Crowdfunding versus Pitching Angels: What Route to Finding Investors is Right for You
Do Angels Investors Make Money?
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Transcript of Do Angels Investors Make Money?
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Do Angels Make Money?
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Do Angels Make Money?
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YES
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Angel Data Shows 2.5x Returns Overall
Source: Kauffman Foundation, NESTA (a UK-based entrepreneurship foundation),
the University of Washington, and Willamette University
Really, they do
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Survey Says
Angel investors’ internal rate of return (IRR) is between 18 and 38 percent…
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Any ONE investment is likely to lose money.
6 investments increases the chances of a return greater than 1X.
But, there is a catch
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Will You?
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Probably NOT
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Unless
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• Your Active• Bring Something to the Table• Build a Portfolio
Differentiate
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Kaufman studies have shown that active investors are 3x more likely to realize a return than passive investors.
Being Active
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When you add value…
What is active?
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•Domain expertise•Hiring better talent•Acquiring more customers•Developing greater operational expertise• Introductions to industry players or follow
on investments
Adding Value
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Bring Something to the Table
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Can you help this business scale faster & smarter?
Why you?
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How can you actually differentiate?
Sell something else, of course.
The Business Angel
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• Your expertise,• Your portfolio’s network effect, • Your history of success,• or….
Sell your personal brand
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Focus on a specific sector and stage of investment…
Focus
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Early stage startup versus a growth-stage business ready to scale.
• Challenges will be different. • Market opportunities will be different. • Expertise gaps will be different.
Different Needs
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• Deliver relevant insights, ideas and advice.• Identify opportunities within the niche.• Create a team capable of delivering on
those opportunities.
Deliver
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To develop a portfolio strategy
Rinse & Repeat
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Build a Portfolio
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Do You Have the Money?
Portfolio of 10 Deals
• Initial investment - 10 x 50,000 = 500,000
• Dry powder – 10 x 25,000 = 250,000
Investment Pool 750,000
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Do You Have the Deal Flow?
• Angel Clubs• Online – AngelsList, Gust, Angels Den• Personal Network
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Do You Have Selection Intelligence?
Do Your Homework - Each investment has to be done as though it’s your only one.
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Term Sheet Basics
• Valuation considerations• Securing the opportunity to invest further in their winners• Protecting yourself from being diluted if a company begins to falter• The connection between the term sheet and an investor's control over a company
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Do You Have a Team?
• Legal – Don’t know what a drag along right is? Get Help• Financial – Tax Credits, Capital Gains• Others – Governance, Technical or Operations
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Can You Make Introductions?
• Mentors, Vendors, Personnel• Other Investors – Can you help raise the next round?• Introductions to their first customer or strategic partner• Help find an exit
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Your founders will
• Build better companies, • Have more successful exits.
If Yes, then…
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www.angelsbootcamp.org