chicago entrepreneurial center small business presentation

Why Angel Investing is Important To Small

Business

About Me• Co-Founder of Hyde Park Angels (www.hydeparkangels.com)

and West Loop Ventures (www.westloopventures.com)

• Blog at pointsandfigures.com Tweet @pointsnfigures

• Active investments in: KapowEvents.com, YCharts.com, Brilliant.org, Alltuition.com, Desktimeapp.com, UICO.com, Supply-vision.com, Tallgrassbeef.com

• Past Investments: Win Detergent, Noblivity, Shuffletech, FeeFighters, Gradebeam

• Trustee at the National World War Two Museum (http://www.nationalww2museum.org) in New Orleans, Louisiana

• married, two kids in college; traded for 22 years at the CME where I was on the Board of Directors

• BS Univ of Illinois, College of Business; MBA University of Chicago, Booth Graduate School of Business

What You Do

•Small Business provides support for Scalable companies

•Adds Character to a City

•Adds depth by providing income to employees that become customers of startups

•Become customers of startups

What StartUps Do

•Create businesses that make your business better and more efficient

•Create customers for your business

•Become customers of your business

•Add jobs to the area, increasing your business potential

4 Ways To Participate In

Chicago Renaissance•Talk about startups to your friends

•Make an introduction for them to a potential customer

•Become a customer

•Invest in them

Lifecycle of an Investment

•Investing is HARD WORK !!!!!

•Friends and Family

•Seed or Angel Round

•Series A and B round

•Venture Capital Round(s)

•Exit

Mistakes

•Take money-and that’s all they get

•Overvalue their companies

•Take too much money

•Take too little money

Friends and Family

•Small round of money, less than $100k. Structured as Convert Debt. Gets company going

Angel Round

•Convert Debt, or a priced round. Usually less than $1M. Gives company 12-18 months of runway

Typical Angel Deals• Average Valuation is $1-3M pre-money.

• Most seed rounds are between $300k and $1M depending on the business

• Seed round should be 12-18 mo runway (company is pre revenue, pre product)

• Angels looking for return. Average return for all angel deals is around 27% IRR (Includes the ones that went bust)

• Typical deal is 5-7 years in length.

What An Angel Does

• Invest Money

• Create Customers, Connections

• Mentor and Advise

• Help Find Talent for Firm

• Create Next Rounds of Financing

• Create Possible Exits

• Angels typically don’t run companies

Series A and B

•Bigger rounds, priced, more runway and allows company to scale up and grow fast

•Usually post pivot-scaling in a market segment and dominating

VC Rounds

•Big rounds of capital done at valuations of $10M +

•More scaling, and diversifying business to attack more segments

•Playing for big exit (Home Run)

Exit

•NOT an IPO

•Usually acquisition by another company or a family office, or a PE firm

Why Investing Is Hard

•Finding, due diligence, structure, mentoring, post investment management, raising next rounds of capital, planning for exits

•Learning curve of investing

Alternatives

•Join an Angel Group

•Invest in a Fund (inefficient and scale tips to the fund managers not you, asymmetric deal choice )

•West Loop Ventures (economic incentives are aligned with GP and LP)

Q+A

•Ask me anything you would like