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How things have changed? Now Past Great time to be a buyer Great time to be a seller M&A More demanding less loyal Lot of shadow alliances Customer acquisition/retention Low rates, more attractive, but much tougher terms Term sheets negotiated, less tendency to borrow Capital formation Hard to keep folks happy, they want to be informed Excessive salaries, overnight millionaires Motivating/compensating your team Nowhere to run, nowhere to hide 3 monkeys & euphoria Deal with bad news Offensive strategy Defensive strategy Intellectual property Get the customers, maintain demand exceeds If built, people will come, look marvelous on paper Infrastructure/system & staffing Defer if it can be deferred Spend if it can be spent Capital expenditure No exit, built to last In through the out door, built to flip Exit strategies Doing more with less Doing less with more Resource management
The term "angel" originally comes from England where it was used to describe wealthy individuals who provided money for theatrical productions .
In 1978, William Wetzel, a professor at the University of New Hampshire and founder of its Center for Venture Research, completed a pioneering study on how entrepreneurs raised seed capital in the USA, and
He began using the term "angel" to describe the investors that supported them.
private individual who invests and shares his personal management experience with the start-ups
Entrepreneurial Angel very rich entrepreneurial individual who invests to diversify portfolio or expand current business Corporate Angel company that make regular large angel type for majority stakes Professional Angel investor with background in professional careers, such as doctor, lawyer, accountant Latent Angel rich individual who has made angel investment but not in the past three years
Investing in companies at a stage where VCs are no longer active;
Being an integral part of the chain of integrated finance tools;
Contributing to the culture of entrepreneurship in the region;
Agglomerating the existing investment capital in a region.
Differences between business angels and formal venture capital?
Business angels invest their own assets and contribute their managerial skills, whereas venture capitalists invest the funds of others.
Business angels also invest lower amounts than venture capitalists. They tend to be involved in the early stages of a business’s lifecycle and their expectations in terms of ROI are more modest.
Business angels make their decisions of the future growth of a new business as venture capitalists are looking to the post records of already existing companies.
Equity Gap between Sources of Finance Cheaper sources of capital, such as bank financing, are usually not available for most early-stage ventures, which may be too small or young to qualify for traditional loans.
Angel investments bear extremely high risk and are usually subject to dilution from future investment rounds. As such, they require a very high return on investment.
Because a large percentage of angel investments are lost completely when early stage companies fail, business angel investors seek investments that have the potential to return at least 10 or more times their original investment within 5 years, through a defined exit strategy, such as plans for an initial public offering or an acquisition.
Current 'best practices' suggest that angels might do better setting their sights even higher, looking for companies that will have at least the potential to provide a 20x-30x return over a five- to seven-year holding period .
After taking into account the need to cover failed investments and the multi-year holding time for even the successful ones, however, the actual effective internal rate of return for a typical successful portfolio of angel investments is, in reality, typically as 'low' as 20-30% .
While the investor's need for high rates of return on any given investment can thus make angel financing an expensive source of funds.
Is your team experienced, driven, coachable, and willing to cede some control and decision-making authority to outside investors?
Do you have an identifiable market segment? Is there a demonstrable and significant demand for your proposed solution?
Are the projected revenues in your product category large and growing? Can this be a several hundred million dollar market?
Have you identified potential competitors? Do you understand your company’s differentiation points? Will true barriers to entry help your company to maintain a competitive advantage?
Have you proven the concept behind your product or technology? Can this be confirmed with data or by objective experts? Have you built a comprehensive business plan to commercialize the technology?
Protected Intellectual Property
Have you protected your intellectual property? Have you performed an exhaustive search to be sure that you are not infringing on patents or trademarks held by others?
Do you have a plan to achieve widespread market penetration for your products and services? How will you do this as efficiently as possible? Will you create an internal, direct sales team, or will you rely on external channel partners?
Can you demonstrate how high margins (+15%) and consistent cash flow growth will be achieved?
Do you require between 200,000 RMB to 5,000,000 RMB to finance growth activities, including product development, recruiting key staff, launching sales and marketing activity?
Have you developed reasonable financial projections - including an income statement, cash flow and balance sheet and supporting spreadsheets - based on logical, realistic assumptions?
Do you have a clear exit strategy that will enable angel investors to generate a return of at least ten times their initial investment within five to seven years?
Have you developed a comprehensive business plan that articulates your key business strategies for how you will grow your venture?
What kind of enterprises need venture funding?
Not all companies are suited to receive venture capital, and some will do better with loans or other forms of financing.
According to Katarina Bonde, Managing Director of KUBI, the following companies can benefit from seed capital:
Companies with business ideas with significant commercial potential;
Companies with enough growth or profit potential to generate a good return on investments;
Companies in dynamic and changing industries;
Companies built on technical innovations;
Founders who can share control of the company.
Common mistakes entrepreneurs make in the search of capital
Searching capital too dispersive
Misjudging the time to close a deal
Falling in love with your business plan
Spending too much time raising money
Failing to understand the investor’s real needs
Taking your projections too seriously
Confusing product development with the need
Failing to recognize the strength of mgt. team
Providing business plans too excessive details
Wasting the time of investors
Lacking of analysis
Acting at the wrong timing
Afraid of sharing idea without telling the whole story
Underestimate strategic benefits from investors
Wrongly recognizing valuation is a science than an art
Mistakenly beleive ownership equal controls
Factors drive value in venture-investing Clearly defined sales & marketing strategy Intellectual asset harvesting & management systems Recognizable brands & industry/peer respect Transparency in accounting and financial systems Culture of innovation and adaptability Commitment to strong/proper governance GROWING COMPANY VALUE DRIVERS
What are the venture investor really looking for? The business plan should always address the areas shown above to ensure there will be a first meeting Marketing & Branding Strategies Durable Revenue Streams Management Team’s Ability to Lead/Execute Path to Profitability is Clear Large and Clearly Defined Target Markets Strong Base of Loyal and Diversified Customers Strategic Alliances, Channels, & Networks Defendable Competitive Advantage (IP) Growing Company