THE ANGEL CONNECTION · 2008. 10. 10. · VC Investments • $22B in 2006 • $ ... • Sourcing...

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THE ANGEL CONNECTION

THANK YOU SPONSORSPremier Partner

THANK YOU SPONSORSSite Partner

THANK YOU SPONSORSAssociation Partners

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Catherine MottCEO and Founder

BlueTree Capital Group and BlueTree Allied Angels

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0 100,000 200,000 300,000 400,000 500,000

500 Classic VCs

1000-2000 Seed Funds

>50,000 Angels

>200,000 Friends & Family

500,000 Startup Companies

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Growth in North American Angel Organizations

1999 2000 2001 2002 2003 2004 2005 2006Sources: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-06 data)

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How much is being invested? (Data Source UNH)

Angel Investments• $25.6B in 2006• $21B in 2005• $22.5B in 2004• $18B in 2003 • $15B in 2002

VC Investments• $22B in 2006• $21.5B in 2005• $21.5B in 2004• $19.4B in 2003 • $21.4B in 2002

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Stage Pre-Seed Seed/Start-Up

Funding Gap between $500,000 and

$2,000,000/$5,000,000

Early Later

Source Founders, Friends

and Family

Individual Angels

Venture Funds, Banks

Investment $25,000 to $100,000

$100,000 to $500,000

$2,000,000/$5,000,000 and up

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Care & Feeding of an Angel Group

DueDiligence

Monitor, Report& Advise

Deal StructureNegotiation

Screening

The Investment Process

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Define theGroup Structure

CapitalSources

GroupManagement

CommunityBuilding

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Affiliates

Full MembersProvisional Members

Members and Affiliates – April, 2008

Source: 2008 ACA Angel Group Confidence Survey

2007 Group Investment Data

• 10% increase in average investment per round from 2006• 66% had follow-on or co-investments with venture capital firms• 25% had distributions to investors

Average MedianNumber of Investments 7.3 5Total dollars invested $1.94 mil $1.1 milDollars invested per round $265,926Number of new companies 4.5

Average Size Investment Per Round - 2007

Percent of GroupsSource: 2008 ACA Angel Group Confidence Survey

0 10 20 30 40

> $750,000

$500,000 - $750,000

$250,000 - $500,000

$150,000 - $250,000

< $150,000

Investment Preference – 2007-2008

Source: 2008 ACA Angel Group Confidence Survey Percent of Groups

0 10 20 30 40 50 60 70 80 90

Telecommunications

Software

Semiconductors

Retail/ Distribution

Networking & Equipment

Medical Devices & Equipment

Media & Entertainment

IT Services

Industrial/ Energy

Healthcare Services

Financial Services

Electronics/ Instrumentation

Consumer Products/ Services

Computers & Peripherals

Business Products/ Services

Biotechnology

Preferred Investment/Company Stage – 2007-2008

Seed/Startup Early Stage Expansion Later Stage

Percent of Groups

Geography – Where do Groups Invest?

Percent of Groups

0 5 10 15 20 25 30

No restrictions

Region

State/ province

4-hour drive

2-hour drive

2008 Prediction: Overall Investment Activity

Percent of Groups

0 10 20 30 40 50 60

Deals and dollars decrease

Deals decrease, dollars increase

Deals increase, dollars decrease

Everything is same

Deals and dollars increase

2008 Prediction:

How Many New Companies Will You Invest In?

Percent of Groups

Companies0

None 1 to 2 3 to 5 6 to 9 10+

2008 Prediction:

How Will Conditions for Liquidity Change?

Source: 2008 ACA Angel Group Confidence Survey Percent of Groups

0 10 20 30 40 50 60

Strengthen signficantly

Strengthen slightly

No change

Decrease slightly

Decrease significantlly

Co-Investment/ Follow-On Preferences

Percent of GroupsSource: 2008 ACA Angel Group Confidence Survey

0 20 40 60 80 100

No co-investment

Other private equity

Family offices

Later-stage VC

Early-stage VC

Other angel groups

Individual angels

2 to 10 11 to 25 26 to 50 51 to 75 76 to 100 101+

Investors Per Group

Source: 2008 ACA Confidence Survey

Average = 55 Median = 41

Percent of Groups

Organization Types

LLC LP C-Corp 501c3 501c4 501c6 Non-Profit None

For Profit 48%(54 groups)

Non Profit 35%(39 groups)

No Structure

17%(20 groups)

Groups

Source: 2007 ACA Conf survey and membership applications – 113 groups reporting (2006-2007)

Trends Among ACA Member Groups

• University-connected angel groups• Green/ clean-tech focus • Women angel groups• Co-investment – regions, US, cross-border• Communication with angels world-wide• Growing relationships with VCs

New Activities and Member Benefits• Public policy committee – education/ policy leadership

• Regional/ collaboration committee – networking and co-investment support

• Directors and Officers’ insurance program – Chubb Insurance/AH&T

• Updated membership directory, searchable on-line

• Partnership with National Venture Capital Association• Research – Returns of Angels in Angel Groups

• Investment data partnership – Dow Jones VentureOne

Best Practice Guidance Papers

• Board Governance• Negotiating Deal Terms• VC – Angel Group Relationships• State Angel Tax Credit Programs• Due Diligence Practices• Sourcing Best Deals Practices

Angel Group Financial Performance Research• Angel Capital Education Foundation, paid by Kauffman

Foundation• Rob Wiltbank (Willamette University) and Warren

Boeker (University of Washington)• First opportunity to understand the ROI of angels

connected to angel groups and drivers behind returns• Released November, 2007• Responses:

– 538 angels (accredited investors)– 3,097 investments– 1,137 exits and closures

Profile of Angels - Median• Years investing 9• Number of investments 10• Total exits/ closures 2• Years as entrepreneur 14.5• Number ventures founded 2.7• Age 57• Percent of wealth in angel investing 10%• Education Masters degree

Heavily Concentrated in EARLY investments– 34% seed stage, 39% startup, 18% early growth– 45% had no revenues when the initial investment was made

Invested Returned

Dollars per deal: $50K $40K median $191K $486K mean

Group-Affiliated Angel Investments

Distribution of Returns by Venture Investment

35% - 0XOverall Multiple: 2.6X

Avg Holding Period: 3.5 years

Average IRR: 27%

3.3 yr

4.6 yr4.9 yr 6 yr

< 1X 1X to 5X 5X to 10X 10X to 30X > 30XExit Multiples

The Impact of Time in Due Diligence

Overall Multiple for High Diligence 5.9X (4.1years)

Overall Multiple for Low Diligence 1.1X (3.4 years)

Median: 20 hours

26% involved over 40 hours

Low Diligence High Diligence

Relationship to Industry Expertise 50% of deals were not related. When related, they typically had 14 years

of experience

High 3.7X (4.0 years)Low 1.3X (3.6 years)

< 1X 1X to 5X 5X to 10X 10X to 30X > 30X

Exit Multiples

Low Industry Expertise High Industry Expertise

Impact of ParticipationMentoring, Board, Financial Monitoring

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)

Low Participation High Participation

Relationship with Follow On Investment (Same Angel)

No 3.6X (3.3 years)Yes 1.4X (3.9 years)

30% of deals had follow on investments

< 1X 1X to 5X 5X to 10X 10X to 30X > 30X

Exit Multiples

Follow-On YesFollow-On No

Venture Capital Involvement35% of deals took on VC investment at some point

VC No VC

Thoughts and Questions?

• We’ll continue developing new programs for angel groups through:

– ACA Annual Members Meeting at Summit– Regional meetings– Surveys– Open to ongoing suggestions

For more Info - Executive Director Marianne HudsonAngel Capital Association8527 Bluejacket StLenexa, KS 66214913-894-4703mhudson@angelcapitalassociation.orgwww.angelcapitaleducation.orgwww.angelcapitalassociation.org

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THE ANGEL CONNECTION · 2008. 10. 10. · VC Investments • $22B in 2006 • $ ... • Sourcing...

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