Success with Venture Capital  and Angel Investors    Presentation to the  America & China  Small & Medium Sized Business C...
Success with Venture Capital and Angel Investors <ul><li>Outline: </li></ul><ul><li>About CFI </li></ul><ul><li>Basics of ...
Success with Venture Capital and Angel Investors <ul><li>CFI </li></ul><ul><li>Capital Formation Institute </li></ul><ul><...
Success with Venture Capital and Angel Investors <ul><li>National Board of Directors </li></ul><ul><ul><li>Chairman:  Dr. ...
Success with Venture Capital and Angel Investors <ul><li>National Advisory Board </li></ul><ul><li>Dr. H. Randall Goldsmit...
Success with Venture Capital and Angel Investors Essential ideas and tested techniques for starting and growing entreprene...
Success with Venture Capital and Angel Investors <ul><li>discussing the issues and works-in-progress that promote seed and...
Success with Venture Capital and Angel Investors <ul><li>CFI’s Audience: </li></ul><ul><li>Committed to the “double-bottom...
Success with Venture Capital and Angel Investors <ul><li>CFI Network members are expert in: </li></ul><ul><ul><ul><li>deve...
Success with Venture Capital and Angel Investors <ul><li>Basics of the  </li></ul><ul><li>Investor Market: </li></ul>Valle...
Success with Venture Capital and Angel Investors   <ul><li>Who invests in what:   Financial industries and investment comm...
Success with Venture Capital and Angel Investors   <ul><li>Financial industries and investment communities (continued)   <...
Success with Venture Capital and Angel Investors   Capital Formation Institute
Success with Venture Capital and Angel Investors   <ul><li>VC Investments by Stages: 2004 </li></ul>Source:  Pricewaterhou...
Success with Venture Capital and Angel Investors   <ul><li>About Angels   </li></ul><ul><li>Angels are the &quot;invisible...
Success with Venture Capital and Angel Investors   <ul><li>About Angel Investments </li></ul><ul><ul><li>Early stage round...
Success with Venture Capital and Angel Investors   <ul><li>Types of Investments: </li></ul><ul><ul><ul><li>Intellectual pr...
Success with Venture Capital and Angel Investors   <ul><li>How to find investors: </li></ul><ul><li>Seed and early stage i...
Success with Venture Capital and Angel Investors   <ul><li>Finding Investors (continued) </li></ul><ul><ul><li>Investment ...
Success with Venture Capital and Angel Investors   <ul><li>Strategic investors from corporations also  source deals throug...
Success with Venture Capital and Angel Investors <ul><li>Other Sources (continued)   </li></ul><ul><ul><li>University IP a...
Success with Venture Capital and Angel Investors <ul><li>Think of Investors as Buyers </li></ul><ul><ul><li>It’s not the a...
Success with Venture Capital and Angel Investors <ul><ul><li>What investors want: </li></ul></ul><ul><ul><ul><li>vetted de...
Success with Venture Capital and Angel Investors <ul><ul><li>ROI Expectations:   </li></ul></ul><ul><ul><li>Desired 5-year...
Success with Venture Capital and Angel Investors Examples from VC Portfolios <ul><ul><li>Innovalight   </li></ul></ul><ul>...
Success with Venture Capital and Angel Investors <ul><li>Konarka </li></ul><ul><ul><li>Konarka builds power plastic that c...
Success with Venture Capital and Angel Investors <ul><li>UltraCell develops and manufactures complete micro fuel cell syst...
Success with Venture Capital and Angel Investors <ul><li>Dan Loague </li></ul><ul><ul><ul><li>Capital Formation Institute ...
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Success With V Cs And Angels (10 22 07)

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  • Transcript of "Success With V Cs And Angels (10 22 07)"

    1. 1. Success with Venture Capital and Angel Investors Presentation to the America & China Small & Medium Sized Business Conference October 30, 2007 <ul><li>Dan Loague </li></ul><ul><li>Capital Formation Institute </li></ul><ul><li>www.cfi-institute.org </li></ul>Capital Formation Institute
    2. 2. Success with Venture Capital and Angel Investors <ul><li>Outline: </li></ul><ul><li>About CFI </li></ul><ul><li>Basics of the investor market </li></ul><ul><li>About Venture Capital and Angel Investors </li></ul><ul><ul><li>Characteristics </li></ul></ul><ul><ul><li>Skill sets </li></ul></ul><ul><li>How to find </li></ul><ul><ul><li>VCs </li></ul></ul><ul><ul><li>Angels </li></ul></ul><ul><ul><li>Strategic investors </li></ul></ul><ul><li>What Investors Want </li></ul><ul><li>Think of Investors as Buyers </li></ul><ul><li>Success Examples from VC Portfolios </li></ul>Capital Formation Institute
    3. 3. Success with Venture Capital and Angel Investors <ul><li>CFI </li></ul><ul><li>Capital Formation Institute </li></ul><ul><li>The Capital Formation Institute provides expert knowledge, research and education, helping leaders build more competitive local economies </li></ul>Capital Formation Institute
    4. 4. Success with Venture Capital and Angel Investors <ul><li>National Board of Directors </li></ul><ul><ul><li>Chairman: Dr. Richard T. Meyer President - Orion Technical Associates, Albuquerque, New Mexico </li></ul></ul><ul><ul><li>President : Woody Maggard Associate Vice Provost – STOR-UB Office of Science, Technology Transfer and Economic Outreach, University at Buffalo, Amherst, New York </li></ul></ul><ul><ul><li>Directors : Mr. C. Michael Cassidy President - Georgia Research Alliance, Atlanta, GA </li></ul></ul>Capital Formation Institute
    5. 5. Success with Venture Capital and Angel Investors <ul><li>National Advisory Board </li></ul><ul><li>Dr. H. Randall Goldsmith, President and CEO, Mississippi Technology Alliance </li></ul><ul><li>Dr. Joseph E. McCann III, Dean, John H. Sykes College of Business, The University of Tampa </li></ul><ul><li>Dr. Robert G. Schwartz, Chairholder, College of Business and Public Administration, Eastern Washington University </li></ul><ul><li>Dr. Frank Hoy, Director, Centers for Entrepreurial Development, Advancement, Research and Support, University of Texas at El Paso </li></ul><ul><li>Dr. William E. Wetzel, Jr., Professor of Management Emeritus, Whittemore School of Business and Economics. Director Emeritus of the Center for Venture Research, University of New Hampshire </li></ul>Capital Formation Institute
    6. 6. Success with Venture Capital and Angel Investors Essential ideas and tested techniques for starting and growing entrepreneurial ventures           2005 Guide to Bootstrapping: Back to 'Bootstrapping'! (or Buddy, Can You Spare Some Cash?) Innovators and Enterprise Creation Planning for Future Growth & Its Consequences A Sea Change in the Economy Incubators and Angel Investors Entrepreneurs - Gamblers or Risk Managers? Capital Formation Institute
    7. 7. Success with Venture Capital and Angel Investors <ul><li>discussing the issues and works-in-progress that promote seed and early stage investing and enterprise development </li></ul><ul><ul><li>Rules for Mentoring Entrepreneurs </li></ul></ul><ul><ul><li>Creating Venture-Backable University Start-Ups </li></ul></ul><ul><ul><li>University Pre-Seed and Venture Funds </li></ul></ul><ul><ul><li>Entrepreneurial Development Corporation </li></ul></ul><ul><ul><li>Midwest Research University Network (MRUN) </li></ul></ul><ul><ul><li>Building Intellectual Capital of University Communities </li></ul></ul><ul><ul><li>Access to Capital for Entrepreneurs Act of 2006 </li></ul></ul><ul><ul><li>Building a Culture of Innovation </li></ul></ul><ul><li>Click-and-listen programs featuring early stage investment professionals </li></ul><ul><ul><li>Faculty CEOs </li></ul></ul><ul><ul><li>State Sponsored Venture Funds </li></ul></ul><ul><ul><li>Translational Research </li></ul></ul><ul><ul><li>Investing in Intellectual Property </li></ul></ul>Capital Formation Institute
    8. 8. Success with Venture Capital and Angel Investors <ul><li>CFI’s Audience: </li></ul><ul><li>Committed to the “double-bottom line” </li></ul><ul><li>Practice the art, not science, of seed and early stage investing </li></ul><ul><li>Build relevant value-added relationships </li></ul><ul><li>Expect peer-to-peer interactions (flat structure – networking is key) </li></ul><ul><li>Participate in adding to knowledge base of early stage investment practices </li></ul><ul><li>Open to ALL points of view in the exchange of information </li></ul><ul><li>Worldwide represent the full range of private, public and non-profit organizations committed to investing and facilitating investing in local entrepreneurs </li></ul>Capital Formation Institute
    9. 9. Success with Venture Capital and Angel Investors <ul><li>CFI Network members are expert in: </li></ul><ul><ul><ul><li>developing new and emerging technology </li></ul></ul></ul><ul><ul><ul><li>structuring companies </li></ul></ul></ul><ul><ul><ul><li>valuing start ups </li></ul></ul></ul><ul><ul><ul><li>mentoring management </li></ul></ul></ul><ul><ul><ul><li>creating networks of investment resources </li></ul></ul></ul><ul><ul><ul><li>scrubbing deals to reduce risk </li></ul></ul></ul><ul><ul><ul><li>establishing investment exits </li></ul></ul></ul>Capital Formation Institute
    10. 10. Success with Venture Capital and Angel Investors <ul><li>Basics of the </li></ul><ul><li>Investor Market: </li></ul>Valley of Death Capital Formation Institute
    11. 11. Success with Venture Capital and Angel Investors <ul><li>Who invests in what: Financial industries and investment communities </li></ul><ul><li>Financial Industries Investment Communities </li></ul><ul><ul><li>Later stage investment “Valley of Death” investments </li></ul></ul><ul><ul><li>Professional management Individuals and informal groups of 4-5 </li></ul></ul><ul><ul><li>Extensive government regulations Regulations minimal </li></ul></ul><ul><ul><li>ROI driven Psychic income </li></ul></ul><ul><ul><li>Professional associations Often “Invisible” investors </li></ul></ul><ul><ul><li>Corporate management skill sets Entrepreneurial start-up skill sets </li></ul></ul><ul><ul><li>Lobbying groups common Limited interest in government actions </li></ul></ul><ul><ul><li>Staff focus on financial analysis and Sophisticated in early stage due diligence </li></ul></ul><ul><ul><li>macro-economic conditions practices </li></ul></ul>Capital Formation Institute
    12. 12. Success with Venture Capital and Angel Investors <ul><li>Financial industries and investment communities (continued) </li></ul><ul><ul><li>Financial Industries Investment Communities </li></ul></ul><ul><ul><li>Large scale market focus Focus on “deals” with expectation of high returns </li></ul></ul><ul><ul><li>Funding “mobilization” common Emphasis on high growth of enterprise </li></ul></ul><ul><ul><li>Little interest in start-up companies Consistent high interest in start-up companies </li></ul></ul><ul><ul><li>Capital leveraging Producing magnitudes of scale value-adds </li></ul></ul><ul><ul><li>Secondary and tertiary role in Primary role in technology commercialization </li></ul></ul><ul><ul><li>technology commercialization </li></ul></ul><ul><ul><li>Extensive business consultant use Extensive personal involvement in company development (risk control techniques) </li></ul></ul><ul><ul><li>Incremental involvement in growth Strategic and tactical involvement in company </li></ul></ul><ul><ul><li>of company growth </li></ul></ul>Capital Formation Institute
    13. 13. Success with Venture Capital and Angel Investors Capital Formation Institute
    14. 14. Success with Venture Capital and Angel Investors <ul><li>VC Investments by Stages: 2004 </li></ul>Source: PricewaterhouseCoopers/Venture Economics/NVCA Moneytree Survey Capital Formation Institute
    15. 15. Success with Venture Capital and Angel Investors <ul><li>About Angels </li></ul><ul><li>Angels are the &quot;invisible&quot; portion of the early stage VC investment market - UNH research shows that since about 1985 an estimated 400,000 angels annually invest on average $30 billion to $40 billion in over 50,000 ventures. </li></ul><ul><ul><li>Invest close to home - about one-half day of travel time </li></ul></ul><ul><ul><li>Cashed out entrepreneurs - &quot;psychic&quot; income important </li></ul></ul><ul><ul><li>Markets and technologies with which they are familiar - angels are &quot;value-added&quot; investors and &quot;mentors for money&quot; </li></ul></ul><ul><ul><li>Terms and conditions - more Informal </li></ul></ul>Capital Formation Institute
    16. 16. Success with Venture Capital and Angel Investors <ul><li>About Angel Investments </li></ul><ul><ul><li>Early stage round </li></ul></ul><ul><ul><li>$100,000 to $1 million range </li></ul></ul><ul><ul><li>6 to 8 investors </li></ul></ul><ul><ul><li>Co-investors are trusted friends and associates who have done deals together before or know each other </li></ul></ul><ul><ul><li>Angels provide crucial smaller rounds of seed and start-up capital - over 80% of the seed deals are done by angel or private investors </li></ul></ul><ul><ul><li>Longer exit horizons - patient investors who provide capital early </li></ul></ul>Capital Formation Institute
    17. 17. Success with Venture Capital and Angel Investors <ul><li>Types of Investments: </li></ul><ul><ul><ul><li>Intellectual property </li></ul></ul></ul><ul><ul><ul><li>Tech commercialization </li></ul></ul></ul><ul><ul><ul><li>Concept/Seed Stage </li></ul></ul></ul><ul><ul><ul><li>Start up companies </li></ul></ul></ul><ul><ul><ul><li>Emerging high growth </li></ul></ul></ul><ul><ul><ul><li>Rarely VC later stage </li></ul></ul></ul><ul><ul><ul><li>Other limited partner </li></ul></ul></ul>Capital Formation Institute
    18. 18. Success with Venture Capital and Angel Investors <ul><li>How to find investors: </li></ul><ul><li>Seed and early stage investors are part of networks that give them access to deals. To find angels and VCs, become a part of their working networks, such as: </li></ul><ul><ul><li>High profile “super angels” </li></ul></ul><ul><ul><li>Individual local investors part of community leadership </li></ul></ul><ul><ul><li>Local informal angel investment clubs skilled in assessing and “scrubbing” potential investments </li></ul></ul><ul><ul><li>Local angel organizations with a legal structure, also skilled in assessing and “scrubbing” potential investments Angel groups </li></ul></ul>Capital Formation Institute
    19. 19. Success with Venture Capital and Angel Investors <ul><li>Finding Investors (continued) </li></ul><ul><ul><li>Investment professionals including: </li></ul></ul><ul><ul><ul><li>Attorneys experienced in: </li></ul></ul></ul><ul><ul><ul><ul><li>seed deals and expert in term sheets, </li></ul></ul></ul></ul><ul><ul><ul><ul><li>intellectual property (IP) law and investment </li></ul></ul></ul></ul><ul><ul><li>Founders - entrepreneurs who bootstrap their enterprises with personal resources and sweat equity </li></ul></ul><ul><ul><li>FFF (Friends, Family and Fools; also referred to as &quot;Uncle Harry or Aunt Harriet money&quot;) - investors in loosely structured seed/start-up deals </li></ul></ul>Capital Formation Institute
    20. 20. Success with Venture Capital and Angel Investors <ul><li>Strategic investors from corporations also source deals through their networks. Primary sources include: </li></ul><ul><ul><li>Consultants, local financial organizations, regional private seed fund managers, local entrepreneurs who have “cashed out” of a successful enterprise and seeking new opportunities (especially those entrepreneurs with successful technology-based companies) </li></ul></ul><ul><ul><li>Technology associations that help develop specialized “clusters” of companies </li></ul></ul><ul><ul><li>Venture Capital c ompanies that work with local private investors (first and later rounds) </li></ul></ul><ul><ul><li>Corporate research and development directors with IP available for investment, new product investment managers, seed and venture funds </li></ul></ul>Capital Formation Institute
    21. 21. Success with Venture Capital and Angel Investors <ul><li>Other Sources (continued) </li></ul><ul><ul><li>University IP and technology managers, business incubators assisting local start up companies </li></ul></ul><ul><ul><li>State sponsored seed and venture funds </li></ul></ul><ul><ul><li>State departments of economic development/commerce with funded technology development programs </li></ul></ul><ul><ul><li>AND MORE … </li></ul></ul>Capital Formation Institute
    22. 22. Success with Venture Capital and Angel Investors <ul><li>Think of Investors as Buyers </li></ul><ul><ul><li>It’s not the amount of money, it’s about the quality of the invesmtent </li></ul></ul><ul><ul><li>in investment communities $1 million checks are readily available and pooled investments often reach $50 million or more </li></ul></ul><ul><ul><li>smaller seed-stage VC funds can write checks for $5 million and often syndicate investments of greater than $50 million </li></ul></ul><ul><ul><li>seed stage VC syndications often launch very large enterprises. </li></ul></ul><ul><ul><li>early stage investors wash out risks, make market connections and help position products and services in the global marketplace. </li></ul></ul>Capital Formation Institute
    23. 23. Success with Venture Capital and Angel Investors <ul><ul><li>What investors want: </li></ul></ul><ul><ul><ul><li>vetted deals </li></ul></ul></ul><ul><ul><ul><li>experienced investment partners </li></ul></ul></ul><ul><ul><ul><li>great enterprise management </li></ul></ul></ul><ul><ul><ul><li>a winning portfolio </li></ul></ul></ul><ul><ul><ul><li>psychic rewards </li></ul></ul></ul>Capital Formation Institute
    24. 24. Success with Venture Capital and Angel Investors <ul><ul><li>ROI Expectations: </li></ul></ul><ul><ul><li>Desired 5-year return (IRR) and percent ownership required </li></ul></ul><ul><ul><ul><ul><li>3X 25% (third-stage financing) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>4X 32% (third-stage financing) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>5X 38% (second-stage financing) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>6X 43% (second-stage financing) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>7X 48% (second-stage financing) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>10X 58% (startup or first-stage projects) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>15X 72% (startup or first-stage projects) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>20X 82% </li></ul></ul></ul></ul><ul><ul><ul><ul><li>25X 90% </li></ul></ul></ul></ul><ul><ul><ul><ul><li>30X 98% </li></ul></ul></ul></ul>Capital Formation Institute
    25. 25. Success with Venture Capital and Angel Investors Examples from VC Portfolios <ul><ul><li>Innovalight </li></ul></ul><ul><ul><li>Innovalight has developed a silicon nanocrystalline ink that holds the promise to bring flexible solar panels to cost that could be as much as ten times cheaper than current solar cell solutions. Using proprietary methods, Innovalight has developed a solvent-based silicon process that lends itself to a low cost production and high throughput manufacturing. </li></ul></ul><ul><ul><li>Conrad Burke, President & CEO </li></ul></ul><ul><ul><li>Mr. Burke brings over 17 years of proven expertise guiding innovative semiconductor and optical technologies into the commercial market. Prior to Innovalight, Conrad was senior vice president of worldwide sales and marketing for Bookham Inc. Before Bookham, Mr. Burke was a venture partner at Sevin Rosen Funds, a leading US-based venture capital firm. </li></ul></ul>Capital Formation Institute
    26. 26. Success with Venture Capital and Angel Investors <ul><li>Konarka </li></ul><ul><ul><li>Konarka builds power plastic that converts light to energy – anywhere. The company develops and manufactures light-activated power plastic that is inexpensive, lightweight, flexible and versatile.   </li></ul></ul><ul><ul><li>Howard Berke, Chairman & CEO </li></ul></ul><ul><ul><li>Berke is chairman, chief executive officer and co-founder of Konarka Technologies.  He has nearly 30 years of hands-on management experience launching, building and leading both public and private technology companies. This includes 20 years of general management with full P&L responsibility for eight start-up companies and nine years of business development and marketing focusing on emerging technologies. Berke has founded or co-founded 13 start-up companies and has initiated and completed numerous corporate acquisitions, mergers and R&D joint ventures in the US, Europe and Asia. </li></ul></ul>Capital Formation Institute
    27. 27. Success with Venture Capital and Angel Investors <ul><li>UltraCell develops and manufactures complete micro fuel cell systems for portable devices. The company has developed new technologies and intellectual property in the field of methanol-based fuel cells.  UltraCell has an exclusive license with Lawrence Livermore National Laboratories for micro fuel cell technology based upon reforming methanol into hydrogen “reformate” using proprietary technology in the fuel reformer and hydrogen fuel cell stack. A single UltraCell fuel cartridge can power a typical laptop computer for an entire workday. By swapping in new cartridges, a wireless workweek is possible. </li></ul><ul><li>James L. Kaschmitter - Chairman, CEO and President </li></ul><ul><ul><li>Jim is Chairman, Chief Executive Officer (CEO) and President of UltraCell Corporation, and has held those positions since he founded the company in 2002. Previously, Jim was Chairman, CEO and President at PowerStor and PolyStor Corporations, both companies he founded.  In 1987, he co-founded nChip Corporation, later sold to Flextronics.  Jim has over 20 years of senior management experience in Silicon Valley's hi-tech industry and holds more than 20 patents.  </li></ul></ul>Capital Formation Institute
    28. 28. Success with Venture Capital and Angel Investors <ul><li>Dan Loague </li></ul><ul><ul><ul><li>Capital Formation Institute Inc. </li></ul></ul></ul><ul><ul><ul><li>University at Buffalo, Office of Science, Technology Transfer and Economic Outreach </li></ul></ul></ul><ul><ul><ul><li>1576 Sweet Home Rd., Amherst, N.Y. 14228 </li></ul></ul></ul><ul><ul><ul><li>Ph: 405-824-5549 </li></ul></ul></ul><ul><ul><ul><li>Fx: 800-420-8329 </li></ul></ul></ul><ul><ul><ul><li>Web: http://www.cfi-institute.org </li></ul></ul></ul>Em: [email_address] Capital Formation Institute
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