Evaluation and due diligence of business angel investments

2 CTI Commission for Technology and Innovation | Start-up program Venture Concept Sàrl

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EVALUATION AND DUE DILIGENCE OF BUSINESS ANGELS INVESTMENTS

Claude Florin, A3 Angels


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Evaluation of projects impacts results

Source: Kaufmann foundation 2007 N= 539 BAs - 3’000 BA investments

010203040506070

less than 1X

1X to 5X

5X to 10X

10X to 30X

more than 30X

% exits

Less than 20 hoursMore than 20 hours


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Assessing and mitigating market risks

Scenario analysis Uncertain predictions Market size

Market dynamics

Market needs

Willingness to pay

Target market


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Valuation matters

Principles A bad business at a good price is a looser A good business at a bad price is not a winner Price matters

Pre-money valuation impact The future determines the value, not the past

Investment example CHF 1M investment CHF 20M exit ROI simulation

Pre-money valuation

Exit after 5 years

Exit after 7 years

1 58% 39% 5 27% 19% 10 13% 9%

Source : Peter Pfister, CTI Start-up, 2010


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Team - Why does it matter so much?

The product/service is what attracts attention People transform the project into reality No individual has an infinite array of qualities and competencies The observer (i.e. you!) matters as much as the one observed Source : Frank Gerritzen,, CTI Start-UP, Angel Days 2012


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Inventory of competencies

Team Inventor or entrepreneur ? Who is part of the team? Are competencies overlapping or complementary?

Assesment bias How to assess the personality and competencies of the entrepreneur and founding team? Usus magister est optimus! Beware your own experience and projections. Do not trust your instincts: objectivity! Source : Frank Gerritzen,, CTI Start-UP, Angel Days 2012


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Competencies vs. attitude Frequent attitudes

1. Resistance to change

2. Difficulty to question own competencies

3. Infatuation with product / service / colleagues.

4. Lack of sales skills / willingness to ‘hit the road’

Life goals

Include entrepreneur and team Driving factors Looking for lifetime employment ? Industry experience Ready to give up CEO title Paranoid, strong personality

Source : Frank Gerritzen,, CTI Start-UP, Angel Days 2012


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Team organization and recruitment What do you bring to the table? What is the start-up looking for? Transparency, honesty and clarity (no hurt feelings!) Know your limitations as much as the entrepreneur’s

Young entrepreneurs

Experienced Business Angels


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Strong personality may impact performance Risk factors

Underperformance • Poor delegation • Poor planning • Excessive optimism • Lack of awareness of the environment • Inability to adapt to change.

Personality • Over confidence • Reliance on of personal taste

and opinion • Intuitive decision-making led

by emotive factors • Education or experience

gaps • Resistance to advice


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Young entrepreneurs

Experienced Business Angels

Role of BA in the team

Share strategy Manage problems Act in good faith No self-serving interest

“Bring something to the party” Expertise Skills Time Networking Money


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Team motivation with participation Salaries lower than the market rate but performance bonus

Stock are a useful tool for start-ups. Shares : employee tax discount 6% year of the lockup period, max 60% (law revision 2010). Options : taxed at exercise date.(GE, VD if vesting period)

Attract key management and employees

Act as an incentive for achieving growth targets

Cost effective method for rewarding employees for

extraordinary efforts

Limit size of pool to prevent the dilution of overall share

value


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Investment sectors ICT,

Software and Multimedia Medtech, biotech Environment, Energy and Health Creative industries Manufacturing, Food, Retail Services

Source : Popular sectors for investments in EBAN 2008 survey


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Involvement in Company Lead investor

Board member Advisor / coach / mentor Crisis management support Exit or next round of fund raising Passive


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«More or Less Correct» vs. «Completely Wrong»

vs

Source : Diego Braguglia, CTI Start-UP, Angel Days 2012


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Technology Adoption Life Cycle

Innovators 2.5%

Early adopters 13.5%

Early majority 34%

Late majority 34%

Laggards 16%

Visionaries: Be the first mover!

Bowling Alley

Early market

Techies: Try it!

Pragmatists: Use it when it’s ready!

Skeptics: Never happen!

Conservatives: Make sure it’s ready!

Late market

Mainstreet market

© Chasm Group


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Assessing the target market # patients Total value of segment Growth rate Accessibility Potential for reimbursement # competitors per segment Maturity of product/services Market penetration and share Revenue, profitability, pricing SWOT Intensity of competition (Porter) Investor interest in segment Variability of needs in segment Are needs met by current treatments Unmet needs and gaps Openness of stakeholders to innovations Likelihood of adopting innovations Willingness to absorb costs

Market size

Market dynamics

Market needs

Willingness to pay

Target market Source : Stanford Bio design


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Market size evaluation Market Size for product and / or technology to be correctly identified

Top Down Reports, Conferences, Web, Stats, …

Bottom Up Harvest “real” numbers from different sources Interviews with industry experts & veterans, sales reps, local players, Re-calculate the market size

Top Down and Bottom UP estimations should be in the same log range



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Market Size Identification Market Size for Product and / or Technology to be Correctly Identified

Strength of the “selling proposition” New Markets to be created (i.e. social media, …) Prime Market vs. OEM “off label” sale potential Generic vs Branded Strength of Brand IP and Trade Mark …



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Medtech market analysis

0 5 10 15 20

Mild CKD

Moderate CKD

Severe CKD

ESRD

Prevalence

Mild CKD Moderate CKD Severe CKD ESRD

274%

47%

190%

15%

1000

10000

100000

10 100 1000

Source : Stanford Bio design

Market size

Cos

t / p

atie

nt /

year

$

Total medical expenses $B

%


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“Shifts”

Founder(s) Friends Science Prototype Unit: 1x $

Entrepreneur Team

Product Trial/Small Scale

Unit: 10x $$$

Manager Organisation Market Manufacture / Sale Unit: 100x $$$...$



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Porter’s Five Forces

Competitive environment Customers

Newcomers

Suppliers

Substitution

products

Competitive strength of rival firms

Ability of new entrants to start operations

Ability of new products to replace existing products

Relative strength and number of buyers

Relative strength and number of sellers


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Medtech sales channels Complex / expensive

medical device ?

No dedicated sales force Dedicated sales force

Funding supports sales force ?

Sales force

Complex product pipeline

Volume ?

Manufacturer licensing Hybrid model Direct sales

force Specialized distributor Distributor

Yes

Access to KOL relationships Yes

High Yes

2-4 years

No

Low No

No

Source : Stanford Bio design


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Evaluation of the product and technology Questions you should consider in relation to products

Is or could the product/technology solving a core problem? What could be the applications the technology can be used for? Is the technology disruptive (By factors, not just 10%) e.g.:

Faster Lighter Cheaper Less power consumption Etc.

What is the status of the development (Research, prototype, industrialization)

Source : Balz Roth, CTI Start-UP, Angel Days 2012


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Evaluation of the product and technology Be aware: • You might not find the disruptive element in the product/technology but in

the meta-system of potential client (E.g. Lemoptix: Pico-projector: unreached miniaturization makes it useful for mobile phones. Arktis: Reduction of false alarms in container ports)

• Calculate the cost-, product-advantage of a potential client application to get a feel for the market demand, pull.



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Evaluation of the product and technology Questions you should consider in relations to clients

Are some clients already willing to pay for services, prototypes? Has the company identified the most promising application to “test the water”? Are they focused or just all over the place? Are they talking to engineers only or is there some pull from business development of the client company? Are they able/willing to develop the final product/services in an iterative way with clients?



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Evaluation of the product and technology Be aware:

Don’t get dragged away by the technology. It’s all about the application, even if the startup does not yet know, which application might be the most promising one. What is the design in effort for the client? Even if the technology might have a huge advantage for the client, if his own engineering effort is substantial he might be reluctant. The “pain relieve” for the client is the key, not the nice technology!



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Intellectual Property Rights - Intangible assets

Patent

Trademark

Design Copyright

Author right

Topography

Plant varieties

Trade secrets

Know How Domain names


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IP Due Diligence

Granted Patents Granted claims covering the product on the market Maintenance fees (annuities) paid ? Appropriate territorial coverage Assess FTO and enforceability of IPR Review licensing policies Review the register for security interests

Patent Applications Assess patentability of existing patent applications Scope of protection (Interpretation of the claims may differ from one country to another) Further searches may be needed to ascertain patentability Ownership of rights Take into account the 18 months ‘blind period’


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Decision to apply IP Protection

Pros protection from infringement competitive advantage returns on R&D investments increasing company value licensing revenues raising image of company security for investors

Cons risk of disclosure of sensitive knowledge long, complex and costly procedures potential difficulties in enforcement of IPRs short life-cycle of products lack of knowledge


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Evaluation of the product and technology Questions you should consider considering IP, patents

Who owns the IP, it is protected & has freedom to act Do the have a second opinion report, e.g. CTI label package? What’s the patent all about? Can it easily be circumvented (Most of them can)?



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Evaluation of the product and technology Be aware:

• Can you defend a patent as a startup? Most likely you cant. Think about

ways to protect your IP differently (E.g. produce the building blocks with different outsourcing partners)



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Evaluation of the product and technology Take away:

Connect the dots, try to think about the meta-system: the client application the clients effort to use the particular technology

Iterate 3h First meeting, read docs, are there enough green lights? 3 days Are the red lights manageable, what do clients say? 3 month Interview with field experts, IP analyses, etc. Don’t analyze endlessly, rather stop, you never know it all



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IP Due Diligence

Registered Trademarks Check effective use of the trademark Renewal fee paid ? Appropriate territorial coverage Review licensing policies Review the register for security interests Review commercial agreements (exclusivity …)

Trademark applications Assess registrability (availibilty searches) Ownership of rights


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Patents Exclusive right or monopoly to prevent competitors from manufacturing, using, selling, offering for sale, importing the invention in a specific territory for a limited time. Protect inventions that are new, involve an inventive step and are susceptible of industrial application. They protect :

Technical characteristics / features (product claim) Process of manufacturing or functions (method or use claim) 20 years from filing date (+5 years for medical


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Trademarks ® ™ Sign for distinguishing goods and services from competitors on the market place May take different forms (word, image, logo, sound, smell, three dimensional representation …) Not limited in time Protection for specific goods or services in a determined territory Prevent others from using, selling, offering to sale, advertising identical or similar products or services under the registered trademark


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Designs ® Protect the aesthetical aspect (two or three dimensional, shape, contour, line, appearance, colour, texture …) of a product for a limited time in a specific territory.

Criteria for registration

Novelty (Prior disclosure prevents obtaining a valid design) Original creation (Not original if the overall impression only distinguishes from existing designs by minor characteristic)

Registered for five years, may be renewed for 4 additional 5 years periods


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Copyright / Author Right © Protects the original work of an author.

books, manual, maps, charts, prints, musical compositions, dramatic works, photographs, paintings, drawings, sculptures, motion pictures, computer programs, sound recordings, choreography and architectural works

Protects the expression or the materialization of an idea, not the idea or concept itself Automatic protection, does not need registration (use of the © copyright, [date], [name], all rights reserved) mention recommended Duration 70 years after the death of the author International recognition (Bern convention)


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How to Protect IP and Manage it ? Keep invention related information confidential Use 'Non-Disclosure Agreement' in preliminary discussions, studies or collaboration with sub contractors or academics Determine ownership of IPR Assess patentability of the invention (prior art searches) Determine a strategy for protecting the invention File and prosecute patent applications Monitor the market and enforce IP rights


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Choose your VC VCs will become your partners and you will spend a lot of time & energy

with them > Choose them carefully; Target equity at exit is not a function of initial equity stake but the reflects of the company strategy; Equity at exit depends on:

Technology success; Negotiation power; Market; Competition.



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The VC’s new Investment Model Same as before for the beginning of the story (Company creation with

100k, founders and F&F are shareholders), but… Once the business model is in place, the first round of investors come into the company. Ideally some smart money together with deep pockets to follow over time. Small investment “to see”… This shareholders’ group is ready to support the company even in rough times as long as the end goal is still in sight and reachable with reasonable means. Else down-rounds occur frequently. New investors may be attracted at a later stage, depending on the actual cash needs of the company. Will not happen at a “huge” premium towards initial investors. Exceptions are always possible! Only investors with long term view and deep pockets might end-up having healthy portfolios.



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Some Lessons Learnt What comes out of our experience …

A game is not won (or lost) until is really over; Always think a couple of strokes in advance; Common sense is key; Grab your luck when you recognize it; Endurance, Endurance, Endurance; Timing is key



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Some Lessons Learnt II Consider fully funded scenarios only;

Ensure full support of investors and co-investors in rough times; Start with very small amounts; Be patient; Ensure support of larger funds; Back mainly big ideas; Small ideas have to be “cheap” or avoided…



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Com

pany

Levels and methods of valuation

Inve

stor

Investor‘s return

Dividends + capital C

usto

mer

s expenses

Cash Inflow

„VC“ method

•Discounted cash-flow , •Multiples (comparables)

Operating revenues earnings

Investor‘s expenses

Operating costs

Capital payment

Cash Outflow


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Valuation on the timeline

Time Foundation

Par Value Price a Price b

Financing Rounds

Most important Valuation

Final Price

Exit (Trade Sale, watch out

for IPO issues)

Intermediate Valuations (with up- and downrounds)

Pie Calculator

Source : Jean-Pierre Vuilleumier, Angel Days 2012 © CTI -Invest


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Valuation: two views Company’s View (DCF Method classical) Company Value = Sum of discounted FCF + discounted CV

CV Continuing Value

t 1 2 3 4 5

Investor’s View (Venture Capital Method) IRR (Internal rate of return) Sum discounted CF = 0 EXIT Value

t

∞

1 2 3 4 5



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Success rate

Source: Rule of thumb of the VC industry.

Number of Projects

Category Probability (in %)

1-2

Highflyer (IPO) Star (Trade Sale) Successful EXIT

10-20 %

3-4

LifeStyle company Survival mode

30-40 %

5-6

Bankruptcy Failure Winding down

50-60 %


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Expected return by stage of company

Put those numbers in relation the expected success rates and the VC Business model!

Project stage Expected Return (p.a.)

Multiplicator (holding period:

5 Years)

Seed 60-80 % 10.5 - 18.9 x

Start-up 50-70 % 7.6 - 14.2 x

First stage 40-60 % 5.4 - 10.5 x



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Business model Venture Capital

Initial situation : VC Company with CHF 10 Mio. in funds 10 Investments of CHF 1 Mio. in Start-up All Exits in 5 years

Data Factor Return Target IRR for all projects 40% 5.3 x

Highflyers / Star (successful exit) 2 5.3 x CHF 10.6 Mio.

Lifestyle companies (buyback founders) 4 1 x CHF 4.0 Mio.

Bankruptcy 4 0 x 0

Return of VC in 5 years CHF 14.6 Mio.

Return of VC in % p.a. (IRR) (calculated on profit of CHF 4.6 for 5 years)

8%



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Business Angel methods Berkus Method

Sound idea CHF 1 Mio. Prototype + CHF 1 Mio. Quality mgt team + CHF 1-2 M. Quality board + CHF 1 Mio. Any roll-out, sales + CHF 1 Mio. Value Range: HF 1 - 6 Mio.

Meier Method 1 Manager CHF 1.5 Mio. 2 Managers + CHF 1.5 Mio. Value Range: CHF 1.5 - 6 Mio.



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Business Angel methods

Morbitzer method Businessidea CHF 0.75 Mio. Mgt Team CHF 1.5 Mio. Prototype (PoC) CHF 0.75 Mio. Board/Investors CHF 0.75 Mio. Total CHF 3.75 Mio. -Value add investor CHF 0.75 to 1.0 Mio. Valuation CHF 2.75 - 3 Mio.

Rule of thirds 1/3 Founders 1/3 Management Tea 1/3 Investor (BA)

Price range method Only consider to invest if: Valuation range proposed by founders is CHF 2 - 5 Mio.



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Valuation of an high potential venture (1) Lemoptix case study

24-month old technology company, Successfully beta-tested its product Seeking $2 million of venture capital to go into volume production and distribution. Forecasting sales revenue of $30 million with net income of $5 million in 5 years. What percent of the equity will the venture capitalists require?

What do we need ? 1. Risk adjusted cost of capital (IRR) 2. Capital Need (investment) 3. Exit timing of investor 4. Exit Value:

-Future earnings and profits (NP = net profit) -Comparable P/E



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Pre- and post-money valuation Post-money valuation CHF 9.5 Mio 100 %

-Investment CHF 2.0 Mio. 42 % Pre-money valuation CHF 7.5 Mio. 58 %



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Internal rate of return (IRR) to compensate risk

.xls function = IRR(values, guess) e.g.: IRR(D1:D:60,0.3/12)

monthly or annual compounding

IRR % Years 1 2 3 4 5 6 7

Mul

tiple

1 - - - - - - - 2 100 41 26 19 15 12 10 3 200 73 44 32 25 20 17 4 300 100 59 41 32 26 22 5 400 124 71 50 38 31 26 6 500 145 82 57 43 35 29 7 600 165 91 63 48 38 32

Multiple Years

1 2 3 4 5 6 7

IRR

%

0% 1.00 1.00 1.00 1.00 1.00 1.00 1.00

5% 1.05 1.10 1.16 1.22 1.28 1.34 1.41

10% 1.10 1.21 1.33 1.46 1.61 1.77 1.95

15% 1.15 1.32 1.52 1.75 2.01 2.31 2.66

20% 1.20 1.44 1.73 2.07 2.49 2.99 3.58

25% 1.25 1.56 1.95 2.44 3.05 3.81 4.77

30% 1.30 1.69 2.20 2.86 3.71 4.83 6.27

35% 1.35 1.82 2.46 3.32 4.48 6.05 8.17

40% 1.40 1.96 2.74 3.84 5.38 7.53 10.5


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Valuation matters

Principles A bad business at a good price is a looser A good business at a bad price is not a winner Price matters

Pre-money valuation impact The future determines the value, not the past

Investment example CHF 1M investment CHF 20M exit ROI simulation

Pre-money valuation

Exit after 5 years

Exit after 7 years

1 58% 39% 5 27% 19% 10 13% 9%

Source : Peter Pfister, CTI Start-UP, 2010


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Discounted Cash Flow

0 1 2 3 4 5 > 5

Point of time of valuation

Residual value

Net residual value

Net value of the free cash-flow during the

planning period

Discounted by capital costs

Planning period


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Discount rates

Stage Discount CAPM

Seed stage 70-100% 4-14%

Start-up stage 50-70% 4-14%

First stage 50-70%

Second stage 35-50%

Later stage 25-40%

Source: Patrick Frei & Benoît Leleux


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Every method gives a different valuation Discounted Cash-Flow

Often over estimates real value Uncertain assumptions Not applicable for growth companies

Multiples Simple– no negative numbers Time value not considered Just a high-level forecast

8% 10% 15%35% 4,850 5,144 6,13540% 3,351 3,517 4,04845% 2,359 2,458 2,76650% 1,675 1,737 1,92655% 1,190 1,230 1,351risk

ratio

annual growth of the residual value

year2011 2012 2013 2014 2015 2016

0.5 0 250 1,000 2,500 5,000 10,0001.0 0 500 2,000 5,000 10,000 20,0001.5 0 750 3,000 7,500 15,000 30,0002.0 0 1,000 4,000 10,000 20,000 40,0002.5 0 1,250 5,000 12,500 25,000 50,000

year2011 2012 2013 2014 2015 2016

5.0 neg. neg. neg. 2,500 10,000 25,0006.0 neg. neg. neg. 3,000 12,000 30,0007.0 neg. neg. neg. 3,500 14,000 35,0008.0 neg. neg. neg. 4,000 16,000 40,0009.0 neg. neg. neg. 4,500 18,000 45,000

turn

over

mul

tipEB

IT-M

ultip

le


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A growing stream of cash flows with a fixed maturity. Present value of a growing annuity:

0 1

C

2

C×(1+g)

3

C ×(1+g)2

T

C×(1+g)T-1

…

Growing annuity


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Comparables (public companies Europe) Industry EV/EBITDA EV/EBIT Biotechnology NA NA Communications Equipment 5.33 7.75 Computer Hardware 4.91 7.40 Consumer Electronics 3.44 6.35 Consumer Finance 42.67 49.19 Electronic Components 3.70 6.39 Electronic Equipment and Instruments 5.62 8.01 Health Care Technology 5.51 10.45 Home Entertainment Software 4.17 31.04 Integrated Telecommunication Services 5.17 10.28 Internet Retail 13.73 18.41 Internet Software and Services 8.03 22.55 Semiconductor Equipment 4.65 6.37 Semiconductors 6.31 NA Systems Software 6.27 8.90 Wireless Telecommunication Services 6.61 12.17

Source: Damodoran on-line


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Comparables (public companies Europe)

Industry Group Price/Sales Net Margin EV/Sales Pre-tax Operating Margin Biotechnology 4.72 -11.84% 4.63 -4.23% Computer Software 2.89 11.09% 2.94 18.16% Computers/Peripherals 0.85 8.62% 0.84 10.23% Electronics 1.29 5.48% 1.41 10.25% Electronics (Consumer & Office) 0.81 3.21% 1.00 7.77% Heathcare Information and Technology 1.61 5.47% 1.79 10.84% Heathcare Products & Services 2.85 14.19% 2.97 19.21% Internet software and services 1.62 4.63% 1.68 6.87% Pharma & Drugs 2.22 15.48% 2.57 24.46% Power 0.89 7.69% 1.62 14.59% Semiconductor 1.40 1.42% 1.53 6.42% Semiconductor Equip 2.33 11.85% 2.27 19.44% Telecom (Wireless) 1.83 23.63% 2.46 16.07% Telecom. Equipment 0.80 2.54% 0.84 6.53%


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Creating a startup is a tough journey! Many interesting projects do not take off, or die…

Project Technical validation

Financing Industrialisation

Commercialisation

Product development

Growth

Commercial validation


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To build a successful startup, one must:

“Solve an important, valuable problem… For clients who have money… Who want to pay well… With a short sales cycle… And will buy more, soon”

Source: Index - Adapted from Ken Morse, MIT


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The process Timeline and milestones Investments criteria SWOT and strategic analysis Due diligence Contract, term sheet

Deal flow generation

Deal screening

Due diligence

Investment decision

Structure transaction

Investment management


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Investment process

4 Months

50% Screening

Evaluation

Due diligence

Investment 1%


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Due diligence process as an ongoing dialogue

Entrepreneur Business Angel

Source: fiban.org

Introduction Pitching

Deal flow identification

Negotiations of business opportunity

Valuation discussions Due diligence Business plan

Investment readiness

Shareholder agreement Financing


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Steps in the investment process

Source : Guide to private equity, BVCA / PWC, 2003

Stage Evaluating B. Plan Due diligence Negotiation Monitoring EXIT

Entrepreneur Prepare Business Plan Contact investors

Provide information

Disclose all relevant business information

Provide periodic management accounts Communicate with investors

Entrepreneur & investor

Meet to discuss BP Build relationship Outline terms Liaise with external consultants and accountants

Negotiate final terms Document constitution and voting rights

Investor Review the Business Plan

Conduct enquiries Value the business Consider financing structure Initiate external DD

Draw up completion documentation

Seat on board ? Monitor investment Constructive input Involvement in major decisions

Reports Business Plan Offer letter Consultants reports Accountant reports

Disclosure letter Warranties and indemnities Memorandum and articles of association Shareholder agreement

Management accounts Minutes of boards and other meetings


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Investors are evaluating a number of parameters


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Four main risks to evaluate Product risk Financial risk People risks Market risks

Technology, patents Expenses, refinancing Entrepreneur, team Business model, customer demand

Source : Peter Pfister, CTI Start-UP, 2010


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Top Investment criteria Selected Criteria BAs VCs Enthusiasm of the entrepreneur(s) 1 3 Trustworthiness of entrepreneurs(s) 2 1 Sales potential of the product 3 5 Expertise of the entrepreneur(s) 4 2 Investor liked entrepreneur(s) upon meeting 5 9 Growth potential of the market 6 6 Quality of the product 7 10 Perceived financial rewards (for investors) 8 4 Niche market 9 13 Track record of the entrepreneurs 10 8

Source : Mark Van Osnabrugge and Robert J. Robinson, Angel Investing, 2000


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Key Partners

Value Propositions

Customer Segments

Customer Relationships

Cost structure

Revenue streams

Channels

Key Resources

Key Activities

Business model


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Financial Forecasts

© Dilbert – International Herald Tribune 17.09.2011


Supported by

Five Types of Start-ups – Be aligned ! Lifestyle Small business Scalable start-ups Buyable start-ups Social start-ups

Work to live their passion Work to feed the family Born to be big Born to Flip Driven to make a difference

Source : Steve Blank’s blog, Sept 6th, 2011


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Due Diligence Process

Source: http://www.angelcapitalwiki.org/mediawiki/index.php5?title=Due_Diligence


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Due Diligence Process

Source: http://www.angelcapitalwiki.org/mediawiki/index.php5?title=Due_Diligence

Eyes-wide-shut investing

Reasonable investigations

Exhaustive due diligence

Forget cardinal rule : killer ideas + profitable business

To ensure as far as possible that entrepreneurs can do what they say

See themselves as financial moguls rather than mentors with money

Extreme A Best Practice Extreme B


Supported by

Source : Mark Van Osnabrugge and Robert J. Robinson, Angel Investing: Matching Start-Up Funds With Start-Up Companies

Due Diligence checklist Track record of the management Size and growth potential of the market Demand for product/service among target customers Ability to deliver product/service on time and at agreed price Competitive advantage of the product Competitors Marketing and distribution plans Soundness of financial projections Assessment of the intellectual property rights, if any Existing or possible legal contingencies Valuation for the venture

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Evaluation and due diligence of business angel investments

Economy & Finance