The Changing Nature of Angel Investing in the Bay Area (And the syndication opportunities it provides) Angel Capital

1. The Changing Nature of Angel Investing in the Bay Area(And the syndication opportunities it provides) Angel Capital SummitMarch 21, 2012 Denver

2. Angel Investing in the Bay Area • Bad Old Days • In the last quarter of the last century • Between 20 and 30 angel groups • Ranged from moderately active to social gatherings • Met once a month, some charged (a lot) • Individuals invested a small amount, usually less than $20k • In the last 18 months the ecosystem has evolved significantly • We will focus on these changes, and the opportunities they pose

3. Most Active Bay Area Angel Groups* * Data from 2007

4. New Players in the last 18 Months Proliferation of New Players • On-line • Angel.co (Angel List) • Caplinked • Both are loose communities of accredited investors and entrepreneurs • Super Angels / Micro VCs • Mainly ex-entrepreneurs • Who got bought out • Invest as individual angels & in small groups • New models • Y-Combinator • BAE Workshop • Large VC firms • Set up small funds to invest in seed stage, even pre-revenue

5. What Drove the Change? • eBay bought PayPal for $1.5B • Created excess executives with cash to burn • Reid Hoffman started LinkedIn • Elon Musk started Tesla and Space X • Peter Thiel started investing in start-ups • Google had an IPO • A lot of early employees entered the 1% • New angel groups sprouted • XG Ventures, XG Silicon Valley, XG North Bay, etc. • Other IPOs and acquisitions added to the mix • Suddenly a lot of new faces entered the arena, and some with new business models, too

6. New Entrants Filled a Void • Most angel groups became more conservative • At least with their tech investments • Looked for market validation, or traction • Started to look like VCs, but with less money • Few if any remained true seed-stage investors • Created classic Catch 22 for entrepreneurs • Can’t get money without customers – Can’t get customers without money • Micro VCs & Super Angels filled that void • Both invest in pre-revenue companies • Form a viable bridge between F&F and Series A

7. Syndication Opportunities Vary Greatly • Traditional angel groups have limited syndication opportunities • Keiretsu Forum syndicates only with other chapters • Most others rarely syndicate outside their organization • Of course they may bring in a personal friend • Not fertile ground

8. New Groups Offer Varied Opportunities • On-line • Unlimited ability to syndicate – in principle • Most deals gravitate to a few individuals • Little screening of start-ups or investors that register • I know there must be some good companies there, but I’ve never encountered one • The couple of companies I’ve suggested register, all highly fundable, went nowhere. • Big-Dog VC firms • New small funds • Little data on their syndication habits • Less likely to syndicate than with Series A or B – can do the whole thing themselves

9. Various Opportunities • Super Angels • Vary in degree of diligence performed • More “smart money” than most angel groups • Wide open to syndication • Willing for you to invest in their companies • Open to investing in your companies • Micro-VCs • Similar in most respects to Super Angels • Often from same background • They invest other people’s money in addition to their own • Similarly open to syndication

10. Super Angels & Micro VCs • I have found so far 157 • But with more big name IPOs in the offing, likely to be new surges of new angels • Looks like a growing presence • Looks like has staying power • In short, with this group, the syndication opportunities look strong and stable

11. Super Angels / Micro VCs – a Snap Shot

12. New Business Models • Screen companies to those that fit the model • Invest same amount in all companies chosen • Y-Combinator • Restricted, in principle, to start-ups who know what a Y-combinator does • Investments only by the founders and Peter Thiel • No opportunity to syndicate that I can see • Have produced some real winners • Xobni • Dropbox • A few others • A combination of micro-VC and super angel

13. New Business Model • Bay Area Entrepreneurs Workshop • Agnostic regarding technical area and stage • Screen companies for ‘fundability’ in two ways • Executive Summaries • 30-minute investor pitch w/ 30-minute Q&A • Focused on getting participants funded at VC level • Use micro VCs and super angels to let participants get enough traction to become attractive to VCs • Invest same amount in each participant – ensuring our investors are invested in winners • Open to investors from anywhere • Partnered for success • Business Catapult • Start-up Weekly • LinkSV

14. Bay Area Entrepreneurs Workshop • Eight three-hour sessions, weekly • Lead attendees in creating all plans and documents needed to secure VC funding • Sessions led by domain experts in go-to-market, marketing, finance, etc. Plus VCs and angels • We invest $10k - $20k in each company that qualifies for the workshop. We know our investors are invested in the winners • Post-workshop we match graduates to VCs who invest in their space, at their stage,and in the amount they are looking for • Based on past results, we expect to get ~ 40% of our attendees funded • Consequently our investors can expect an increase in value of ~ 5X in a time of 9 - 24 months

15. Thank You Ralph Patterson CEO BAE Workshop & Investments www.baeworkshop.com 925-200-1895