knauss angel investing
Post on 13-Jan-2015
1.373 Views
Preview:
DESCRIPTION
TRANSCRIPT
Seed and Early StageAngel Investing: A Case Study
Troy Knauss, Fund ExecutivePiedmont Angel Network
Adjunct Professor, Wake Forest Universitytknauss@panfunds.com
Presentation
Investing Structures
> Individual Angels
> Angel Networks
> Angel Funds
> Venture Capital FundsANGELS MUST BE ACCREDITED INVESTORS UNDER ALL STRUCTURES
Idea Start up
Intro Rollout Growth Expansion Maturity
ANGEL GROUPS$100,000 – $1MM+
INDIVIDUAL ANGELS$10k – $100k
GRANTS UP TO $1MM
SYNDICATIONUP TO $2.5MM
Seed Capital / Grants
Individual Angels / Groups / Boutique VCs
Venture Banks / Venture Capital Funds
Traditional Banks
Acquisition Stage / IPO /
Mergers
Rev
enu
e / E
BIT
DA
Funding Size
Source: University of New Hampshire Center for Venture Research, Price Waterhouse Coopers
Source of FundingE
arly
Sta
ge
to L
ate
Sta
ge
2007 Angel Investments 2007 VC Investments
$25+ Billion51,000 Deals
Average Deal Size:
$500,000
$25+ Billion3,416 Deals
Average Deal Size:
$7,500,000
TheEntrepreneur’sFundsm
All individuals areAccreditedInvestors
$1 Million Net Worthor $200,000 in salary
for past two years
PAN has over 150investors in 2 funds.Limit to 99 investors
per fund (SEC)
Each investorcommits a minimum
$50,000
The funds have$10 million under
management
Important: Thefunds are
member-managed
Business Plan
Business Plan
Business Plan
FundExecutive
ScreeningCommittee
DD TeamRecommend
InvestmentVote
DDVote
MembershipPresentation
Due DiligenceTeam
Deal TermsMonitoring
Team
PresentRecommendation
to Membership
No
No
No
YesYes
Yes
Yes(Invest)
Yes(Invest)
No
No
Su
bm
it E
xecu
tive
Su
mm
ary
Structured Process
Funding Statistics
Percent Approved by Screening Committee Percent Approved by Members to go to DD
Percent DD Recommended for Investment PAN Two Statistics
81 Plans Reviewed at Screening Meetings
52 Plans Reviewed at Member Meetings
38 Plans Approved by Members for DD
5 Plans Approved for an Investment
70%
Percent Approved by Screening Committee Percent Approved by Members to go to DD
Percent DD Recommended for Investment PAN Two Statistics
81 Plans Reviewed at Screening Meetings
52 Plans Reviewed at Member Meetings
38 Plans Approved by Members for DD
5 Plans Approved for an Investment
13%
jjjjj
Percent Approved by Screening Committee Percent Approved by Members to go to DD
Percent DD Recommended for Investment PAN Two Statistics
81 Plans Reviewed at Screening Meetings
52 Plans Reviewed at Member Meetings
38 Plans Approved by Members for DD
5 Plans Approved for an Investment
64%jjjjj
>Funds invest in 6% of all companies screened and less than 1% of all deals seen
>Individuals invest in 30% of companies seen
Sources of Deal Flow
> Other Angel Groups
> Venture Capital Firms
> Individual Angels
> Professional Services Lawyers, Accountants, Incubators
South Coast Angel Fund, LLC
More than 20 Angel Groups in the Southeast U.S.
Geographic LimitationsInvestments are restricted to an approximate three-hour drive of the Piedmont Triad region to provide better access to portfolio companies for improved monitoring and assistance.
PAN will review investments throughout North Carolina, as far north as Charlottesville, Virginia, and as far south as Columbia, South Carolina.
Investment Region
Percent of GroupsSource: 2008 ACA Angel Group Confidence Survey
0 5 10 15 20 25 30
No restrictions
Region
State/ province
4-hour drive
2-hour drive
Where do groups invest?
Portfolio CompaniesVirginia
Winston-Salem
Greensboro
Triangle
Charlotte
16TotalInvestments
7 Life Science Investments + 2 to be announced soon
Industry Portfolio %
Life Science 43.8%
Technology / Software
37.5%
Services 12.5%
Education 6.2%
What Angels are Investing in?>University of New Hampshire Research for
Q1/Q2 2008:
>This is the first time in many, many years that Life Science investments are not in the top 3
> Expect exit in 5 – 7 years
> 10X to 30X multiples
> Will not look at valuations above $5MM
> Initial investments expected to yield min.10% equity
> Dry powder (very important to ultimate returns)
> Board Governance / Monitoring critical to returns
Expectations / Conditions
35% - 0X
Overall Multiple: 2.6X
Avg Holding Period: 3.5 years
Average IRR: 27%
3 yr
3.3 yr
4.6 yr
4.9 yr6 yr
0
10
20
30
40
50
60
< 1X 1X to 5X 5X to 10X 10X to 30X > 30X
Exit Multiples
Perc
en
t o
f T
ota
l E
xit
sDistribution of Returns by Venture Investment
Average Returns
-
10
20
30
40
50
60
< 1X 1X to 5X 5X to 10X 10X to 30X > 30X
Exit Multiples
Per
cent
of E
xits
Low Participation High Participation
High = 1 or 2 times per monthLow = 1 or 2 times per year
High 3.7X (4.0 years)
Low 1.3X (3.6 years)
Impact of ParticipationMentoring, Board, Financial Monitoring
Returns with Monitoring
FINANCIAL RETURNS /VALUATION
Sample Portfolio ReturnsPortfolio Co.
Multiple 5-Year IRR
Portfolio Co.
Multiple 5-Year IRR
1 0.0 0% 6
2 0.0 0% 7
3 0.0 0% 8
4 9
5 10
Source: Becoming an Investor-Ready Entrepreneur (sbtdc.org)
Sample Portfolio ReturnsPortfolio Co.
Multiple 5-Year IRR
Portfolio Co.
Multiple 5-Year IRR
1 0.0 0% 6
2 0.0 0% 7
3 0.0 0% 8
4 1.3 5% 9
5 1.3 5% 10
Sample Portfolio ReturnsPortfolio Co.
Multiple 5-Year IRR
Portfolio Co.
Multiple 5-Year IRR
1 0.0 0% 6 1.6 10%
2 0.0 0% 7 1.6 10%
3 0.0 0% 8
4 1.3 5% 9
5 1.3 5% 10
Sample Portfolio ReturnsPortfolio Co.
Multiple 5-Year IRR
Portfolio Co.
Multiple 5-Year IRR
1 0.0 0% 6 1.6 10%
2 0.0 0% 7 1.6 10%
3 0.0 0% 8 7.6 50%
4 1.3 5% 9
5 1.3 5% 10
Sample Portfolio ReturnsPortfolio Co.
Multiple 5-Year IRR
Portfolio Co.
Multiple 5-Year IRR
1 0.0 0% 6 1.6 10%
2 0.0 0% 7 1.6 10%
3 0.0 0% 8 7.6 50%
4 1.3 5% 9 20.0 82%
5 1.3 5% 10
Sample Portfolio ReturnsPortfolio Co.
Multiple 5-Year IRR
Portfolio Co.
Multiple 5-Year IRR
1 0.0 0% 6 1.6 10%
2 0.0 0% 7 1.6 10%
3 0.0 0% 8 7.6 50%
4 1.3 5% 9 20.0 82%
5 1.3 5% 10 Unknown Unknown
Return on Portfolio Investments (1-9) is 3.7X (26% IRR over 5 Years)
Start-uptechnology usingrecycled plastic
for compositewood decks
Start-up plastictoy company inPennsylvania
In 1990, I had the option to put $100,000 in one of the following deals:Why invest as a fund?
In 1990, I had the option to put $100,000 in one of the following deals:Why invest as a fund?
$10,000,000$17,000
In 1990, I had the option to put $100,000 in one of the following deals:Why invest as a fund?
LOST $83,000 DIDN’T MAKE $9,900,000
RETURN RETURN
In 1990, I had the option to put $100,000 in one of the following deals:Why invest as a fund?
IF YOU INVESTED AS A FUND
AND PUT $50,000 IN EACH DEAL,
YOU WOULD HAVE MADE
$4,908,500
Deals Missed
“If you are in this business long enough, you'll see some great deals walk through your door. If you are in this business long enough, you’ll show some great deals the door.” – OVP Venture Part.
“A guy walks into your office in the late 1980’s and says he wants to open a chain of retail shops selling a commodity product you can get anywhere for 25 cents, but he will charge 2 dollars. Of course, you listen politely, and then fall off your chair laughing when he leaves. Howard Shultz didn’t see this as humorous. And we didn’t make 500 times our money. To get even (wasn’t our not making money enough?) years later, Howard opened his own venture capital firm right down the street.”
“The Internet boom was just beginning. Amazon had sales of $4M a year. We had a handshake on a term sheet with the CEO to put $2M into Amazon for 20% of the company (a $10M post money value). At the eleventh hour, some guy named John Doerr flew up and offered $8M going in for 20% of the company (a $40M post money value). Handshake? What handshake? To get even, we buy all our books at Barnes & Noble. We don’t think Amazon has noticed.”
Quote
Contact Information:Troy KnaussPiedmont Angel Networktknauss@panfunds.com(336) 235-0941
top related