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Finding Capital: Angels

Finding Capital: Angels. Innovation Summit at NAU September 9, 2012 James Goulka Managing Director Arizona Technology Investor Forum. Angel Investor: SEC Definition. Net worth of $1 million or more Or Income for each of last 3 years $200,000 pa if single $300,000 pa if married.

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Finding Capital: Angels

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  1. Finding Capital: Angels Innovation Summit at NAU September 9, 2012 James Goulka Managing Director Arizona Technology Investor Forum

  2. Angel Investor: SEC Definition • Net worth of $1 million or more Or • Income for each of last 3 years • $200,000 pa if single • $300,000 pa if married

  3. Why This Definition? • No liquidity • Unproven management • Unproven technology • Unproven markets • Unknown competitors lurking in the bushes • No predictability

  4. Who Cares? • $20 billion invested in 2010 • 61,900 deals in 2010 Source: Center for Venture Research, University of New Hampshire 2011

  5. Angel Investor:Operative Definition • Able to assess and absorb the risk • Invests own money • Invests brainpower • Due diligence on investment • Board or Advisor • Know-how • Invests time • Opens contact database

  6. Where Angels Play

  7. Cherubim & Seraphim • Super Angels (Ron Conway) • Domain Magnets (Pat Sullivan, the Crowns) • Angel Groups (ATIF)

  8. Why Angel Groups • Can make smaller investments ($25,000) • Leverage from multiple brains • Leverage from single center • Shared due diligence • Aggregated capital = better terms • Multiple ways to invest • Multiple ways to participate • Fun

  9. ATIFWho We Are • 55 Phoenix individual investors • Entrepreneurs, Technology Executives, Accountants, Lawyers, Investment Bankers, Consultants • 23 investments • $6.2 million invested • Direct and through ATIF Sidecar Fund I • Partner with Desert Angels & NM Angels

  10. ATIFDomains We Like • Software & SaaS • Semiconductors & Sensors • New Materials • Non-invasive medical devices • Capital efficient green tech

  11. What We look For • The business, not the technology • What is the pain point? • How acute is it? • The customers • Who are they • How many of them are there • How do you get them? • Why will they pay for your solution?

  12. ATIF Focus • Where • Arizona • Southwest • Size: $250,000 - $1,500,000 • Stage • Prototype or Alpha customer • Revenue not required (but nice)

  13. What Matters Most Valuation

  14. Angel Arithmetic • 2 equal sized investments • Target Return for portfolio: 25% p.a. • At the end of year 1: • 1 fails: complete loss • Need 50% p.a. on the other one • Critical Problem: Don’t know which is which • Therefore expect 50% p.a. on all

  15. Growth Curves & Exits • Achieve 50% returns by explosive growth • Not linear growth, eg service businesses • Technology powers the growth • 3-5 year investment horizon • Not the grid, but controllers of the grid • Not VinodKhosla’s “science projects” • Not businesses to hand to your children • Exit typically sale to large entity

  16. What Matters 2nd Most: Derisking the Deal • Deal Terms • Due diligence • Taking care of the team: Option Pool • Governance

  17. Deal Funnel 200 Inquiries 100 Applications 24 Semifinalists 12 Presenters 6 Investments

  18. Arizona Technology Investor Forum(ATIF)James GoulkaManaging Directorjegoulka@atif-az.org602-463-0844

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