How to Pitch to Angels Don Morrison Chairman of Deal Flow BlueTree Allied Angels Accidental Retailer Recovering Entrepreneur
How to Pitch to Angels
DonMorrisonChairmanofDealFlowBlueTreeAlliedAngels
AccidentalRetailer
RecoveringEntrepreneur
How to Pitch to Angels Beforeyoucanbegintoputyourpitchtogether,itisimportanttounderstand:• Whoangelsare• Thefundingprocess• Angelsplaceinthefundinglandscape
Who are Angel Investors? • O6ensuccessfulentrepreneursorre7red
professionals• Accreditedinvestors–SECdefini7on• Investtheirownmoney(notmoney
managers)• Generallyinvestinlocalcompanies• Investinbusinessesnotrunbyfamilies• Investindividuallyoraspartofanangelgroup
Why Angel Groups? • ThePowerofAggrega7on• Mi7gateRisk• HigherQualityDealFlow• GreaterInvestmentClout• PorNolioManagement
Advantage of Angel Groups for Entrepreneurs
• Diversifiedbusinessexperience• Extensiveindustrycontacts• Opportuni7estosyndicate
Growth in Number of Angel Groups
Sources: Center for Venture Research (pre 03 data) and Kauffman Foundation/ARI (04-13 data)
050
100150200
250300350
400
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
The Funding Landscape
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TechnologyDiscovery
Proof-ofConcept
IniEalDesign
Develop&Test
Build&Deliver
Pre-seedFunding
SeedFunding
ExpansionMezzanine
OperaEng&Growth
Start-upFunding
$25K$100K$500K$2M$10M$50M
$100K$500K $2M$10M$75M$250M
Company - Product
Stage
ScaleUp
FundingStage
Friends&Family
SeedFunds
VentureFunds
Founder
InsEtuEonalEquity
Loans/BondsGov.EconomicDev.
SBIRPhase1&2
IndividualAngels
AngelGroups
Sourceof
Funding
InvestmentNeeded
CompanyValuaEon
BusinessIncubators
Angels Fund Majority of Startups in USA
Sources: Center for Venture Research/ UNH; NVCA 2014 Yearbook; PwC MoneyTree
• $24.8billion• 71,000deals• 32,000seed• 29,000earlystage• 9,200expansion• >298,000individuals
AngelInvestors(2013)• $29.6billion• 4,050deals• 120seed• 1,375earlystage• 2,550later/expansion• 548ac7vefirms
VentureCapital(2013)AngelsProvide~90%ofOutsideEquityforStartups
Angels Fund Nearly All Seed/Early-Stage Deals…
Without angels few startups would make it to VC, PE or IPO funding
VCTotal=1,495
AngelTotal=61,000
Number of Deals in 2013: Angel Investment and Venture Capital
Source: Jeffrey E. Sohl, Center for Venture Research and 2013 NVCA Yearbook
32,00029,000
9,200
1201,375
2,550
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Startup/Seed EarlyStage Expansion/Later
VentureCapital
AngelInvestment
Telling Your Story (Elements of the Pitch)
Togetfunded,entrepreneursneedtotellacompellingstory.Yourstory,or“pitch”,mustcontainseveralimportantelements:• Product/Service• Market• BusinessPlan• Sales&Marke7ng• Financials• ManagementTeam• Exitstrategy 10
Product or Service (Elements of the Pitch)
Yourproductslidesshouldexplainwhat“problem”or“pain”youareaddressing:• Howbigistheproblem?• Whoisyourtargetcustomer?• Whoareyourcompe7tors?• Whatisyourproductdifferen7a7onorcompe77veadvantage?Howdoesitwork?
• Whatisyourvalueproposi7on?• Whatarethebarrierstoentry?(Patents,tradesecrets)
• Whataretherisks?(Technology,regulatory) 11
Market (Elements of the Pitch)
YoushouldaddressthefollowingquesEonsaboutthemarketforyourproduct:• Whatisthetotalmarketsize?• Whatistheaddressablemarketsizeforyourproduct?
• Whatistheprojectedmarketgrowth?• What%ofmarketsharewillyouhavein5years?
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Business Plan (Elements of the Pitch)
YourBusinessPlanslidesshouldaddress:• Whatisyourrevenuemodel?• Whatassump7onsareyoumakingregarding:• Pricingandmargin?• SG&A?• Supplychain?
• Howwillyouscale?• Whatisthelong-termprospectforproductormarket
extension?
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Sales & Marketing (Elements of the Pitch)
EventhebestideasgonowherewithoutasoundsalesandmarkeEngstrategy.YourSales&MarkeEngslidesshouldaddress:• Gotomarketstrategy:• Directsales?• ChannelPartners?• Licensing?
• Costofcustomeracquisi7on?• Lengthofsalescycle?• RegulatoryDrivers(orBarriers)?
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Financials (Elements of the Pitch)
Aspartofthestory,theFinancialsshouldconvey:• 5YearP&LProjec7on
• Revenue• Expenses• EBITDA
• Howlongandhowmuchwillittaketogettobreakeven?
• Howmuchareyouraskingfor?• Useoffunds• Howmuchhaveyouraisedtodate?• Howmuchaddi7onalcapitalwillyouneed?• PMV?
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Management Team (Elements of the Pitch)
YoumusttalkabouttheteamthatwillberesponsibleforexecuEngthebusinessstrategy.
YourManagementTeamslideshouldaddress:• WhatistheCEO’sstart-upexperience?• Whoaretheotherkeymanagementteammembersandwhatistheirexperience?
• Istheteambalanced?• Whoisonthecompany’sboardofadvisors/directors?
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Exit Strategy (Elements of the Pitch)
Everyinvestorwanttoknowhowtheymightgettheirinvestmentback.ThistypicallyhappensbywayofanacquisiEonormorerarelyviaanIPO.YourExitStrategyshouldaddress:• Whomightacquireyou?• Whatothercompanieshavebeenacquiredinthisspace?
• Whatweretheexitmul7ples?(EBITDA,revenue)• Howlongwillyoutaketoexit?
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The Pitch
HerearesomeEpsonpresenEnganeffecEvepitch:
• Planona20Minutepitch• Prac7ce,prac7ce,prac7ce• “Lessismore”onyourslides• Avoidthe“beau7fulbabysyndrome”• Getfeedbackbeforeanda6er• Beexcitedandpassionate
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Information, Resources, and Support
• KauffmanFoundaEonwww.eventuring.com• AngelCapitalAssociaEonwww.angelcapitaleduca7on.org
• Books– EarlyExitsbyBasilPeters– TermSheets&ValuaEonbyAlexWilmerding– TheArtoftheStartbyGuyKawasaki
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TheWiltonE.ScoqIns7tuteforEnergyInnova7onatCarnegieMellonUniversityisfocusedonusinganddeliveringtheenergywealreadyhavemoreefficiently;expandingthemixofenergysourcesinawaythatisclean,reliable,affordableandsustainable;andcrea7nginnova7onsinenergytechnologies,regula7onsandpolicies.TheCenterworkswithitspartnerstoservetheen7reCMUcommunity—departments,colleges,centersandcampuses—toacceleratebringingresearchinnova7onsandpromisingideastotheglobalmarketplaceandhelpingallentrepreneurialstudents,faculty,staffandalumnitapintothe'innova7onecosystem.ProjectOlympusencouragesandsupportentrepreneurshiponcampusbyhelpingfacultyandstudentsturntheircuvng-edgeresearchandgreatideasintostartups.