A Snapshot of Angel Investing In America

1. A Snapshot of Angel Investing In America --------------------------------------------------------------------

3. For over 15 years, our team has provided specialized products, management and training to development associations and entrepreneurial networks relevant to our expertise: • Our services enhance our partners' efforts to: • Commercialize new technologies • Attract capital for business development • Invest capital in entrepreneurial ventures • Build communities with development finance and advanced business skills Our offices are located throughout the US. DCNteam.com

4. DCN History

5. Important Things for Entrepreneurs to Know about Angel Investors

6. HAIL TO THE JOB CREATORS From 1980 to 2005, firms less than five years old accounted for all net job growth in the United States. Business Dynamics Statistics Briefing: Jobs Created from Business Start-ups in the United States, January, 2009.

7. Companies Backed by American Angels

8. Why Angels Matter:More than Money A really great angel helps an entrepreneur: 1. See around the corner 2. Gain a sober second opinion 3. Network with people who can help build the business 4. By being an ambassador 5. Gain credibility in a field Source: David Pecaut, Boston Consulting Group, 9/06 NAO

9. The Capital Lifecycle Proof of concept Pre-Seed Seed & Start-up Early First, Second, etc... Government Sources Friends & Family PROFIT Venture Capital Self Angel Investors IPO, Banks VALLEY OF DEATH TIME

10. Sources of Early Stage/ Seed Equity Capital

11. How are Angels Different?

12. Equity Capital Markets Large & Complementary 2,917 deals $18.25 B Avg.: $ 6.26M Mostly later stage 57,000 deals $17.6 B Mostly early stage Avg.: $310K Early Stage Late 2009 Angel Investment source: UNH CVR 2009 VC Investment source: NVCA/PWC/VE

13. WASHINGTON NORTH MAINE MONTANA MINNESOTA DAKOTA VT OREGON NH WISCONSIN MASS SOUTH IDAHO DAKOTA NEW YORK MICHIGAN WYOMING RI CONN IOWA PENN NEW NEBRASKA JERSEY NEVADA OHIO DELAWARE INDIANA UTAH ILLINOIS COLORADO MARYLAND WV KANSAS VIRGINIA MISSOURI KENTUCKY CALIFORNIA NORTH CAROLINA TENNESSEE ARIZONA ARKANSAS OKLAHOMA SOUTH CAROLINA NEW MEXICO MISS GEORGIA ALABAMA >100 deals 25-100 deals < 25 deals < 10 deals TEXAS FLORIDA LOUISIANA ALASKA HAWAII VC Deals by State Avg. Yr.

14. Who Are These Angels? “Been there and done that” entrepreneurs Roughly 400,000 active angels in the US “The Millionaire Next Door” Average age: 47 9 out of 10 investments are devoted to small, start-up firms with < 20 employees Accept roughly 3 deals for every 10 considered Average investment <$40K ($25K to $250K)

15. Myths: Angel Investing • Investments are large • Done mostly in the form of equity • Terms Sheets are detailed and complicated • Investments result in IPO • There is a shortage of Angel capital • Angels are very wealthy people • Angels are mostly retired Shane, Scott A. Fool’s Gold: The Truth Behind Angel Investing in America. 2009, NY: Oxford University Press

16. Financially Successful Angel Investors… • Are Accredited Investors (rather than “informal angels”) • Have Experience … • Starting Companies • Investing in Start-ups • Working in the Industries in which they invest • Are Highly Selective • Look for Financial Deal with High Returns • Do Not Overvalue Companies • Diversify their Early Stage Investments Shane, Scott A. Fool’s Gold: The Truth Behind Angel Investing in America. 2009, NY: Oxford University Press

17. Achieving Liquidity

18. Why Do They Do It? • “Psychic income” • Social responsibility • Networking among peers • Affection for Entrepreneurs • Fun factor • Return on Investment - from one’s own account

19. Growth of Angel Market Number of active angels: 400,000 Number of Angel groups: 340 Angel investments totaled $8.5 billion across 25,200 ventures in the first half of 2010 Some states have enacted tax breaks for angel investors

20. Growth in Number of American Angel Groups

21. Sector Activity 58% of 2011 angel group investments are in healthcare and internet. 60% of healthcare deals were in medical device & equipment companies.

22. Premise on Angel Groups • • Creating new class of investor • – Entrepreneur-friendly • – Developing sophistication/ excellent processes • – Growing geographic diversity • • Market efficiencies developing • – Entrepreneurs can locate more easily • – Investors get better quality deal flow, while individuals maintain anonymity • – Building partnerships w/ other angel groups & VC community for follow-on funding • • Beginning to close capital gap

23. Networks vs. Funds Angel Networks Angel Funds More structured Group decision-making Can be member-led or manager-led Deal-making inside • More informal (e.g., dinner club) • Individual decision-making • Tend to be member-led • Deal-making outside

24. Member-led vs. Manager-led Member-led Manager-led Manager does the work Relies on Manager Leadership is employed Admin tasks by Manager Member involvement can wane • Share the work: finding, vetting, pricing, negotiating • Relies on camaraderie • Leadership is elected • Admin tasks by volunteers • Member involvement can wane

25. New Approach - Facilitated • Member-led but professionally-facilitated & administered • Supports member-led collaboration with a more intentional approach • Builds knowledge and skill • Sustains long-term viability

26. WBTangels www.wbtangels.com

27. Role of Facilitator • Help the Fund Get Organized • Facilitate the Investment Process • Methods and Disciplines • Support Logistics • Communications, Website • Administrative Services • Templates • Facilitate Network Linkages • Technology • Capital

28. Recap:Characteristics of Angel Investors Business Builders Prosperous Give Back to Young Entrepreneurs Spend Time Contribute Knowledge

29. The Task of a Regional Economic Development Strategy is to Build an Entrepreneurial Ecosystem

30. CommercializingOklahomaTechnology and Research through university-connected angel funds

31. Thank You Jim Troxel Team Leader WBTangels, a unit of Development Capital Networks, LLC jtroxel@dcnteam.com