angels 101 everything you need to know, some things you don’t want to hear, and some musings,...
TRANSCRIPT
Angels 101
Everything you need to know, some things you don’t want to hear, and some musings, advice and observations.
We all need an Angel…
Things we will talk about What is an Angel Investor anyway? What do they want? Is this a viable source of capital? Should you try to take in to this kind of capital? How should founders make the approach?
Me Six Time Entrepreneur Pitched over 400 times/raised $billions of debt and equity Angel Investor (7 years) Regular Pitch Judge/100+ panels 10 Advisory Boards/current + past ------------ Co-Founder Equipment Lease and Investment Business Non-Executive Chairman of the Board Accomplice.io
What is an Angel
Investor anyway?
ANGELS
Who can call themselves an Angel Investor? Anybody! Most often have at least actively looked at making an investment 25% - 0 investments 25% - 1-2 investments 40% - 2-5 investments 10% - 6 or more investments Elite - 25+ investments
Typical investment is $25-50,000. Elite can be $100,000++.
What caused these investors to invest?1. Influencers2. Sense they can pick out winners
Rapid growth seems assured by existing traction Cheap valuation Charismatic and proven founders with track
record Sexy and gripping idea
3. Naivete, ego
4. Insight gained from industry specific experience
Industry Specific Experience: Example
Influencers• Somebody well known is an investor
Mark Cuban, Elon Musk, Jeff Bezos
• Somebody known to the angel is an investor, such as another angel
• An angel investment group is a “sponsor”, which may give group members comfort
Angel Groups• There are many dozen groups in the Bay
Area.• Typical structure: Free of charge, you can
present at a monthly meeting in a 10-30 minute presentation format.
• Some, like Keiretsu Forum, do charge to present.
• Accredited investors• Co-operation among members• Co-operation among groups
An Angel Group Meeting: 8 presenters?
TECH CO. CLAIMS
THAT THEY WILL DO HUGE IPO
?? MAYBE WILL
PIVOT TO SERVICES
TAKING ON
DESIGNING
AMAZING BIKE
SLEEP APNEA CURE
APP THAT EVERY REAL
ESTATE BROKER NEEDS
TASTY ENERGY BAR FOR
DIABETICS
IPAD EDUCATION APP FOR PRISONERS
The life of an “Angel”
Last week Incoming call from LA area
Hi Paul, a friend of yours told me that you are an angel investor and I would like you to call me back and let me know if you might be interested in investing in my new company. My name is [Sam]. Thank you I look forward to speaking to you, my number is [xxx].
Standing out in the Hungry Crowd – Humanity and Humility
Dear Sally: I have read all about your career in burlesque
dance and have admired your work for a long time.
Now, I have launched an iPhone app which helps burlesque dancers get work at children’s birthday parties, and I would be so honored if you could spend a few minutes with me.
I want to talk to you about the burlesque industry and get your feedback on the app and our marketing…
Standing out in the Hungry Crowd – Humanity and Humility
…Sally, we want to have you involved, and of course we will need to find some investors too. Can we schedule a call or can I buy you coffee?
I will travel anywhere on the globe to get a few minutes with the “Greatest Burlesque Dancer of the Modern Era” according to the Washington Post.
I am so excited about the possibility of meeting you.
Standing out in the Hungry Crowd – Play All of Your Cards• You are an industry expert and I need
your help and advice, or I know you have been an investor or entrepreneur in the space
• You have been involved is similar businesses and perhaps can advise me on mistakes to avoid
• Like me you are a proud Norwegian/Swede and I am looking for help from someone who has made their way successfully in the U.S. from our country
Standing out in the Hungry Crowd – Play All of Your Cards• Like me you attended XX University
and I am hoping for help from a fellow alum
• Mr. Victor Belfor said you would be willing to spend some time with me and that it would be very useful to us to get your advice
• I hear you are interested in archery, I was first grade champion when I was 7 years old
Advantages of Angel Money
• Deconcentration of authority• Possible can close faster on
individual basis• Access for networking and
additional capital, mentoring• Sometimes more able to be
flexible• It’s MONEY!
Angel Money Myths Part I• Angels make earlier stage
investments before proof of concept
• Angels take more risk• Angels are easier to deal with
than VCs• Angel round naturally precedes
an A round
Angel Money Myths Part II• Angels can be tapped instead of
friends and family first• Angels ask less tough questions• Angels generally deliver faster• Angels are impressed by
Advisory Board members
The Pitch/Common Mistakes Part I
1. You cannot describe the business opportunity in one sentence
2. The market share fallacy: “We will get 10% of the market, that’s $2 billion of revenue”
3. Talk fails to include Risks Use of proceeds Barriers to Entry Capital raised to date Exit Concepts
4. Overemphasize your team of unknowns
The Pitch/Common Mistakes Part II
5. Overemphasize industry size
6. Speak of Patents or Patents Pending as the secret sauce
7. Poor Speaking Skills – GET A COACH not feedback from a loved one
8. Lousy PowerPoint: ugly, old, dense, scattered
• A PowerPoint is not a Handout
9. Lacks Humility, Grace, Humor
What we hear when you say “Freemium”
(Angels like your paying customers more than your free users)
In conclusionWith Angels• There is no free middag• Networking is the key• Understand your target• Use flattery and grace on approach
• Ask for help not just money• Rejection is likely
…but when it works, Angels can be a nice part of your investor base and you will met many nice people along the way
