Understanding and Making the Most       of Business Angels            29th August 2006          Professor Alan Barrell    ...
Stay Cool!             Dilbert - Scott Adams
Stay Cool!             Dilbert - Scott Adams
Stay Cool!             Dilbert - Scott Adams
Venture Capital Investments in E-          Commerce (U.S.A.)                                                              ...
Building Tomorrow’s Businesses –Culture, Mindset and The Columbus Spirit      My ‘3i s’     • Inspiration     • Invention ...
Mind of an Entrepreneur         “You look at things           and ask - why?             but I dream of           things t...
Joseph Schumpeter (1911) “Entrepreneurs blow gales   of creative destruction.”Role of the entrepreneur in transforming eco...
Financing Tomorrow’s        BusinessesWhere to go for early stage money –    there is plenty of it around ! The Bank      ...
Sources Of Business Finance       “Our Money”        “Our Money”                                                          ...
Sources Of Business Finance1)   “Our Money”          -   Our decisions - no strings2)   Family and Friends   -   Few strin...
Stages Of Investment (1)1. SeedDeveloping IPR, unlikely to have full time employees, and maywell have no business premises...
Stages Of Investment (2)4. ExpansionEstablished companies, with a full management team andgenerating sales, and require fu...
Thinking Of Angels!
Finding Your Angels•   Networking, Networking, Networking!•   Research and Knowledge•   Investment Criteria•   Lone or “Ch...
How do we IMPRESS our Angels?•   Very clear Business Model and Plan•   “Show me the MONEY”•   Clarity and attractiveness o...
Engaging The Funders•   Preparing the case - how to start -”Do we need help ?” -    Intermediaries-Corporate Finance.•   I...
Great Eastern Investment ForumStarted in April 1994Membership of 500 plusThree presentation days a year - 8 companies at a...
Other Cambridge Angels• Cambridge Angels  - Very High Net Worth ( HNWIs )  - Dining Club Format              Each Group is...
Financing Tomorrow’s Businesses-including spin-outs – Angel Virtues•   Technical Expertise•   Marketing Expertise     What...
US Angels – The REAL early stage               funders !• In 2000 US business Angels invested more than  $200billions in e...
“Show Me The Money!”• Basics – Investment Readiness• How organised are we ?• Company structure ?• Management Team?• Intell...
“Show Me The Money!”•   Understanding the “Money Supply Chain”•   Research and Help – and where to find it•   What’s Best ...
Financing Tomorrow’s Businesses-        including spin-outs•   Technical Expertise•   Marketing Expertise     What else yo...
Due Diligence is a two way thing: •   Investors due diligence agenda:-      – Technology and I.P.      – Market - is it re...
Structuring The Deal• Selecting advisors• Aligning Shareholders/Investors• Offers and Agreements• Leaving space for future...
Valuation – how and why• To indicate value to potential  investors• What is a company worth?     - What someone will pay f...
A Search for Fair Value               Issue date On issue   1 Year OnBookham        April 2000 £1.2       £231            ...
Case Study: Antenova           – a funding fable• Disruptive technology which could change the world –  from University co...
Show Inspiration!Investors have emotions!  “Excellence can be achieved, if we:   Care more than others think is wise,   Ri...
In Pursuit of Excellence !  “Excellence can be achieved, if we:   Care more than others think is wise,   Risk more than ot...
Be Visionary !More information at….Alan@alanbarrell.comwww.alanbarrell.com
Understanding and Making the Most of Business Angels (Alan Barell)
Understanding and Making the Most of Business Angels (Alan Barell)
Understanding and Making the Most of Business Angels (Alan Barell)
Understanding and Making the Most of Business Angels (Alan Barell)
Understanding and Making the Most of Business Angels (Alan Barell)
Understanding and Making the Most of Business Angels (Alan Barell)
Understanding and Making the Most of Business Angels (Alan Barell)
Understanding and Making the Most of Business Angels (Alan Barell)
Understanding and Making the Most of Business Angels (Alan Barell)
Understanding and Making the Most of Business Angels (Alan Barell)
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Understanding and Making the Most of Business Angels (Alan Barell)

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Slides from Connect Estonia seminar CONNECT WITH THE SMART MONEY, on August 29, 2006.

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Understanding and Making the Most of Business Angels (Alan Barell)

  1. 1. Understanding and Making the Most of Business Angels 29th August 2006 Professor Alan Barrell Tallin CONNECT Seminar
  2. 2. Stay Cool! Dilbert - Scott Adams
  3. 3. Stay Cool! Dilbert - Scott Adams
  4. 4. Stay Cool! Dilbert - Scott Adams
  5. 5. Venture Capital Investments in E- Commerce (U.S.A.) Total Invested ($ million) Number of Companies 600 $6,000 500 $5,000 400 $4,000 300 $3,000 200 $2,000 Netscape IPO 100 3rd largest in Amazon.com IPO $1,000 Nasdaq History 0 $0 94 95 96 97 98 99Source: Venture Economics Number of Companies Total Invested
  6. 6. Building Tomorrow’s Businesses –Culture, Mindset and The Columbus Spirit My ‘3i s’ • Inspiration • Invention • Implementation So remember -the Columbus Spirit?
  7. 7. Mind of an Entrepreneur “You look at things and ask - why? but I dream of things that never were and ask - why not?” George Bernard Shaw
  8. 8. Joseph Schumpeter (1911) “Entrepreneurs blow gales of creative destruction.”Role of the entrepreneur in transforming economies bydeveloping:• New products• New methods of production• New ways of organizing• Untapped raw materials• Enhanced competitive performance
  9. 9. Financing Tomorrow’s BusinessesWhere to go for early stage money – there is plenty of it around ! The Bank Corporate Venturers Government Grants Family and friends Seed Funds The local Pub Venture Capitalists Business Angels 2
  10. 10. Sources Of Business Finance “Our Money” “Our Money” B Family and Friends Family and Friends A N Business Angels Business Angels K Seed Funds Seed FundsRisk F I Early Stage VC Early Stage VC N A Expansion Capital Expansion Capital N C E Pre-IPO Pre-IPO ?? Maturity
  11. 11. Sources Of Business Finance1) “Our Money” - Our decisions - no strings2) Family and Friends - Few strings, great faiths3) Business Angels - Money “plus” - use my expertise4) Seed Funds - Support proof of principle5) Early Stage - Management support - experience6) Expansion - Lower level of support - but experience of business development7) Pre-IPO - Opportunistic8) Banks - Not risk takers – can be helpful
  12. 12. Stages Of Investment (1)1. SeedDeveloping IPR, unlikely to have full time employees, and maywell have no business premises. Working on “proof ofprinciple”2. Start upCompanies in the process of being set up, with limited trading.Involved in product development and initial marketing3. Early stageCompanies that have completed the “proof of principle”, ownsome IPR, have a management team substantially in place,requiring funds for manufacturing and/or licensing, and sales
  13. 13. Stages Of Investment (2)4. ExpansionEstablished companies, with a full management team andgenerating sales, and require further finance to break intonew markets. The definition “Expansion” often createsconfusion5. Pre IPOFinal round prior to a listing on a recognised Stock Exchange.Can be referred to as “Expansion” funding6. Later stageMany variants – M and A, MBO, MBI etc.
  14. 14. Thinking Of Angels!
  15. 15. Finding Your Angels• Networking, Networking, Networking!• Research and Knowledge• Investment Criteria• Lone or “Choirs” of Angels• Angel Connections and Expertise• Personal Chemistry• Active or Passive• Track Record and Referrals
  16. 16. How do we IMPRESS our Angels?• Very clear Business Model and Plan• “Show me the MONEY”• Clarity and attractiveness of Presentation• Integrity• Answers to Questions• Asking the right Questions• Believable People and Teams• Ideas on building a coherent Board – including Investor Directors
  17. 17. Engaging The Funders• Preparing the case - how to start -”Do we need help ?” - Intermediaries-Corporate Finance.• Is the Business Model Clear?• Keep Business Plans Simple!• Targeting funders - Investors have specific criteria• ?Angels, Banks, Seed Fund, Corporates or VCs – or a “mix”• Matching agendas• Sponsors for spin-outs• Organisations and people - the forward plan
  18. 18. Great Eastern Investment ForumStarted in April 1994Membership of 500 plusThree presentation days a year - 8 companies at atime. Also publishes “Link-Up” and “online” atwww.geif.co.uk 1,000- plus companies seen. 250 plus presented.“Hit rate” of 40%Total funds raised is £50 millionGovt. money augments Angel Money – SmallBusiness Growth Fund – and EnterprisheChallenge Fund 4
  19. 19. Other Cambridge Angels• Cambridge Angels - Very High Net Worth ( HNWIs ) - Dining Club Format Each Group is approx 40 - Little Formal Structure members – No fund - - “Heavy Hitters” Individual investment decisions.• Cambridge Capital Group - “Distant Angels” - “Absent Angels” - “Passive Angels”
  20. 20. Financing Tomorrow’s Businesses-including spin-outs – Angel Virtues• Technical Expertise• Marketing Expertise What else you get• Contacts from Business• Decision Making skills Angels….• Presentation skills• Dealmaking skills• Money-raising skills• Other Financial skills• Possible exit routes and practical help with exit 7
  21. 21. US Angels – The REAL early stage funders !• In 2000 US business Angels invested more than $200billions in early stage companies• This was much more than the so called “venture capital industry” which did not reach investment levels that year of $150 billions.• In the difficult year of 2002 – when VCS “sat on hands” – Cambridge Angels kept the early stage and emerging business sector alive and well• Cambridge Angels are adopting the US success model and working more closely together.
  22. 22. “Show Me The Money!”• Basics – Investment Readiness• How organised are we ?• Company structure ?• Management Team?• Intellectual Property?• Vision, Purpose,Plans and Positioning Ideas?• Advisors ? “Greyhairs and Wisdom” ? Basics – eg Accounts and Controls ?• “Rumsfeld Questions” – “What we DON’T know?”
  23. 23. “Show Me The Money!”• Understanding the “Money Supply Chain”• Research and Help – and where to find it• What’s Best for Our Business ?• “Money on its own may not bring the Value you need”• Friends, Banks, “Angels”, VCs et al.• Grants – including DTI R & D Grants• Resourcefulness, Resilience and Recovery”• Learning from encounters with investors• Attention to detail – “nitty gritty”• Understanding how Angels may ( or may not ) work with later investors – such as VCs
  24. 24. Financing Tomorrow’s Businesses- including spin-outs• Technical Expertise• Marketing Expertise What else you get• Contacts from Business• Decision Making skills Angels….• Presentation skills• Dealmaking skills• Money-raising skills• Other Financial skills• Possible exit routes and practical help with exit 7
  25. 25. Due Diligence is a two way thing: • Investors due diligence agenda:- – Technology and I.P. – Market - is it really there? – People - can they do it? – Exit options and drive • Due Diligence on Investors:- – Investment criteria – Track record – People, relationships, references – Clarity of expectations – Available finance - including “follow on” – Willingness to syndicate and to participate
  26. 26. Structuring The Deal• Selecting advisors• Aligning Shareholders/Investors• Offers and Agreements• Leaving space for future financing rounds• Business strategy and Exit options• Valuation
  27. 27. Valuation – how and why• To indicate value to potential investors• What is a company worth? - What someone will pay for it• What is this determined by? - Other investment choices
  28. 28. A Search for Fair Value Issue date On issue 1 Year OnBookham April 2000 £1.2 £231 billion millionLastminute.c March £571 £54om 2000 million millionOrchestream June 2000 £212 £52 million millionJust2clicks Feb 2000 £130 £- million
  29. 29. Case Study: Antenova – a funding fable• Disruptive technology which could change the world – from University collaboration• Outstanding management – technical and operations• Inexperienced in fundraising• Valuation obsession• Where has all the money gone?• Salvation, adequate funding and continued progress
  30. 30. Show Inspiration!Investors have emotions! “Excellence can be achieved, if we: Care more than others think is wise, Risk more than others think is safe,Dream more than others think is practical,Expect more than others think is possible.” Deborah Johnson-Ross
  31. 31. In Pursuit of Excellence ! “Excellence can be achieved, if we: Care more than others think is wise, Risk more than others think is safe,Dream more than others think is practical,Expect more than others think is possible.” Deborah Johnson-Ross
  32. 32. Be Visionary !More information at….Alan@alanbarrell.comwww.alanbarrell.com
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