At the Individual Level

1. At the Individual Level • National Survey of Angel Investing • Rob Wiltbank Asst Professor of Strategic & Entrepreneurship • International study of decision making under uncertainty Angels, VC’s, entrepreneurs and managers • 1,038 Angel Investments, 414 exit events. • 624 on going investments, approximately $85M. THANK YOU VERY MUCH FOR PARTICIPATING!

2. At the Individual Level • Factors of Interest • Investing and Entrepreneurial Experience Years, number of investments, and number of startups • Aspects of the investment process Stage & Industry focus, Due Diligence, Deal Sources, Participation post investment • Prediction vs. Control in Selection and Development Entrepreneurial scenario responses

3. At the Individual Level • Prediction vs. Control in Selection and Development Prediction:To the extent that I can predict the future, I can control my outcomes. efforts to insightfully position for success based on expectations/forecasts for the development of important market elements. This often includes modeling event spaces, estimating probabilities and consequences, and forming sophisticated portfolio strategies with multiple options. Assumes that market elements are predominantly independent of the organization. Control:To the extent that I can control the future, I do not need to predict it. efforts to deliberately construct/create market elements, such as defined products, articulated demand preferences, and market structures (i.e. channels, technical standards, common practices). Assumes either the non-existence of some key elements, or the organization’s ability to significantly affect the evolution of those elements. Prediction is uniquely difficult with new ventures, while efforts to directly construct markets may be particularly effective. Affordable Loss, Pre-Commitments, and Leveraging Uncertainty

4. Strategy Making Under Uncertainty High Predictive Control Planning Visionary Persistently build your vision of a valuable future Try harder to predict and position more accurately Emphasis On Prediction Non-Predictive Control Transformative Transform current means into goals created with others that commit to build a possible future Adaptive Move faster to adapt to a rapidly changing environment Low Low High Emphasis on Control

5. At the Individual Level • Non Predictive Control in Angel Investing: • Select ventures that appear most capable of influencing critical market elements. Create and Influence local or smaller markets, rather than compete in large “ideal” ones. • Emphasize the current means and capabilities of the venture rather than on plans for acquiring the “best” means to reach their original goals. Adjusting goals is less expensive than acquiring different means. Commitment is more important than Best. • Encourage the venture to make smaller investments that get to cash flow positive rather than investing in the resources suggested by market research to “hit plan.” Overhead trails growth • Avoid prediction as the basis for investment decisions. Emphasize affordable loss rather than maximizing expected values. Control is likely to reduce failures, but possibly at the expense of homeruns. Prediction may increase failures, but when predictions are on target…..

6. At the Individual Level • Overall Outcomes • Success vs. Failure: 1,038 investments, 23% Successful. Perception of success by the investor • Distribution of IRR at Exit: 414 Exits, 2/3 < 0% IRR # of exits across IRR categories • Cash on Cash Estimated Multiple: 2.9 assumes consistent investment size across deals. keep in mind possible self selection bias. the majority of deals remain open.

7. At the Individual Level • Explaining Outcomes Investing and Entrepreneurial Experience • Years as an investor increases homeruns, and perception of success. • Entrepreneurial experience not strongly related. Investment Approach • Focus in seed stage deals reduced negative AND homerun exits, and improved success/fail ratios • Deals from personal relationships increased negative exits • Due diligence is nearly related to increased homeruns • Participation post investment, and Industry breadth had no effects. Development Strategy: Prediction vs. Control • Control increases percent of successful deals, decreases negative exits without reducing homeruns. • Prediction has moderate effects on increased negative exits.

8. At the Individual Level • The Details Median Shaded areas are key regression factors.

9. At the Individual Level: Tidbits • Fail in 3, win after 5 years. About 1 year std dev in both. • 80 investors underwater (currently), 40 investors had over 3X. • PVG very comparable mix of deals to overall sample. 2/3 computer related, 15% nontech, 15% healthcare related. • 50 hours of due diligence, but very broad range on this measure. From virtually none to several hundred hours. • Over 40% of investments were made in the first year of the venture’s life, over 70% were less than 3 years old. • 20% of the ventures employed more than 50 people (and growing). Robert Wiltbank Wiltbank@Willamette.edu

10. At the Individual Level: Summary • Emphasis on market construction rather than prediction, with a seed stage focus and broad deal sources are success factors. • The control variable has the single largest effects, reducing negative exits. • efforts to deliberately construct/create market elements. To the extent that I can control the future, I do not need to predict it. • Nearly 2/3 of angel investments do not pass Go. • While due diligence & participation post investment aren’t statistically strong, it’s hasty to reduce them below current levels. Robert Wiltbank Wiltbank@Willamette.edu