OUR 2020 PLAN: KEEP MOVING FORWARD WHEN THE WORLD SHUTS DOWN

Crisis. Pandemic. Recession. A few months ago, who could have

guessed these would be words we’d end up hearing on a daily,

even hourly, basis? Back then, most people wouldn’t have believed

a storm of this magnitude was even coming.

In reality, you never know when something like COVID-19 could

come along and rattle the global economy. And the impact of the

virus on the stock market is not just evident – it’s staggering. But

that doesn’t mean we need to panic – because things are going

to be okay. We’re going to get through this.

In fact, this could be a better time than ever to consider adding private

equity to your portfolio of assets. All startups share a certain set of

qualities that make them better equipped to weather this storm

than many publicly traded goliaths. Let’s dig into this a little deeper.

The Big Advantage of Being Tiny

The truth is, many big companies – think Microsoft, Apple, or

GE – will miss their earnings this quarter. Most will see their

share price plummet. It could take months or even years for

them to recover.

These same factors can and do affect many startups’ bottom

lines. But when it comes to surviving recessions, there are big

advantages to being tiny.

T H E S T A T E O F A N G E L I N V E S T I N G

Q1 2020

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3

7

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The Private Equity Landscape

Digging Deeper Are SAFEs Really Safe?

The Future Is Automated – and It’s Starting Now

Ask Neil

Deal Snapshots

angels +entrepreneursnetwork

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For one thing, startups tend to have lower

overhead costs; many are fully remote, while

others have just a few dozen employees.

They also typically have more manageable

needs when it comes to manufacturing.

It’s much easier to stay up and running

when you’re only producing a small

number of units.

What this really boils down to is agility.

Most startups have pretty small needs

in comparison to their publicly-traded

counterparts – which means they’re able

to move quickly when the going gets

tough. When a crisis like COVID-19 forces

people to work from home, having a

small, nimble staff is a huge relief.

Plus, consider the fact that the vast

majority of younger companies sell most or

all of their products online – meaning they

don’t need to rely on brick-and-mortar

locations to make money. This gives them

a huge advantage over many traditional

retailers since it lowers their overhead costs

substantially. And in fact, some of these

companies are seeing significant growth

right now as consumers stay home and

do more shopping online.

Short-Term Pain for Long-Term Gains

Another key thing to remember is that

angel investing is a long-term commitment.

If you invested in a startup today – or even

six months ago – the odds of an exit within

that time window are minute. A typical

angel investment takes two to 10 years to

yield a return; the average holding time

is 3.5 years. By the time your portfolio

companies reach maturity, the effects of

this crisis are likely to be long past.

Additionally, many VC funds are still operating

like normal. Right now, there are many funds

in varying stages of completion – and many

that are already full. The managing partners

of these funds aren’t just going to sit on their

hands while this all plays out. Their funds are

effectively already raised.

And with deal terms on track to improve

as the market adjusts, startups will have

to justify every penny that goes into their

valuations… which most likely means they’ll

have to raise cash at a lower valuation. Just

like with real estate, stocks, and groceries,

the best time to buy is when the price is low.

Winners Never Quit

It’s a bit of a cliché, but it’s true: hard times

make us tougher. Think back to the Great

Recession of 2008 and 2009. Startups like

Uber and Airbnb – and plenty more – were

founded during this time and ended up with

valuations well over $1 billion. Some remain

in the tens of billions, even today.

Incredible stories like those are exactly why

I believe this could be one of the biggest

turning points in angel investing history. A

startup that has what it takes to persevere

through a global crisis might just have what

it takes to join the “unicorn club,” too.

But only those investors with a proven strategy

are likely to pick the right deals… and doing

your due diligence is more important than

ever in times like these. Without a data-driven,

analytical approach, the odds of rushing

into subpar deals is so much higher. In

conditions like these, it’s sink or swim.

My advice? Be careful, stay safe, protect

yourself… but don’t let your life come to

a screeching halt. You might miss out on

something amazing. +

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THE PRIVATE EQUITY LANDSCAPE

Credit Karma, the fintech portal

used by over 100 million members for

credit scores and taxes, is reportedly

negotiating a $7.1 billion acquisition by

Intuit (NASDAQ: INTU) - the company

behind TurboTax and QuickBooks.

Asana, founded by Facebook co-founder

Dustin Moskovitz, recently filed for a direct

listing IPO. Its last priced round valued the

firm at $1.5 billion in 2018. Asana makes

task-management and productivity software

for businesses.

Visa (NYSE: V) announced a “definitive

agreement” to buy Plaid, a fintech startup

with clients like Venmo and Robinhood,

for $5.3 billion. The acquisition marks a

significant exit for early investors like Spark

Capital, and could allow Visa to partner with

future fintech startups to drive innovation.

One Medical debuted on the Nasdaq

exchange on January 31, 2020, at a valuation

of $1.71 billion. The San Francisco-based

company is a concierge medical practice that

aims to provide primary care to patients at a

lower cost than traditional doctors’ offices.

Salesforce (NYSE: CRM), the world’s

leading CRM software provider, agreed to

purchase cloud software firm Vlocity for

$1.3 billion in an all-cash deal announced

in February. The acquisition will improve

Salesforce’s ability to build industry-

specific products.

Harry’s Inc., purveyor of direct-to-

consumer shaving products, had its planned

acquisition by Edgewell Personal Care Company

thwarted this February by the Federal Trade

Commission. The FTC cited concerns that

the $1.37 billion move would grant Edgewell

an unfair monopoly in its target market.

Procore, which makes cloud-based

project management software for the

construction industry, filed for a direct

listing IPO. Its last priced round valued the

company at $4.7 billion. According to the

global consulting firm McKinsey & Company,

investors have poured more than $27 billion

into the construction sector since 2008.

OfferUp, an online marketplace where

people can trade and sell their belongings,

announced on March 25 that they’re raising

$120 million in a round led by OLX Group

– which also happens to be the majority

investor in OfferUp’s competitor, letgo.

OfferUp’s previous investors include

Andreesen Horowitz and Warburg Pincus.

To date, OfferUp has raised $380 million.

Facebook (Nasdaq: FB) acquired

Scape Technologies, a London-based

computer vision startup trying to produce

location-tracking software that’s better

than existing GPS. The deal was reportedly

worth around $40 million – an interesting

sign that Facebook may be targeting

earlier-stage companies for their AR/VR

research laboratory.

4

DIGGING DEEPERAre SAFEs Really Safe?

If you’ve invested in an equity crowdfunding

campaign, there’s a good chance you

purchased a Simple Agreement for Future

Equity, or SAFE. The SEC recently proposed

a ban on SAFEs in equity crowdfunding,

leaving investors to wonder about the future

of their investments.

We encourage you not to worry - because

the SEC’s proposal still leaves the door open

for crowdfunded SAFEs in the future.

Here’s why.

A SAFE is essentially a contract that ensures

your investment dollars will convert into

shares of equity… eventually. They were

developed by Y Combinator, a prominent

startup incubator in Mountain View, California.

This conversion will occur only if a “trigger

event” occurs; most often, these events include

new rounds of funding and acquisitions.

The SEC believes these securities can be too

difficult for investors to understand and value.

They’re also concerned that unhappy investors

will damage the crowdfunding industry.

To be clear, the only bad SAFEs out there

are ones that say investors are never

converted to equity or ones that allow

founders to buy out their investors for little

to no return regardless of how well the

company has done. Most SAFEs are investor

friendly – certainly all those approved by

crowdfunding portals are – and those with

valuation caps and discounts built in can be

quite easy to understand.

Despite the SEC’s proposal, crowdfunding

portals may simply continue using investor-

friendly SAFEs.

They fall under these definitions because they

have the built-in possibility of converting to

true equity shares. In other words, the SEC’s

proposal may have left a loophole open for

issuers to keep using SAFEs.

At the end of the day, just keep in mind

that the Research Team and I spend hours

and hours digging through deal terms

for each and every startup we consider.

Not only can I say with confidence that

every deal on the Network is set up with

investor-friendly terms… but I can assure

you that we’ve never come across a bad

or dangerous SAFE. So keep doing your

diligence; make sure you know what

you’re getting into; but don’t let fear keep

you from a great opportunity. +

This is because good SAFEs fall under the definitions of both equity and convertible securities, both of which will still be allowed.

5

The robots aren’t taking our jobs just yet…

but they’re definitely changing the way we

work. Startups are increasingly using robotics

to solve so many real-world problems from

manufacturing to food preparation to surgery

– and venture capitalists are getting on board.

In the first quarter of 2020, VCs invested more

than $770 million in robotics companies

alone. As a result, the cost of robots has

been steadily declining, opening the door

for further innovation. In the past, only major

corporations could afford to buy robots for

their manufacturing facilities (think Tesla

building cars). Now that smaller companies

can afford to purchase a robotic arm, they

can take it back to HQ and figure out how

to make it smarter and more collaborative.

Which brings me to my next point: robots

are getting smarter. Software developers

are finding novel ways to use robots by

equipping them with all sorts of sensors and

cameras. These additions allow the robots to

collect data from their environments – which

they can use to adapt in real time. In the

wake of the COVID-19 pandemic, startups

are even teaching robots to thermally scan

people for signs of a fever. The integration of

sensors and cameras allows robots to assist

with increasingly complex tasks.

On top of that, the introduction of artificial

intelligence and machine learning allows

the robots to learn through trial and error.

This is a crucial step towards human-robot

collaboration. Developers are working around

the clock to make robots respond in real time

to their human counterparts, opening up new

applications for robotic technology.

It’ll be truly exciting to watch this space

develop – but we can’t forget the tried and

true uses that are particularly relevant during

these uncertain times. As I write this, robots

are delivering food and medicine, spraying

disinfectant in public spaces, patrolling

schools and businesses, and keeping the

technological world functioning while

we’re all stuck at home.

Personally, I’m grateful for our computerized

coworkers, and I can’t wait to see what they

do next. They’re poised to change business

as we know it, and their earliest investors

will reap the rewards. Keep an eye out for

your chance to back the next revolutionary

robotics company as an angel investor. The

team and I will do the same. +

THE FUTURE IS AUTOMATED– AND IT’S STARTING NOW

Total Capital Raised by Robotics Companies

Tota

l Fu

nd

ing

0

8K

4K

2K

10K

6K

Q2 ‘19 Q4 ‘19 Q1 ‘20Q1 ‘19 Q3 ‘19

66

ASK NEIL

Q: Is now a good time to invest in stocks with all that’s happening in this country?

The short answer is “yes.” But what’s happening in the world right now is going to fundamentally

change the business landscape. You need to be thoughtful about your investments and

only buy stock in those companies that are going to emerge from the pandemic stronger

than they were before. Do your research, and don’t put all your eggs in one basket.

Q: What kinds of things should I look for when completing due diligence?

There are a lot of considerations to make before making an investment in a company. Think

about my suggestion to back the jockey not the horse. Does the company have a team

you want to invest in? Think about whether the founders have relevant experience. If not,

do you suspect they’re just trying to cash in on a trend? Perform a SWOT analysis on the

company to see if they are truly differentiated from the competition. Does the company

have any intellectual property? Lastly, look at the company’s financials. If the company has

an unreasonable amount of debt on their balance sheet, that could be a red flag.

PRO TIPStrength, Weakness, Opportunity, and Threat (SWOT) Analysis

When evaluating a company, it’s important to find out whether or not that company

has a competitive advantage over its peers. This may sound like a daunting task. Luckily,

there are a number of tools you can use to tackle this type of analysis, one of which is

called a SWOT Analysis. Here are the main components of a SWOT Analysis:

Strengths: What does the company do well or better than its competitors? What unique

advantages does the company have (a star team, proprietary tech, cash on hand, etc.)?

Weaknesses: What does the company lack? Where is the company falling short of

competitors? What limitations does the company face?

Opportunities: Where could the company capitalize? Where could it operate with less

competition? What’s happening next in the market that could help the company succeed?

Threats: Are there weak points or openings where competitors could emerge? Is there

any upcoming legislation that could impact the company’s chances of succeeding? Is

the market getting smaller?

This is a simple framework, but it allows you to assess a startup’s competitive position

before you invest... and if you’ve already invested, it can help you see things from other

perspectives and develop innovative strategies for success.

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DEAL SNAPSHOTS

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Information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. Angels and Entrepreneurs Network expressly forbids its writers from having a financial interest in any security they recommend to their readers.All Angels and Entrepreneurs Network employees and agents must wait 24 hours after an Internet publication and 72 hours after a publication is mailed before acting on an initial recommendation. The Angels and Entrepreneurs Network does not act as an investment advisor, or advocate the purchase or sale of any security or investment. Investments recommended in this newsletter

should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Subscription includes The Angels and Entrepreneurs Network, which is published once per quarter by the Angels and Entrepreneurs Network, LLC, 1125 N. Charles Street, Baltimore, MD 21201. POSTMASTER: Send address changes to Angels and Entrepreneurs Network, 1125 N. Charles Street, Baltimore, MD, 21201. For questions about your subscription, call Member Account Services at 866.310.1498 or text to 443.294.7100. Our website is www.angelsandentrepreneurs.com.

For more information on these deals and instructions for those who would like to invest,

check out your active deal pages on AngelsAndEntrepreneurs.com.

7

EVERYDAE is an app that provides adaptive digital learning using 10-minute micro-lessons

to improve students’ educational performance, starting with the SAT. Their plan is to expand

across the students’ entire educational journey, providing a digital learning app for all

subjects at an affordable price.

CEO Christine Outram was named one of the Top 36 Most Creative Women by Business Insider.

Minimum investment: $500

HELLOWOOFY.COM is a social media marketing platform driven by AI and data science

for marketers of all levels of experience. The Company’s mission is to empower small- to

medium-sized business owners to succeed at social media marketing while saving more

than 10 hours a week.

HelloWoofy had more than $30,000 in sales in the last quarter of 2019.

Minimum investment: $100

PURE GREEN FRANCHISE is a retail juice bar franchise that started in New York and has

spread as far as Florida and Chicago. Its stores offer selections of healthy cold-pressed juices,

smoothies, and acai bowls made to order.

Pure Green’s five retail locations pulled in roughly $3 million in revenue in 2019 alone.

Minimum investment: $100