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New Mexico Angels

New Mexico Angels. www.NMAngels.com. Goals of Presentation. Venture Capital Investing Angel Investing What has changed in the Investing World. New Mexico Angels’ President. Angel investor since 2003 President of New Mexico Angels Managing Director Phase One Ventures-Super Angel Fund

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New Mexico Angels

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  1. New Mexico Angels www.NMAngels.com

  2. Goals of Presentation • Venture Capital Investing • Angel Investing • What has changed in the Investing World

  3. New Mexico Angels’ President • Angel investor since 2003 • President of New Mexico Angels • Managing Director Phase One Ventures-Super Angel Fund • Former Cabinet Secretary NM Taxation and Revenue

  4. Small Company Financial Ecosystem • Entrepreneur funds company • Friends and Family • Micro Lenders • Angel Investors • Super Angel Funds • Venture Capital Funds

  5. What is Venture Capital? • Professionally managed risk capital • Focused on Innovative and High Growth Companies • Funds new ideas that could not be financed with traditional Bank Financing • Long Term investment horizon • Minimal liquidity until sold.

  6. What type of Companies get VC $

  7. There’s a VC for most stages 2010 363 Deals $1.7B 2010 1147 Deals $5.3B 2010 1,021 Deals $8.5B 2010 746 Deals $6.3B Source: NVCA

  8. Strategic Partners IPO Banks $ 10M Venture Capital $ 1M Decreasing Return Angels $ 100K FFF Gov’t Business Plan Beta Profitability Idea Prototype Sales Decreasing Risk Reference: Tom Stephenson, Verge

  9. Discounted for Present Value Discounted for Risk Classic Investor Approach to Value Annual Cash Flows Projected Future Profits Ref: Geoff Moore / Chasm Group LLC Total Company Valuation Year 1 2 3 4 5 6 7 8 9

  10. VC Investors Care Only About Value at a Liquidity Event VCs Approach to Value Projected Future Profits Annual Cash Flows Ref: Geoff Moore / Chasm Group LLC Total Company Valuation Year 1 2 3 4 5 6 7 8 9

  11. Bit of Perspective

  12. Structure of the VC Industry Investor Investor Investor Limited Partners (Investors) Venture Fund VC Firms (“General Partners” or “Fund Managers”) G, Inc. C, Inc. E, Inc. A, Inc. Portfolio Companies F, Inc. D, Inc. B, Inc.

  13. How VC’s Make Money for their Investors?

  14. Historical VC Returns Investment Horizon Performance - as of 03/31/2011 Source: Cambridge Associates

  15. Key Points VC’s evaluate

  16. Angel Investing • High Risk/High Return • Angels make equity investments of less than $500K and usually purchase less 20% of company funded. • Return is realized when company is sold and money distributed.

  17. Angel Investing • In 2007, 258,200 angels pumped $26 billion into 57,120 U.S. companies, according to figures from the University of New Hampshire's Center for Venture Research. • Note: VC’s provided $3 Billion in start-up capital • 185 Angel groups are members of the Angel Capital Association

  18. Angel Investing • Why Are Angel Investors Important? • What Do They Add To The Financial Structure In The United States?

  19. Angel Investing What are Angels Are Good At? • Having lunch and drinking coffee! Why Is This Important? • Angel investors are the front-line educators of entrepreneurs who want to utilize outside capital in their companies.

  20. Angel Investing • In the year 2007, Angel investors funded 57,000 new start-ups. • One in ten start-ups obtains Angel financing. • One in ten Angel deals sees VC money.

  21. Angel Investing • Angel investors have traditionally higher investment returns than comparable asset groups. • 22.4% versus 18.7% for venture capital firms. • 22.4% versus S&P 500 returns of 14.9%. (Pre 2008)

  22. Angel Investing • Angel investors comprise of wealthy individuals. Many Angel investors are “been-there, done-that” entrepreneurs. • Angel investors usually have a portfolio of investments. Their Angel investments are a way to diversity their portfolio.

  23. Angel Investing • The usual size of an Angel investment is per angel $10,000 to $100,000. • The usual size of an Angel deal is $100,000 to $500,000 • The typical investment is a seed or early stage investment.

  24. Angel Investing • Angel investors do not want to control the companies in which they invest. However, they do like to influence the company. • Angel investors usually take two to four months to process an investment.

  25. New Mexico Angels The Numbers- Invested in companies • 2005 two Investments in the amount of $130K. • 2006 two Investments in the amount of $330K. • 2007 six Investments in the amount of $785K. • 2008 seven Investments in the amount of $1.31 million • 2009 six investments in the amount of $750K • 2010 five investments in the amount of $562K • 2011 four investments in the amount of $1.21 Million

  26. New Mexico Angels What Angels look for in a company • Barriers to entry such as patents, trade secrets or other proprietary advantage. • A solid management team. • A scalable product or service that provides large amount of revenue in the short timeframe. • A desire for advice and coaching. • A potential return that will provide a 10X return during the life of the investment. 3-5 years.

  27. Investing Post 2008 Financial Crisis of 2008 • Housing prices plummet • Securities back by mortgages plummet • Investment Firms did not meet obligations to counter-parties • Financial Markets no one trusts anyone

  28. Investing Post 2008 Financial Crisis of 2008 Massive Government intervention in the markets; Bear Stearns, Lehman Brothers fail 2008. Numerous Banks fail from 2008-2011.

  29. Impact on Ventures Capitalist Fundamentals changes: • VC’s rely on “Exits”, return of Capital to their investors to raise another fund. Exits ceased to exist. • VC’s have a limited amount of capital to invest. They have stopped investing in new companies to focus on current portfolio companies

  30. VC Fund Raising ($) 2008-2010 Source: NVCA

  31. Venture Backed Exits 2007-2010

  32. VC Investments 2002-2009

  33. VC Investments 1999-2009

  34. Venture CapitalistsStructural Changes • Hard to raise new funds • Investment period longer • Nurturing portfolio companies to reach exit • Disappeared from early stage investing -Moving to later stage investing • Questions about the Venture Capital Model?

  35. Angel Investment changes 2008-2011 • More Angel investors joining established angel groups • Angels maintained their funding in early stage start-ups during this period. $27B in 2007, 23B 2009 • Valuation of investable deals fell by 60%, average in 2007 $5M, to average in 2011, $1.75M. • Still looking for more exits, exits are taking longer and are more complex

  36. Angel Investment changes 2008-2011 • Angel investors are moving up the value path replacing the VC’s who have abandon the market • Angels are creating new investment funds to sustain their portfolio companies and to increase the capital raised for new investments. Example Desert Angels Sidecar fund, Phase One Ventures. • Syndication are happening between angel groups to provide additional capital to new investments.

  37. New Mexico Angels Information: www.NMAngels.com John Chavez: (505) 843-4206

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