the VC if they divulge or act on Information

Problems With NDAs for Investors

Startups Are Counter Intuitive

They think they know everything and are outfitted with all they need

When they launch all hell breaks loose

Startups Look More

Like This

The best laid plans almost never work out the way they were drawn up

You Won’t Have Everything You Need At Launch

Be Flexible. Add as You Go

Listen to Your Customers

Be Intuitive and ProActive

Don’t Focus on Exit

Focus on Building Something Great

Focus on Survival

Get to the Next Round

Questions And

Answers