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What Angel Investors Look For
Karen Grant
Executive Director & Angel Investor Angel One Investor Network
January 20, 2015
So You Have An Idea
S Industry Canada reports:
S 30% of small businesses won’t survive longer than 2 years
S Only 50% make it to 5 years
Some financing stats
S In December 2012, Canada had 610,178 businesses employing 1-4 people
S In a typical year
S 80,000 are born
S 60,000 business die
S 7,000 are bankrupt
(c) 2015, Angel One Investor Network 2
Tips to Beat the Odds*
S Declare how big you want to be in 24 months
S Choose who you intend to serve
S Determine how you intend to compete
S Focus on the critical few, not the possible many
S Cut the crap
S Plan on the run
(c) 2015, Angel One Investor Network 3 * Roy Osing, author, “Be Different or Be Dead”
Tips to Beat the Odds*
Don’t get
MESMERIZED
by your long term potential
(c) 2015, Angel One Investor Network 4 * Roy Osing, author, “Be Different or Be Dead”
Motivation of Angels
S Community Good
S Diversification
S High Growth
S Mostly . . . Angels want to make money
5 (c) 2015, Angel One Investor Network
What we do
S Angel One was the top Angel group in Canada by # of deals in 2012 and 2013
6 (c) 2015, Angel One Investor Network
Year Total Invested
Avg. Ind. Investm’t
# of Investm’ts
Active Investors
2011 $1,220,000 $94,000 1 13
2012 $5,400,000 $62,791 18 86
2013 $5,280.000 $76,522 20 69
2014 $4,100,000 $73,214 16 56
Totals $16,000,000 $73,413 55
Where We Invest
S But we will look at deals in areas that involve significant intellectual property and/or high growth
(c) 2015, Angel One Investor Network 7
Sector Funds Share
ICT $7,328,298 46%
SaaS $5,555,957 35%
Clean Tech $2,110,150 13%
Health Care $7,650,000 04%
Industrial $7,322,000 02%
Our Approach
S We received on average 300 applications per year
S People (create team of ‘A’ players)
S Product (unique and defendable)
S Market (large, multinational, wants the product)
S Customer validation key
(c) 2015, Angel One Investor Network 8
Results To Date
S 55 investments into 35 companies
S One failure
S Sept 30, 2013: Granite Networks, 9 month hold, 27% ROI
S Nov 18, 2013: Vana Workforce, 11 month hold, 82% ROI
S No exits in 2014
(c) 2015, Angel One Investor Network 9
Tell Us Your Story
S Angels need key information, but . . . don’t be boring
S Tell a story about your customer or your business or your product that is compelling
S Be honest about your stage, your competitive position, your ability to deliver
(c) 2015, Angel One Investor Network 10
Key Components of A Pitch
S What problem do you solve?
S Why will someone pay you to solve the problem?
S How big is the problem?
S When/how will you make money?
S Who is on your team?
S What do you need from the angels?
(c) 2015, Angel One Investor Network 11
Know Your Business
S You must show that you understand your business S Experience matters
S Depth matters
S Prior success matters
S You probably can’t do it all but you should try
(c) 2015, Angel One Investor Network 12
Discussing Product
S Three categories of product
S Products with IP Products with Brand
S Everything else
S Intellectual Property when granted provides comfort to investors.
S IP with customers has more value.
S ‘Applied’ for has limited value.
S Brand identity dramatically reduces risk
(c) 2015, Angel One Investor Network 13
Operations
S Just a product is not enough
S How will you: sell, support, defend
S What is your cost of customer acquisition
S Does your product/service have key dependencies
S How long will a customer stay?
S Can you find employees?
(c) 2015, Angel One Investor Network 14
Scaling Your Venture
S Do you understand how to grow?
S Production
S Distribution
S Human Resources
S Support
(c) 2015, Angel One Investor Network 15
Financial Metrics
S Highlight historical ACTUAL sales and expenses
S Project revenue/expenses you can justify
S Explain how customers pay you
S Explain how investors profit
S Project time and funding required to cash flow positive
(c) 2015, Angel One Investor Network 16
Deal Structure
S What Instrument: S Equity S Preferred Shares S Convertible Debt
S How much are you raising
S Pre-money valuation
S Other investment/investors
(c) 2015, Angel One Investor Network 17
Be Simple
S Don’t make it complicated
S Separate product/technology from business
S Customer validation reduces risk
S Leave complex items for due diligence but …
S Be direct with answers
(c) 2015, Angel One Investor Network 18
Be Honest
S Most angels have significant experience
S Straight talk will win friends
S If it sounds too good to be true . . .
(c) 2015, Angel One Investor Network 19
Be Successful
Angel One members average investment per company $457,143
Apply if you are ready at:www.angelonenetwork.ca/entrepreneurs/
(c) 2015, Angel One Investor Network 20
Thank you
Angel One members average investment per company $457,143
Apply if you are ready at:www.angelonenetwork.ca/entrepreneurs/
(c) 2015, Angel One Investor Network 21
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