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presents
THE ANGEL CONNECTION
THANK YOU SPONSORSPremier Partner
THANK YOU SPONSORSPremier Partner
THANK YOU SPONSORSPremier Partner
THANK YOU SPONSORSSite Partner
THANK YOU SPONSORSAssociation Partners
presents
THE ANGEL CONNECTION
Catherine MottCEO and Founder
BlueTree Capital Group and BlueTree Allied Angels
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0 100,000 200,000 300,000 400,000 500,000
500 Classic VCs
1000-2000 Seed Funds
>50,000 Angels
>200,000 Friends & Family
500,000 Startup Companies
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Growth in North American Angel Organizations
0
50
100
150
200
250
300
1999 2000 2001 2002 2003 2004 2005 2006Sources: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-06 data)
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How much is being invested? (Data Source UNH)
Angel Investments• $25.6B in 2006• $21B in 2005• $22.5B in 2004• $18B in 2003 • $15B in 2002
VC Investments• $22B in 2006• $21.5B in 2005• $21.5B in 2004• $19.4B in 2003 • $21.4B in 2002
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Stage Pre-Seed Seed/Start-Up
Funding Gap between $500,000 and
$2,000,000/$5,000,000
Early Later
Source Founders, Friends
and Family
Individual Angels
Venture Funds, Banks
Investment $25,000 to $100,000
$100,000 to $500,000
$2,000,000/$5,000,000 and up
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Care & Feeding of an Angel Group
DueDiligence
Monitor, Report& Advise
Deal StructureNegotiation
Screening
The Investment Process
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Define theGroup Structure
CapitalSources
GroupManagement
CommunityBuilding
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Affiliates
Full MembersProvisional Members
Members and Affiliates – April, 2008
Source: 2008 ACA Angel Group Confidence Survey
2007 Group Investment Data
• 10% increase in average investment per round from 2006• 66% had follow-on or co-investments with venture capital firms• 25% had distributions to investors
Average MedianNumber of Investments 7.3 5Total dollars invested $1.94 mil $1.1 milDollars invested per round $265,926Number of new companies 4.5
Average Size Investment Per Round - 2007
Percent of GroupsSource: 2008 ACA Angel Group Confidence Survey
0 10 20 30 40
> $750,000
$500,000 - $750,000
$250,000 - $500,000
$150,000 - $250,000
< $150,000
Investment Preference – 2007-2008
Source: 2008 ACA Angel Group Confidence Survey Percent of Groups
0 10 20 30 40 50 60 70 80 90
Telecommunications
Software
Semiconductors
Retail/ Distribution
Other
Networking & Equipment
Medical Devices & Equipment
Media & Entertainment
IT Services
Industrial/ Energy
Healthcare Services
Financial Services
Electronics/ Instrumentation
Consumer Products/ Services
Computers & Peripherals
Business Products/ Services
Biotechnology
Preferred Investment/Company Stage – 2007-2008
0
10
20
30
40
50
60
70
80
90
Seed/Startup Early Stage Expansion Later Stage
Percent of Groups
Source: 2008 ACA Angel Group Confidence Survey
Geography – Where do Groups Invest?
Percent of Groups
Source: 2008 ACA Angel Group Confidence Survey
0 5 10 15 20 25 30
No restrictions
Region
State/ province
4-hour drive
2-hour drive
2008 Prediction: Overall Investment Activity
Source: 2008 ACA Angel Group Confidence Survey
Percent of Groups
0 10 20 30 40 50 60
Other
Deals and dollars decrease
Deals decrease, dollars increase
Deals increase, dollars decrease
Everything is same
Deals and dollars increase
2008 Prediction:
How Many New Companies Will You Invest In?
Source: 2008 ACA Angel Group Confidence Survey
Percent of Groups
Companies0
5
10
15
20
25
30
35
40
45
None 1 to 2 3 to 5 6 to 9 10+
2008 Prediction:
How Will Conditions for Liquidity Change?
Source: 2008 ACA Angel Group Confidence Survey Percent of Groups
0 10 20 30 40 50 60
Strengthen signficantly
Strengthen slightly
No change
Decrease slightly
Decrease significantlly
Co-Investment/ Follow-On Preferences
Percent of GroupsSource: 2008 ACA Angel Group Confidence Survey
0 20 40 60 80 100
No co-investment
Other private equity
Family offices
Later-stage VC
Early-stage VC
Other angel groups
Individual angels
0
5
10
15
20
25
30
35
40
2 to 10 11 to 25 26 to 50 51 to 75 76 to 100 101+
Investors Per Group
Source: 2008 ACA Confidence Survey
Average = 55 Median = 41
Percent of Groups
Organization Types
0
5
10
15
20
25
30
35
40
LLC LP C-Corp 501c3 501c4 501c6 Non-Profit None
For Profit 48%(54 groups)
Non Profit 35%(39 groups)
No Structure
17%(20 groups)
Groups
Source: 2007 ACA Conf survey and membership applications – 113 groups reporting (2006-2007)
Trends Among ACA Member Groups
• University-connected angel groups• Green/ clean-tech focus • Women angel groups• Co-investment – regions, US, cross-border• Communication with angels world-wide• Growing relationships with VCs
New Activities and Member Benefits• Public policy committee – education/ policy leadership
• Regional/ collaboration committee – networking and co-investment support
• Directors and Officers’ insurance program – Chubb Insurance/AH&T
• Updated membership directory, searchable on-line
• Partnership with National Venture Capital Association• Research – Returns of Angels in Angel Groups
• Investment data partnership – Dow Jones VentureOne
Best Practice Guidance Papers
• Board Governance• Negotiating Deal Terms• VC – Angel Group Relationships• State Angel Tax Credit Programs• Due Diligence Practices• Sourcing Best Deals Practices
Angel Group Financial Performance Research• Angel Capital Education Foundation, paid by Kauffman
Foundation• Rob Wiltbank (Willamette University) and Warren
Boeker (University of Washington)• First opportunity to understand the ROI of angels
connected to angel groups and drivers behind returns• Released November, 2007• Responses:
– 538 angels (accredited investors)– 3,097 investments– 1,137 exits and closures
Profile of Angels - Median• Years investing 9• Number of investments 10• Total exits/ closures 2• Years as entrepreneur 14.5• Number ventures founded 2.7• Age 57• Percent of wealth in angel investing 10%• Education Masters degree
Heavily Concentrated in EARLY investments– 34% seed stage, 39% startup, 18% early growth– 45% had no revenues when the initial investment was made
Invested Returned
Dollars per deal: $50K $40K median $191K $486K mean
Group-Affiliated Angel Investments
Distribution of Returns by Venture Investment
35% - 0XOverall Multiple: 2.6X
Avg Holding Period: 3.5 years
Average IRR: 27%
3 yr
3.3 yr
4.6 yr4.9 yr 6 yr
0
10
20
30
40
50
60
< 1X 1X to 5X 5X to 10X 10X to 30X > 30XExit Multiples
Perc
ent o
f Tot
al E
xits
The Impact of Time in Due Diligence
Overall Multiple for High Diligence 5.9X (4.1years)
Overall Multiple for Low Diligence 1.1X (3.4 years)
Median: 20 hours
26% involved over 40 hours
-
10
20
30
40
50
60
70
< 1X 1X to 5X 5X to 10X 10X to 30X > 30XExit Multiples
Perc
ent o
f Exi
ts
Low Diligence High Diligence
Relationship to Industry Expertise 50% of deals were not related. When related, they typically had 14 years
of experience
High 3.7X (4.0 years)Low 1.3X (3.6 years)
-
10
20
30
40
50
60
70
< 1X 1X to 5X 5X to 10X 10X to 30X > 30X
Exit Multiples
Perc
ent o
f Exi
ts
Low Industry Expertise High Industry Expertise
Impact of ParticipationMentoring, Board, Financial Monitoring
High = 1 or 2 times per monthLow = 1 or 2 times per year
High 3.7X (4.0 years)Low 1.3X (3.6 years)
-
10
20
30
40
50
60
< 1X 1X to 5X 5X to 10X 10X to 30X > 30XExit Multiples
Perc
ent o
f Exi
ts
Low Participation High Participation
Relationship with Follow On Investment (Same Angel)
No 3.6X (3.3 years)Yes 1.4X (3.9 years)
30% of deals had follow on investments
-
10
20
30
40
50
60
70
80
< 1X 1X to 5X 5X to 10X 10X to 30X > 30X
Exit Multiples
Per
cent
of E
xits
Follow-On YesFollow-On No
Venture Capital Involvement35% of deals took on VC investment at some point
-
10
20
30
40
50
60
70
< 1X 1X to 5X 5X to 10X 10X to 30X > 30XExit Multiples
Perc
ent o
f Exi
ts
VC No VC
Thoughts and Questions?
• We’ll continue developing new programs for angel groups through:
– ACA Annual Members Meeting at Summit– Regional meetings– Surveys– Open to ongoing suggestions
For more Info - Executive Director Marianne HudsonAngel Capital Association8527 Bluejacket StLenexa, KS 66214913-894-4703mhudson@angelcapitalassociation.orgwww.angelcapitaleducation.orgwww.angelcapitalassociation.org
presents
THE ANGEL CONNECTION