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A Snapshot of Angel Investing
In America--------------------------------------------------------------------
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• Regional Economic Development
• Technology Transfer • Development Finance
• Entrepreneurship• Venture Capital • Capital Formation
For over 15 years, our team has provided specialized products, management and training to development associations and entrepreneurial networks relevant to our expertise:
Our services enhance our partners' efforts to:
• Commercialize new technologies • Attract capital for business development • Invest capital in entrepreneurial ventures • Build communities with development finance and advanced
business skills
Our offices are located throughout the US.
DCNteam.com
DCN HistoryYear Program Launched
1997 National Association of Seed and Venture Funds
2002 Latin American Venture Capital Association
2002 WBTshowcase
2005 Technology Commercialization Services
2010 WBTangels
Important Things for Entrepreneurs
to Know about Angel Investors
HAIL TO THE JOB CREATORS
From 1980 to 2005, firms less than five years old accounted
for all net job growth in the United States.
Business DynamicsStatistics Briefing: JobsCreated from BusinessStart-ups in the UnitedStates, January, 2009.
Companies Backed by American Angels
Why Angels Matter:More than Money
A really great angel helps an entrepreneur:
1. See around the corner
2. Gain a sober second opinion
3. Network with people who can help build the business
4. By being an ambassador
5. Gain credibility in a field
Source: David Pecaut, Boston Consulting Group, 9/06 NAO
Investigation Feasibility Development Introduction Growth Maturity
Proof of concept
Pre-Seed Seed &Start-up
Early
TIME
VALLEY OF DEATH
Government Sources
Friends & Family
Angel Investors IPO, Banks
Self
The Capital Lifecycle
First, Second, etc...
Venture Capital
Sources of Early Stage/ Seed Equity Capital
How are Angels Different?FriendsFamily
$25K-$100K
Not accreditedUnsophisticatedInvesting in a friendPassiveOnly one investment (<$5,000)
Angels100K-$1 M
AccreditedExpertise and personal moneyActiveInvesting in entrepreneurPortfolio of angel deals
Venture Funds$3 Million +
Limited partnershipInstitutional moneyGen. Partners activeInvest in companyLarge portfolio History of building companies
Equity Capital Markets Large & Complementary
2009 Angel Investmentsource: UNH CVR
Early
St
age
Lat
e
57,000 deals$17.6 B
Mostly early stageAvg.: $310K
2009 VC Investment
source: NVCA/PWC/VE
2,917 deals$18.25 B
Avg.: $ 6.26MMostly later stage
MONTANA
WYOMING
IDAHO
WASHINGTON
OREGON
NEVADA
UTAH
CALIFORNIA
ARIZONA
NORTH DAKOTA
SOUTH DAKOTA
NEBRASKA
COLORADO
NEW MEXICO
TEXAS
OKLAHOMA
KANSAS
ARKANSAS
LOUISIANA
MISSOURI
IOWA
MINNESOTA
WISCONSIN
ILLINOIS INDIANA
KENTUCKY
TENNESSEE
MISSALABAMA
GEORGIA
FLORIDA
SOUTHCAROLINA
NORTH CAROLINA
VIRGINIAWV
OHIO
MICHIGAN NEW YORK
PENN
MARYLAND
DELAWARE
NEWJERSEY
CONNRI
MASS
MAINE
VTNH
ALASKA
HAWAII
>100 deals
25-100 deals
< 25 deals
< 10 deals
VC Deals by State
Avg. Yr.
Who Are These Angels?• “Been there and done that” entrepreneurs• Roughly 400,000 active angels in the US• “The Millionaire Next Door”• Average age: 47• 9 out of 10 investments are devoted to
small, start-up firms with < 20 employees• Accept roughly 3 deals for every 10
considered • Average investment <$40K ($25K to $250K)
Myths: Angel Investing• Investments are large• Done mostly in the form of equity• Terms Sheets are detailed and
complicated• Investments result in IPO• There is a shortage of Angel
capital• Angels are very wealthy people• Angels are mostly retired
Shane, Scott A. Fool’s Gold: The Truth Behind Angel Investing in America. 2009, NY: Oxford University Press
Financially Successful Angel Investors…
• Are Accredited Investors (rather than “informal angels”)
• Have Experience …– Starting Companies– Investing in Start-ups– Working in the Industries in which they invest
• Are Highly Selective• Look for Financial Deal with High Returns• Do Not Overvalue Companies• Diversify their Early Stage Investments
Shane, Scott A. Fool’s Gold: The Truth Behind Angel Investing in America. 2009, NY: Oxford University Press
Achieving Liquidity
Why Do They Do It?• “Psychic income”• Social responsibility• Networking among peers• Affection for Entrepreneurs• Fun factor• Return on Investment - from
one’s own account
Growth of Angel Market
• Number of active angels: 400,000
• Number of Angel groups: 340• Angel investments totaled $8.5
billion across 25,200 ventures in the first half of 2010
• Some states have enacted tax breaks for angel investors
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Growth in Number of American Angel Groups
Sector Activity
58% of 2011 angel group investments are in healthcare and internet.
60% of healthcare deals were in medical device & equipment companies.
Premise on Angel Groups• Creating new class of investor
– Entrepreneur-friendly– Developing sophistication/ excellent processes– Growing geographic diversity
• Market efficiencies developing– Entrepreneurs can locate more easily– Investors get better quality deal flow, while individuals maintain anonymity– Building partnerships w/ other angel groups & VC community for follow-on funding
• Beginning to close capital gap
Networks vs. Funds
Angel Networks
• More informal (e.g., dinner club)
• Individual decision-making
• Tend to be member-led
• Deal-making outside
Angel Funds
• More structured
• Group decision-making
• Can be member-led or manager-led
• Deal-making inside
Member-led vs. Manager-led
Member-led
• Share the work: finding, vetting, pricing, negotiating
• Relies on camaraderie• Leadership is elected• Admin tasks by
volunteers• Member involvement
can wane
Manager-led
• Manager does the work
• Relies on Manager• Leadership is
employed• Admin tasks by
Manager• Member involvement
can wane
New Approach - Facilitated
• Member-led but professionally-facilitated & administered
• Supports member-led collaboration with a more intentional approach
• Builds knowledge and skill
• Sustains long-term viability
Role of Facilitator
• Help the Fund Get Organized• Facilitate the Investment Process
– Methods and Disciplines
• Support Logistics– Communications, Website
– Administrative Services
– Templates
• Facilitate Network Linkages– Technology
– Capital
Recap:Characteristics of
Angel Investors• Business Builders• Prosperous• Give Back to Young
Entrepreneurs• Spend Time• Contribute Knowledge
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The Task of a Regional Economic Development
Strategy
is to Build an Entrepreneurial
Ecosystem
CommercializingOklahoma
Technology and Research
through
university-connected
angel funds
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Thank You
Jim TroxelTeam Leader
WBTangels, a unit ofDevelopment Capital Networks, LLC