angel investing - brian cohen ny angels
DESCRIPTION
Angels InvesttingTRANSCRIPT
The Inside
Story of
Angel
Investing
More than $100 Million invested in 100 CompaniesNo organization has invested in more New York startups
@brianscohen
The
Wisdom od
Crowds
Choosing the “right” Partnerships,
Not Cash, Are Often the Basis For
Success
Angels And Entrepreneurs
A Special Relationship
Great for
openning
doors to
customers!
Investor Raising
Angel Investment Flow Analysis
This is 40:1 get
investments
Angel Investor Gambler?
Angels Have Become Very PromiscuousHurting The
Funding
Ecosystem
@brianscohen
Angel Investing IsRapidly Becoming A Losers Sport
Very very very
few angels
EVER make
money!
Half of Angel Investors Regret Investments They Made This year!
• Overly Optimistic Financial Projects
• Business Model Flawed
• Startup Management was not the right fit
• Go To Market Strategy was wrong
• Pre money Valuation Was To High
• Did NOT Understand Term Sheet Legal Info
• Used Convertible Notes
Worthworm Research
And their wives
(only 18% of
angels are
women) knew it
Angel
Exhaustion
Everyone Needs To Wake Up And Step Up Their
Game Every MUST get
smarter!
Angel only have
so much to
invest.
Venture $ Is Running Away!
Venture Backed Company Exits
• 1500 Companies per year
• 8 exits per year > $750M
• 80 exits per year > $50M
Losers Gold!
Chances of
investing in a
billion $
business IS
ZERO!
Smart Money
Investing in
Smart
Businesses
What Is Professional Angel Investing ?
Only route to
angel investing
success is best
business
practices!
IF you are an Accredited Investor, and
IF you are prepared to invest at least $50K to $100K per year, and
IF you make sure to reserve quite a bit for follow-on financings, and
IF you develop a VERY strong deal flow of good companies, either through
an angel group or your own contacts, and
IF you invest consistently so that you have at least 20 companies (ideally
more) in your portfolio, and
IF you are professional in both your “do” diligence investigation and your
deal term negotiation (including specifically with regard to valuations), and
IF you go in with the knowledge that you are going to be in it for at least a
decade, holding completely illiquid assets, and
IF you can help add value to your portfolio companies above and beyond
simply money (such as board service, contacts, fundraising, etc.)
IF you have an Angel friendly term sheet (does not imply entrepreneur
unfriendly)
The Odds Will ONLY Be In Your
Favor
Lots of
Touchy-
Feely
Stuff
Due Diligence Considered a Tedious (But Necessary) Process
Entrepreneurs
Neither investors nor entrepreneurs are particularly thrilled about
the process – it is costly in for both in terms of hours involved
(dozens or possibly scores of hours) and money required (legal
fees, etc.)
Do
Diligence
Investors
Due “Do” Diligence in Today’s Market Building a More Agile Approach
Angel Must
Get Better At
this
Angel Investment Without Do Diligence is Like Unprotected Sex
Opportunity Risks Resources Deal
• Market size – Huge
• Team leadership
expertise
• Product/technology
• Value
proposition/clear
customer pain
point
• IP
• Competitive
advantages
• Traction/proof of
concept
• Customer base
• Scalable
• Target segments
• Existing business
models
• Market dynamics
(Porter’s Five
Forces analysis)
• Underlying
financial
assumptions
• Competition/compe
titive threats
• Lack of team
expertise
• Unproven business
model
• Scalability issues
• Breakeven analysis
• Likelihood of
execution
• Cost of capital
• Capital/cash on
hand
• IP
• Unfair advantage
• Technology/data
• Team
expertise/knowled
ge base
• Existing
partnerships
• Brand/goodwill
• Other Assets
(real, intangible)
• Preferred Equity
• Angel Protections
• Valuation
• Market forces
• Cap table
• Equity available
• Option pool
• Existing
investors/partners
• Existing
deals/partnerships
• Extenuating
circumstances
*Basic model provided by HBS developed and taught
by Professor Glenn Okun at NYU Stern School of Business.
Not all
balanced.
Some more
important
Angels don’t
mind smaller
exits! that’s a
good thing
Angels Are Really In The Exit
Business!
It’s Not Just About Ideas!
Good Ideas Are
Everywhere –
Can The
Leader Lead
and Team
Execute
Simulations have shown that it takes investing the same
amount of money consistently into at least 20-25 companies
before your returns begin to approach the typical return of over
20Most
angels only
invest in
one
company!
Portfolio Theory Wins!
Smart SyndicationIt Takes Many Smart
Angels/Groups To Do A Deal
So Many
Investment
s Need
Many
Smart
Angels!
It’s about Becoming Close
To The Start Up Community
Get Close To
The Startups!
Relatively
Stable!
Money Per Seed Round
Seed Stage Valuations
SVB Research Halo Report 2014
Dropped
last
quarter!
Can the Founder Handle Surprising Challenges?
You Need
To Meet
Them &
Get To
Know
Them
• $1 million for angel investments
• Distributed over 10 deals
• 1.256 = 3.8x ROI
5 = 0x
2 = 1x
2 = 3x
Economics of the Angels
1/10 x 5 x 0 = 0.01/10 x 2 x 1 = 0.21/10 x 2 x 3 = 0.6
3.8 –
0.0+
0.2+
0.6
3.0
Source: David S. Rose http://rose.vc
It’s all in the
numbers
The Exit
must return 30 times
our investment
It’s All About
The Math!
It is quite likely that the value of the syndicate's portfolio will still be
underwater, unless it just happened to include one unusual, Black Swan,
quick home run.
The Big Wait
Exits only
happen
1.7% of
the time