Angel Investing: the Inside ScoopTed McCluskey, President of Sand Hill AngelsWednesday, September 7th, 2011
Agenda for Tonight• Introductions• The Angel Process• Panel Discussion             Tweet @efactorglobal and #efactorsf   2
Introductions•   Ted McCluskey•   Mason Ng•   Rick Lazansky•   Don Ross              Tweet @efactorglobal and #efactorsf   3
Ted McCluskey•   Sand Hill Angels – 5 years, President•   BS – Chemistry - Stanford•   MD/PhD – Washington Univ.•   Cardio...
Mason Ng•   Mason Ng has over 20 years of Internet    and enterprise software experience. Mr.    Ng spent over 15 years at...
Rick Lazansky•   Sand Hill Angels, Board Director•   Vantage Analysis, Founder•   Denali Software, Founder•   Standard MEM...
Don Ross•   Sand Hill Angels, Board Director•   HealthTech Capital, Founder/Director•   Life Science Angels, Member•   Fig...
Good Angels Add Value•   The Angel investment process•   How Angels help the company move forward•   Journey to exit•   Wh...
Investment ProcessNew     dealsEntering Angelsoft                Screening                   Call                         ...
What we do:Investor 1                                          Company 1Investor 2Investor 3                              ...
What we do:Investor 1                                          Company 1Investor 2Investor 3                              ...
What we do:Investor 1                                          Company 1Investor 2Investor 3                              ...
What we do:Investor 1                                          Company 1Investor 2Investor 3                              ...
What we do:Investor 1                                          Company 1Investor 2Investor 3                              ...
What we do:Investor 1                                          Company 1Investor 2Investor 3                              ...
The Company Pitch• What the company does   – Why it is great, What is the Unmet need• How we will make money• What is our ...
How Angels help move        the company forward• Lead the Priced Round term sheet• Introductions to other Angel groups &  ...
What investors look for in a                company•   Great Idea (with tight patents/IP)•   Experienced Team•   Strong “G...
Valuation• “1M on a 2M pre”  – Company is currently “worth” $2M    • “Pre-Money” Valuation  – Investors put in $1M  – “Pos...
Current Trends in Valuation•   $100K – Idea on a napkin and great team•   $500K – Patented idea, some feasibility•   $1M –...
Typical Forms of Financing• Priced Round  – Angels give company e.g. $1M for 33% of    company stock. “1M on a 2M pre”• Co...
Bay Area Angel Groups•   Sand Hill Angels          • North Bay Angels•   Life Science Angels       • Tech Coast Angels•   ...
AngelsoftTweet @efactorglobal and #efactorsf   23
AngelsoftTweet @efactorglobal and #efactorsf   24
AngelsoftTweet @efactorglobal and #efactorsf   25
The Angel Process•   Intro•   Pitch•   Diligence•   Investment•   Wait…………………………………………•   (Re-invest)•   Exit           Tw...
How investors negotiate• Economics   – Price   – Employee Option Pool   – Liquidation Preference   – Participation, pay-to...
Summary•   The Angel Process•   What investors look for in a company•   How investors negotiate•   How Angels help the com...
The Sand Hill Angel Process• Intro• Angelsoft   – Pitch Deck, (Video), Business Plan, Financials• Screening Meeting (6), D...
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Angel Investing: The Inside Scoop

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  • Angel Investing: The Inside Scoop

    1. 1. Angel Investing: the Inside ScoopTed McCluskey, President of Sand Hill AngelsWednesday, September 7th, 2011
    2. 2. Agenda for Tonight• Introductions• The Angel Process• Panel Discussion Tweet @efactorglobal and #efactorsf 2
    3. 3. Introductions• Ted McCluskey• Mason Ng• Rick Lazansky• Don Ross Tweet @efactorglobal and #efactorsf 3
    4. 4. Ted McCluskey• Sand Hill Angels – 5 years, President• BS – Chemistry - Stanford• MD/PhD – Washington Univ.• Cardiology – UCSF, CCF• Genentech (8), Scios/JNJ (4)• CMO – Aviir, Inc. (Stanford Startup) Diagnostic test for Cardiac Disease• UCSF QB3 - Incubator program• Stanford BioDesign – Medical Device startups• Stanford ‘SPARK’ – Medical Therapeutics startups Tweet @efactorglobal and #efactorsf 4
    5. 5. Mason Ng• Mason Ng has over 20 years of Internet and enterprise software experience. Mr. Ng spent over 15 years at Oracle and held product management positions in middleware, mobile and multimedia groups. While in the multimedia group, he helped launch some of the world’s first video-on-demand systems with British Telecom, Bell Atlantic (Verizon) and Oracle’s Information Superhighway at Disney Epcot Innovention. At Yahoo!, Mr. Ng led engineering M&A integration, commercial and open source software architecture. Mr. Ng has a B.S. in Electrical Computer Engineering from University of California Davis Tweet @efactorglobal and #efactorsf 5
    6. 6. Rick Lazansky• Sand Hill Angels, Board Director• Vantage Analysis, Founder• Denali Software, Founder• Standard MEMS, Founder• RedSpark, Founder• 9 startups as founder, exec• Focus: Software (SaaS, consumer, EDA) Semi/Electronics• Active Angel investor• Mentor to many startups, formal and informal• Entrepreneur, looking for the next challenge Tweet @efactorglobal and #efactorsf 6
    7. 7. Don Ross• Sand Hill Angels, Board Director• HealthTech Capital, Founder/Director• Life Science Angels, Member• Figure 8 Surgical, Board Director• OncoHealth, Board Director• Active in Angel/VC syndications• Investor and mentor• Entrepreneur - Cofounded, built, sold life science publishing company Tweet @efactorglobal and #efactorsf 7
    8. 8. Good Angels Add Value• The Angel investment process• How Angels help the company move forward• Journey to exit• What investors look for in a company• The company pitch• Valuations Tweet @efactorglobal and #efactorsf 8
    9. 9. Investment ProcessNew dealsEntering Angelsoft Screening Call Screening Meeting Dinner Meeting Angelsoft 1-2 deals Due diligence 6-8 deals 2-3 deals 20 deals ~6-8 deals ~60 deals per month Funded/year Tweet @efactorglobal and #efactorsf 9
    10. 10. What we do:Investor 1 Company 1Investor 2Investor 3 Company 2Investor 4Investor 5 Company 3Investor 6 Tweet @efactorglobal and #efactorsf 10
    11. 11. What we do:Investor 1 Company 1Investor 2Investor 3 Company 2Investor 4Investor 5 Company 3Investor 6 Tweet @efactorglobal and #efactorsf 11
    12. 12. What we do:Investor 1 Company 1Investor 2Investor 3 Company 2Investor 4Investor 5 Company 3Investor 6 Tweet @efactorglobal and #efactorsf 12
    13. 13. What we do:Investor 1 Company 1Investor 2Investor 3 Company 2Investor 4Investor 5 Company 3Investor 6 Tweet @efactorglobal and #efactorsf 13
    14. 14. What we do:Investor 1 Company 1Investor 2Investor 3 Company 2Investor 4Investor 5 Company 3Investor 6 Tweet @efactorglobal and #efactorsf 14
    15. 15. What we do:Investor 1 Company 1Investor 2Investor 3 Company 2 VC FundInvestor 4Investor 5 Company 3Investor 6 Tweet @efactorglobal and #efactorsf 15
    16. 16. The Company Pitch• What the company does – Why it is great, What is the Unmet need• How we will make money• What is our sustainable competitive barrier• Who we are (The Team)• Why we need money now – How we plan on using the money, Deal Terms• Exit – Acquisition (most likely) or IPO Tweet @efactorglobal and #efactorsf 16
    17. 17. How Angels help move the company forward• Lead the Priced Round term sheet• Introductions to other Angel groups & VCs – Syndication• Contacts for vendors & customers• Publicity• Angels may need to invest more $$$$ Tweet @efactorglobal and #efactorsf 17
    18. 18. What investors look for in a company• Great Idea (with tight patents/IP)• Experienced Team• Strong “Go-to-Market” Plan• Low capital demands• Likely additional funding• Near-term Exit Tweet @efactorglobal and #efactorsf 18
    19. 19. Valuation• “1M on a 2M pre” – Company is currently “worth” $2M • “Pre-Money” Valuation – Investors put in $1M – “Post-Money” Valuation = 1M + 2M = $3M – Investors own 1M/3M or 33% of company Tweet @efactorglobal and #efactorsf 19
    20. 20. Current Trends in Valuation• $100K – Idea on a napkin and great team• $500K – Patented idea, some feasibility• $1M – Great idea, prototype, great team• $2M – Idea, team, customers, SALES• $5M – Rapidly Growing Sales, Issued Patents• $10M – Phase 1-2 Clinical DataIn overheated sectors, this goes out the window. Tweet @efactorglobal and #efactorsf 20
    21. 21. Typical Forms of Financing• Priced Round – Angels give company e.g. $1M for 33% of company stock. “1M on a 2M pre”• Convertible Note (less desirable) – Angels loan company $1M today, interest accrues at __% annually. Angels also receives __% incentive discount. – Note “converts” to stock in next priced round Tweet @efactorglobal and #efactorsf 21
    22. 22. Bay Area Angel Groups• Sand Hill Angels • North Bay Angels• Life Science Angels • Tech Coast Angels• Health Tech Capital • Angel Capital Network• Band of Angels • Golden Gate Angels• The Angels Forum • Angel Investor Forum• Golden Seed Angels • Acorn Angels• US Angels • Silicom Ventures• Harvard Angels• Keiretsu Forum • AngelList.com Tweet @efactorglobal and #efactorsf 22
    23. 23. AngelsoftTweet @efactorglobal and #efactorsf 23
    24. 24. AngelsoftTweet @efactorglobal and #efactorsf 24
    25. 25. AngelsoftTweet @efactorglobal and #efactorsf 25
    26. 26. The Angel Process• Intro• Pitch• Diligence• Investment• Wait…………………………………………• (Re-invest)• Exit Tweet @efactorglobal and #efactorsf 26
    27. 27. How investors negotiate• Economics – Price – Employee Option Pool – Liquidation Preference – Participation, pay-to-play, vesting, anti-dilution• Control – Board composition – Protective provisions – Drag along, conversion, information rights Tweet @efactorglobal and #efactorsf 27
    28. 28. Summary• The Angel Process• What investors look for in a company• How investors negotiate• How Angels help the company move forward Tweet @efactorglobal and #efactorsf 28
    29. 29. The Sand Hill Angel Process• Intro• Angelsoft – Pitch Deck, (Video), Business Plan, Financials• Screening Meeting (6), Dinner Meeting (3)• Diligence• Priced Round (vs Convertible Note)• LLC formation, Syndication with other Angels• Quarterly updates, Annual 510-K• Exit Tweet @efactorglobal and #efactorsf 29

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