How to Pitch to Angels?

DonMorrisonChairmanofDealFlowBlueTreeAlliedAngels

AccidentalRetailer

RecoveringEntrepreneur

How to Pitch to Angels? Beforeyoucanbegintoputyourpitchtogether,itisimportanttounderstand:•  Whoangelsare•  Thefundingprocess•  Angelsplaceinthefundinglandscape

Who are Angel Investors? •  ODensuccessfulentrepreneursorreEredprofessionals

•  Accreditedinvestors–SECdefiniEon•  Investtheirownmoney(notmoneymanagers)•  Generallyinvestinlocalcompanies•  Investinbusinessesnotrunbyfamilies•  Investindividuallyoraspartofanangelgroup

Why Angel Groups?

•  ThePowerofAggregaEon•  MiEgateRisk•  HigherQualityDealFlow•  GreaterInvestmentClout•  PorQolioManagement

Advantage of Angel Groups for Entrepreneurs

•  Diversifiedbusinessexperience•  Extensiveindustrycontacts•  OpportuniEestosyndicate

Growth in Number of Angel Groups

Sources: Center for Venture Research (pre 03 data) and Kauffman Foundation/ARI (04-13 data)

0 50

100 150 200 250 300 350 400

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

The Funding Landscape TechnologyDiscovery

Proof-ofConcept

IniEalDesign

Develop&Test

Build&Deliver

Pre-seedFunding

SeedFunding

ExpansionMezzanine

OperaEng&Growth

Start-upFunding

$25K$100K$500K$2M$10M$50M

$100K$500K $2M$10M$75M$250M

Company - Product

Stage

ScaleUp

FundingStage

Friends&Family

SeedFunds

VentureFunds

Founder

InsEtuEonalEquity

Loans/BondsGov.EconomicDev.

SBIRPhase1&2

IndividualAngels

AngelGroups

Sourceof

Funding

InvestmentNeeded

CompanyValuaEon 8

BusinessIncubators

Angels Fund Majority of Startups in USA

Sources: Center for Venture Research/ UNH; NVCA 2014 Yearbook; PwC MoneyTree

• $24.6billion• 71,000deals• 17,750seed• 31,950earlystage• 19,170expansion• 305,000individuals

AngelInvestors(2016)• $59.1billion• 4,380deals• 186seed• 2,219earlystage• 1,975later/expansion• 718acCvefirms

VentureCapital(2016)AngelsProvide~90%ofOutsideEquityforStartups

Where Angels Invest

Sources: Center for Venture Research/ UNH; NVCA 2016 Yearbook; PwC MoneyTree

SoGwareOtherHealthcareCommercialservicesPharma/BiotechMediaITHardwareConsumergoodsEnergy

Sector33.9%25.5%14.1%8.7%7.3%3.8%2.4%2.4%1.9%

%ofInvestmentAngelInvestments(2016)

Angel Investment Stats

•  50%newdeals,50%follow-onfunding•  75%ofangeldealsarenowsyndicated•  $347,000averageinvestmentperdeal•  Averagepre-moneyvaluaEon$3.6M

Telling Your Story (Elements of the Pitch)

Togetfunded,entrepreneursneedtotellacompelling

story.Yourstory,or“pitch”,mustcontainseveral

importantelements:–  Product/Service– Market–  BusinessPlan–  Sales&MarkeCng–  Financials– ManagementTeam–  Exitstrategy

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Product or Service (Elements of the Pitch)

Yourproductslidesshouldexplainwhat“problem”or

“pain”youareaddressing:– Howbigistheproblem?– Whoisyourtargetcustomer?– WhoareyourcompeCtors?– WhatisyourproductdifferenCaConorcompeCCveadvantage?Howdoesitwork?

– WhatisyourvalueproposiCon?– Whatarethebarrierstoentry?(Patents,tradesecrets)– Whataretherisks?(Technology,regulatory)

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Market (Elements of the Pitch)

YoushouldaddressthefollowingquesEonsaboutthe

marketforyourproduct:– Whatisthetotalmarketsize?– Whatistheaddressablemarketsizeforyourproduct?– Whatistheprojectedmarketgrowth?– What%ofmarketsharewillyouhavein5years?

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Business Plan (Elements of the Pitch)

YourBusinessPlanslidesshouldaddress:– Whatisyourrevenuemodel?– WhatassumpConsareyoumakingregarding:•  Pricingandmargin?•  SG&A?•  Supplychain?

–  Howwillyouscale?–  Whatisthelong-termprospectforproductormarket

extension?

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Sales & Marketing (Elements of the Pitch)

Eventhebestideasgonowherewithoutasoundsales

andmarkeEngstrategy.YourSales&MarkeEngslides

shouldaddress:– Gotomarketstrategy:•  Directsales?•  ChannelPartners?•  Licensing?

–  CostofcustomeracquisiCon?–  Lengthofsalescycle?–  RegulatoryDrivers(orBarriers)?

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Financials (Elements of the Pitch)

Aspartofthestory,theFinancialsshouldconvey:–  5YearP&LProjecCon•  Revenue•  Expenses•  EBITDA

– Howlongandhowmuchwillittaketogettobreakeven?– Howmuchareyouraskingfor?– Useoffunds– Howmuchhaveyouraisedtodate?– HowmuchaddiConalcapitalwillyouneed?–  PMV? 17

Management Team (Elements of the Pitch)

Youmusttalkabouttheteamthatwillberesponsiblefor

execuEngthebusinessstrategy.YourManagementTeam

slideshouldaddress:– WhatistheCEO’sstart-upexperience?– Whoaretheotherkeymanagementteammembersandwhatistheirexperience?

–  Istheteambalanced?– Whoisonthecompany’sboardofadvisors/directors?

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Exit Strategy (Elements of the Pitch)

Everyinvestorwanttoknowhowtheymightgettheir

investmentback.Thistypicallyhappensbywayofan

acquisiEonormorerarelyviaanIPO.YourExitStrategy

shouldaddress:– Whomightacquireyou?– Whatothercompanieshavebeenacquiredinthisspace?– WhatweretheexitmulCples?(EBITDA,revenue)– Howlongwillyoutaketoexit?

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The Pitch

HerearesomeEpsonpresenEnganeffecEvepitch:

•  Planona20Minutepitch•  PracEce,pracEce,pracEce•  “Lessismore”onyourslides•  Avoidthe“beauEfulbaby”syndrome•  GetfeedbackbeforeandaDer•  Beexcitedandpassionate

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Information, Resources, and Support

•  KauffmanFoundaEonwww.eventuring.com

•  AngelCapitalAssociaEonwww.angelcapitaleducaCon.org

•  Books–  EarlyExitsbyBasilPeters–  TermSheets&ValuaEonbyAlexWilmerding

–  TheArtoftheStartbyGuyKawasaki21

Q & A

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