angels vs vc\'s ishai green forum mit israel
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Angel VS. VCAngel VS. VCIshay GreenIshay Green
Angel VS.
Venture Capital(And some tips about both…)
DisclaimerDisclaimer
Entrepreneurship is a game of imagination – The following are my
opinions
TERMINOLOGYTERMINOLOGY
11
TerminologyTerminology
• Valuation• Shares• Dilution
ANGEL VS. VC ANGEL VS. VC MONEYMONEY
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Angel VS. VC MoneyAngel VS. VC Money
VC’s are professionals who invest other people’s money
Angel VS. VC MoneyAngel VS. VC Money
Angels are private people investing their hard earned money
ANGEL VS. VC ANGEL VS. VC PROFIT EXPECTATIONSPROFIT EXPECTATIONS
33
Profit ExpectationsProfit Expectations
VC’s look for double digits profit multipliers(10 Times)
Profit ExpectationsProfit Expectations
Angles would usually be happy in low end of a single digit(3 Times)
ANGEL VS. VC ANGEL VS. VC INVESTMENT RISKSINVESTMENT RISKS
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Investment RisksInvestment Risks
The Angel is risking their own money
Investment RisksInvestment Risks
The Angel is usually less knowledgeable than a VC in most aspects
Investment RisksInvestment Risks
The Angels tend to follow their gut feeling
(So you better be damn sure you know what you’re doing…)
Investment RisksInvestment Risks
The Angel knows where you live
Investment RisksInvestment Risks
The VC risk is divided through a larger
portfolio
ANGEL VS. VC ANGEL VS. VC EXCEPTED HOLDINGSEXCEPTED HOLDINGS
55
Excepted HoldingsExcepted Holdings
VC’s expect a minimum of 20%-25%
share holdings(They will ask for much more)
Excepted HoldingsExcepted Holdings
Angles are agnostic.
TIMINGTIMING
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TimingTiming
Angels can afford investing in the scenarios of:1.Seed2.Down-round* Angels will usually not execute their preemptive right
TimingTiming
VC will usually require a more mature company,
and even a proof of concept before
investing
TimingTiming
Angel money is faster(For most Angels a meeting or two is
sufficient to decide)
TimingTiming
“Some VC’s will yes you to death”
- Adi Pundak-Mintz
WHY DO ANGELS EXIST?WHY DO ANGELS EXIST?
77
Why do Angels Exist?Why do Angels Exist?
Potential for large multipliers on their
investment outside of the stock markets
Why do Angels Exist?Why do Angels Exist?
The investment is not liquid – When it is gone
it is gone
Why do Angels Exist?Why do Angels Exist?
The Google – Facebook – The Marker Effect
Why do Angels Exist?Why do Angels Exist?
Tax Benefits
Why do Angels Exist?Why do Angels Exist?
It’s Fashionable& Cool
VC TYPES – ENTREPRENEUR POVVC TYPES – ENTREPRENEUR POV
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VC Types – Seed FundsVC Types – Seed Funds
Invest small amount of money in early stage, with no promise for recurring investment
VC Types – Israel Top Five VC Types – Israel Top Five
- Has more then $100M fund- Known for its smart and
beautiful partners*
* Yaron from Giza VC is a great example
VC Types – InternationalVC Types – International
Enables you to tell everyone you now have direct access to Steve Jobs, Balmer and God
VC Types – Famous VC Types – Famous
Proven winners - Index Ventures invested in
VC Types – Top TierVC Types – Top Tier
- Sequoia- Draper Fisher Jurvetson
ANGEL TYPESANGEL TYPES– ENTREPRENEUR POV– ENTREPRENEUR POV
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Angel Types IAngel Types I
Rich Industry Expert / Entrepreneur
(Eduardo Shoval)
Angel Types IIAngel Types II
Super Angel(Yossi Vardi / Paul Grahm)
Angel Types IIIAngel Types III
Richie Rich
Oil / Real-estate / Diamonds / Weapons
Angel Types IVAngel Types IV
The Gambler
Angel Types VAngel Types V
Family
BOARD OF DIRECTORSBOARD OF DIRECTORS
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Board Of DirectorsBoard Of Directors
The board represents the share-holders
(investors)
Board Of DirectorsBoard Of Directors
The board devises tactics and strategies for
the company
Board Of DirectorsBoard Of Directors
The CEO is responsible for executing board
decisions
Board Of DirectorsBoard Of Directors
Entrepreneurs & CEO keep the board up-to-
date
Board Of DirectorsBoard Of Directors
An effective board:• Smart and self-conscience members• One member+ is an industry expert
INVESTOR RIGHTSINVESTOR RIGHTS
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Investor RightsInvestor Rights
Voting Rights Are Dangerous
(Try to avoid them)
Investor RightsInvestor Rights
Veto Rights Are Lethal (Unacceptable)
ANGEL-MAINTENANCE ANGEL-MAINTENANCE TECHNIQUESTECHNIQUES
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Angel-Maintenance TechniquesAngel-Maintenance Techniques
Angel turns into Devil:• Conflict of Interest • Disappointment• Greenmail • Ignorant / Boarder Line Disorder
Angel-Maintenance TechniquesAngel-Maintenance Techniques
Proxy Mechanism -• Protect the company from its investors• Protect the investors from themselves• Protect the individual investor from himself
Angel-Maintenance TechniquesAngel-Maintenance Techniques
Define a board representative for the
angels with past experience
ANGEL VS. VC VALUATIONANGEL VS. VC VALUATION
1212
VCVC
• VC allocates ~$10M total for an investment• The money is divided between rounds• The VC needs to maintain 25% holdings in the company – unless you go to huge valuations. (*)
AngelAngel
The Tomer-Ishay Method™• Find a prominent lead investor and then negotiate • Talk to the rest of the investors only after valuation was set• Raising money in chunks
AngelAngel
What should you tell the Angels before closing
• Make sure they understand the business plan• Tell them they need to consider the money as gone.• Say that you do not take money from widows and orphans.
SUMMARYSUMMARY
&&
SummarySummary
•There are not definite pros & cons•Angels are a great way to start•Do you believe in Angels?
I doI do
THANK YOUTHANK YOU
!#%!#%