Angel Investing Workshop

What Angel Investors Look For

Karen Grant

Executive Director & Angel Investor Angel One Investor Network

Tuesday, May 12, 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  Make decisions quickly: if someone is not working out, make the change

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

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


What we do

S  Angel One was the top Angel group in Canada by # of deals in 2012 and 2013

7 (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 59

Totals $16,000,000 $73,413 55

Where We Invest

S  We will look at deals in areas that involve significant intellectual property and/or high growth


Sector Invested Share

ICT $9,237,314 54%

Communications & Media $4,516,600 27%

Clean Tech $2,110,150 12%

Life Science $800,000 5%

Industrial $150,000 1%

Other $172,000 1%

Results To Date

S  58 investments, over $16 million into 39 companies

S  One failure

S  Three Exits: S  Sept 30, 2013 - Granite Networks, 9 month hold, 27% ROI

S  Nov 18, 2013 -Vana Workforce, 11 month hold, 82% ROI

S  March 20, 2015 – SurfEasy, 16 month hold, 87% ROI


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


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?


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


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


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?


Scaling Your Venture

S  Do you understand how to grow?

S  Production

S  Distribution

S  Human Resources

S  Support


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


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 ?


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


Be Honest

S  Most angels have significant experience

S  Straight talk will win friends

S  If it sounds too good to be true . . .


Be Successful


Thank you

If your EIR says you are ready, apply at:

www.angelonenetwork.ca/companies/


Angel Investing Workshop

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