Tag Archives: Angel Investor

Angel Investing – Term Sheet “Control” Provisions

teamwork rowingIn a recent post I discussed the “economic” aspects of a term sheet. In addition to laying out the economics of a proposed transaction, the term sheet also provides a road map to various issues revolving around “control”.  As angels, although we are not involved in the day to day management of our portfolio companies, we need to have a voice in strategic issues that impact our portfolio companies. Typically this “control” is exercised either through: Continue reading

Angel Investing – Investing in Women Entrepreneurs

successful word cloudIn their soon to be released book –  What Every Angel Investor Wants You To Know  – An Insider Reveals How To Raise Smart Money For Your Billion Dollar Idea (McGraw Hill, 2013), Brian Cohen, Chairman of New York Angels, and John Kador, demystify the process of Angel investing.

Of particular interest to me is Brian’s experience with investing in early stage companies that are either founded by women or where women serve on the senior leadership team. There is lots of buzz these days on how women should or should not position themselves to excel in the corporate ranks. In the excerpt from his book below, Brian provides us with some great DATA as well as opinion on the case for investing in women. Continue reading

Angel Investing – Financial Models

Gold Guy With Business Reports“I am a serial entrepreneur with a business idea that will generate $100 million in sales in 3 years!!!!” , sound familiar? As an angel investor, I meet many passionate entrepreneurs who present a very optimistic outlook for the future of their business concept. Building financial projection models is a very difficult process for the CEO of an early-stage company and an even more difficult process for the investor to believe in.

So, is there any real value in financial projections? Continue reading

Angel Investing – Diligence: to “due” or not to “due”…….

Investment StrategyDue Diligence is defined by Merriam Webster as “research and analysis of a company or organization done in preparation for a business transaction (as a corporate merger or purchase of securities)“.  When it comes to Due Diligence in Angel Investing, there are many schools of thought. With the advent of Angel List and other online platforms as well as a myriad of crowdfunding sites, it is possible to make investments in early stage companies without ever actually meeting the entrepreneur.  Conversely there are Angel Groups like Golden Seeds, of which I am an active member, whose members conduct a rigorous due diligence analysis of potential investment opportunities. And there is every variety in between. Continue reading

Angel Investing – What it’s all about

Collaboration concept in word tag cloudLast week I had the opportunity to attend the Golden Seeds Innovation Summit. During this annual event, CEOs from the Golden Seeds Portfolio Companies, Golden Seeds Members, LPs in the Golden Seeds Funds and guest speakers come together for two days in NYC. It is a venue for the CEOs to update current and potential investors about their companies and also to interface with one another, a powerful networking opportunity. In addition to hearing about the progress of our portfolio companies, members are able to attend sessions on topics including; positioning for exit, brand building, trends in various industry sectors, and many others.

To me, angel investing is so much  more than just writing a check, as I discussed in an earlier blog post. The ability to interface with our dynamic CEOs and to collaborate on investment opportunities with a great group of investors, like my colleagues at Golden Seeds, is “What it’s all about“. Each time I participate on a deal team, in addition to sharing my own expertise, I always learn something new. I follow my companies on Twitter and other social media venues and try to be a supportive “angel” (which means not trying to micromanage but being strategic with both advice and input). I feel extremely privileged to be a part of the Golden Seeds national network and look forward to investing with them in 2013.

Angel Investing – Rules for Investing

stockpile 05There are many screens that angel investors employ when trying to decide which investment opportunities make sense for them. Selection criteria often include:

  • The “big” or “disruptive” idea
  • Quality Management Team
  • Large addressable market
  • Significant barriers to entry
  • Plausible Exit Strategy & “reasonable” valuation Continue reading

Angel Investing – Valuation Methods

Question Gold Dollar CoinsFor those of use entering the world of angel investing with a background in evaluating publicly traded equities, the valuation process for this investment class can be a real challenge. PE multiples and comps are very difficult to apply to companies that are not only pre-earnings but in many cases pre-revenue. The earlier the life cycle of the company, the less data points exist to determine a reasonable valuation.

In this post, I will outline some of the valuation methods you may want to consider for evaluating these early-stage investments (Note: please click on the title links to learn more about these methods): Continue reading

Angel Investing – Follow-on Rounds

DecisionIn my last post, I discussed planning your angel investment strategy for 2013 and taking into consideration not only new portfolio additions but also participations in “follow-on” rounds emanating from your current portfolio. So how do you decide, if you have the option to invest, whether or not to participate in a “follow-on” round? When I am considering this question for my own portfolio, I first determine what type of “follow-on” round this investment opportunity represents. I use the following three categories: Continue reading

Angel Investing – Resolutions 2013

Ready for year 2013It’s a New Year and time to make those resolutions. In addition to thinking about personal goals for the year, it’s a great time to review your angel investment portfolio. As angels we see many interesting investment opportunities and it helps to set a goal at the beginning of the year for the investment amount that you want to commit to this sector over the next 12 months. When setting this goal take into consideration: Continue reading

Does Angel Investing Generate Investment Returns?

A recent article by Andy Rachleff published in TechCrunch entitled Why Angel Investors Don’t Make Money … And Advice For People Who Are Going To Become Angels Anyway, paints a very dismal picture for the potential returns to angel investors.  Rachleff uses as a proxy for potential returns to angel investors, data from the venture capital industry where he cites that ” about 3 percent of the universe of venture capital firms – generates 95 percent of the industry’s returns” and that overall returns for the industry are less than compelling. Rachleff cautions angel investors not to enter this investment class with an expectation of making money.

In response,  Robert Wiltbank, PhD a professor at Willamette University, has shared the research he has conducted on angel investing in conjunction with the Kauffman Foundation, NESTA, the University of Washington, and Willamette University. In his recent TechCrunch article entitled  Angel Investors Do Make Money, Data Shows 2.5x Returns Overall, Professor Wiltbank concludes from his research that the best estimates  of overall angel investor returns is 2.5 times investment over a four-year holding period.

As an angel investor, this is a very interesting debate to follow and both Rachleff and Wiltbank have interesting perspectives to share. Where Rachleff and Wiltbank agree is that a portfolio approach is important when investing in this sector as the probability of success for any one investment is less than 50%.