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Finding Capital: Angels

Explore the world of angel investing with James Goulka at the Angel Innovation Summit on September 9, 2012, NAU. Learn about defining Angel Investors, why they are critical, and how Angel Groups operate, with a focus on the ATIF. Discover what ATIF looks for in potential investments and their approach to valuation and deal structuring. Connect with Phoenix investors and industry professionals, delving into key investment domains and strategies. Contact James Goulka for more information.

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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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