what angel investors look for in fundable companies, nz and aus
DESCRIPTION
This presentation includes Summary of Capital Food Chain, Non-disclosure Agreements, and how investors evaluate deals.TRANSCRIPT
What Angel Investors LookWhat!Angel!Investors!Look!For in Fundable CompaniesFor!in!Fundable!Companies
Bill!PayneBNZ!University!of!Auckland!Business!School!
Entrepreneur!in!Residence
dAgendaNew!Zealand!– Australian!Investment!Forum
• Summary!of!Capital!Food!Chain
• Non disclosure Agreements• Non"disclosure!Agreements
• How!investors!evaluate!deals
Investigation Feasibility Development Introduction Growth Maturity
The!Capital!LifecycleInvestigation Feasibility Development Introduction Growth Maturity
Proof!of!concept
Pre"Seed Seed!&Start"up
Early First,!Second,!etc...
ROFIT Friends!&!Family
Angel!Investors IPO,!Banks
Venture!CapitalSelf
PR
g ,
TIME
VALUE!OF!DEATH
TIME
d &Friends!&!Family Angels Venture!
CapitalistsFamily
Typical!round:!!<US$100K Typical!round:! US$400K
Capitalists
Typical!round:!!US$7M
Each!investor:!US$2"10,000
Annual!Total:!!!!US$60B
Each!investor:!!US$35,000
Annual!Total:!!!!US$20B
Each!investor:!!US$3M
Annual!total:!!!!US$20B
Unsophisticated
Investing!in!a!friend,!family
Passive
Accredited,!savvy
Investing!time!and!money
Active
Limited!partnership
Institutional!money
General Partners activePassive
1"2!lifetime!investments!
Equity,!debt,!gift?
Active
Investing!in!entrepreneur
Portfolio!of!angel!deals
General!Partners!active
Invest!in!company
Large!portfolio
F i d d F il IFriends!and!Family!Investors
P d fi i• Pre"seed!financing– To!develop!product
– To!find!customers
• Unsophisticated• Unsophisticated– Equity?!!Debt?!!Gift?
i i h b f i– Limit!the!number!of!investors
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Wh A Th A l ?Who!Are!These!Angels?! Wealthy!individuals!– “accredited!investors”y! “Been!there!and!done!that”!entrepreneurs! “Mad!money”! Generally!$25K"$250K!per!deal!per!angel! Several!angel!investments! Range!of!involvements
! Lead!investor!– Chairman!of!the!BoardI t / d i! Investor/advisor
! Passive!investor
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V t C it li tVenture!Capitalists! General!partners
! Salaried!managers! Minimal!investment,!huge!upside
! Limited!partners! Corporations,!pension!funds,!
wealthy!individuals! Totally!passive!involvement
! 800!venture!capital!funds!#! Size: $5 million to >$10 billionSize:!!$5!million!to!>$10!billion
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N di l A t (NDA )Nondisclosure!Agreements!(NDAs)• Most angels and VCs will not sign• Most!angels!and!VCs!will!not!sign
– See!too!many!deals
I t it i k t ti i b i– Integrity!is!key!to!continuing!business
–Not!motivated!to!steal!technology
• May!sign!NDA…
– During!due!diligence,!not!earlier
– Covering!a!very!narrow!set!of!issues
• Business Plan " no proprietary informationBusiness!Plan! no!proprietary!information
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Evaluating DealsEvaluating!DealsWhat!do!investors!look!for?f
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A l R ti S tAngel!Rating!System0"30%Management team 0"30%
0"25%
Management!team
Size!of!opportunity
0"15%
0"10%
Product!&!technology
Sales!channels
0"10%
0 5%
Competitive!advantage
Si f thi d 0!" 5%
0!" 5%
Size!of!this!round
Need!for!more!funding
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F d bl M TFundable!Management!Teams• CEO
– CEO!experience
– Coachable (very important)Coachable!(very!important)
– Vertical!experience
Leadership– Leadership
• Team
– Balance!and!complete
– Experience working togetherExperience!working!together
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Si f th O t itSize!!of!the!Opportunity
l bl• Scalable!– $20!million!(min.)!in!revenues!in!5!years
$– (VCs!look!for!>$100!million)
• High!gross!marginsg g g
• Large!niche!market
U f i i i d• Unfair!competitive!advantage
• Ready!for!customers
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C titi Ad t (IP)Competitive!Advantage!(IP)
• Patents– Important, but difficult to defendImportant,!but!difficult!to!defend
• Trademarks/copyrights
T d S t• Trade!Secrets
• Very!important!at!exit
D l Fl St ti tiDeal!Flow!Statistics
• Prescreening
• Screening
! 1!in!4!to!Screening
! 1 in 3 to DDScreening
• Due!Diligence
! 1!in!3!to!DD
! 1!in!3!to!Inv.!Meeting
• Investment ! 1!in!2!raise!money
!• OVERALL ! 1!in!72!who!apply!receive!
investment
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2009!NZ!Angel!Dealsg• ~NZ$127!Million!since!2006– 2009!" NZ$50!"" 2008!" NZ$29– 2007!" NZ$27.4!"" 2006!– NZ$20.2
• Investment!vs Stage!of!Development!– 09– Seed!and!Start"up!=!78%– Expansion!!!!!!!!!!!!!!!=!22%
• New!Deals!vs Follow"on!Funding!" 09– 40%!first"time!investments– 60%!follow"on!investments
