Do Angels Make Money?

Do Angels Make Money?

YES

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

Will You?

Probably NOT

Unless

• 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…

www.angelsbootcamp.org