Building a local Ecosystem
by John Sechrest
@sechrest
Mapping the Clusters
Including non-tech Clusters
Life cycle of a business
Outside Investment Stages
Angel Conference Model
20-60 companies apply

20-40 investors join LLC

$5500 for each investor

10 weeks of due dilige...
How does Angel Investing work?
Company Pitches
Due Diligence Feedback
Detailed Event Program
Select an investment
Angel Investing Distribution of Returns
60

50

40

Percent of Exits

US: Overall Multiple: 2.6X
UK: Overall Multiple: 2.2...
Distribution of Returns by Venture Investment

60

Hold: 3.0 yrs.
50

$80M

Percent of Total Exits

40

Hold: 3.3 yrs.

Ov...
Economic Impact of Angel Oregon Alumni
90

600

80

500

70
60

400

50

300

40
30

200

20

100

10
0

0

Revenue in (cu...
As a reminder: Angel Investor Performance Project
More than half fail to return
capital
Wins take longer to exit than
loss...
Estimated Multiple of AO as a Portfolio
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2006

2007

2008

Multiple by year, if...
5 Types of Angel Groups









Angel Networks 98%
Managed Angel
Funds - Founders
Coop
Passive Angel Funds
– Side ca...
Cities with Angel Conferences


Portland ( Since 2003 )



Bend



Corvallis/Eugene ( Since 2009 )



The Gorge



Me...
WWW.SEATTLEANGEL.COM
Where are they now?
Tracking the Angel Oregon Alumni

Willamette University Angel Fund
Median Early Stage Pre-Money Valuation

$2.5M
$1.5M

Median

$3.7M

3rd Quartile

$6.6M

1st Quartile

$0.11M

*Including ...
Robert E Wiltbank, Ph.D.
wiltbank@willamette.edu

www.Willamette.edu/~Wiltbank
Angel Investing Distribution of Returns
60

50

40

Percent of Exits

US: Overall Multiple: 2.6X
UK: Overall Multiple: 2.2...
Distribution of Returns by Venture Investment

60

Hold: 3.0 yrs.
50

$80M

Percent of Total Exits

40

Hold: 3.3 yrs.

Ov...
60

50

Percent of Exits

40

2X better multiple for
20+ due diligence

30

20

10

<1X

1X to 5X

5X to 10X

Exit Multipl...
60

50

60% better multiple for deals
related to industry expertise

Percent of Exits

40

30

20

10

<1X

1X to 5X

5X t...
Follow-On Investment from Same Angel Investor

60

50

30% of deals had follow on
investments.

Percent of Exits

40

3X b...
Diminishing Marginal Returns to Raising Capital

6/2/13
Diminishing Returns to Invested Capital
Private Acquisition Size from ‘96 to ‘06

Only 15%> $50M

6/2/13
… But Trending Up at Year End
Median Angel Round Size Reaches Five Quarter High in Q4 2012

$M
$1.50

$1.25M
$950K

$950K
...
Median Early Stage Pre-Money Valuation Stays the Same in 2012

$2.5M
$1.5M

Median

$3.7M
3rd Quartile

$6.6M

1st Quartil...
Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest
Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest
Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest
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Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest

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Growing the Startup Ecosystem by growing stronger Entrepeneurs and stronger Angel Investors using the Angel Conference model

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Transcript of "Building the Startup Ecosystem - Startup Iceland 2013 Talk by John Sechrest "

  1. 1. Building a local Ecosystem by John Sechrest @sechrest
  2. 2. Mapping the Clusters
  3. 3. Including non-tech Clusters
  4. 4. Life cycle of a business
  5. 5. Outside Investment Stages
  6. 6. Angel Conference Model 20-60 companies apply  20-40 investors join LLC  $5500 for each investor  10 weeks of due diligence  Workshops for Angels and Entrepreneurs  Large Final Event 
  7. 7. How does Angel Investing work?
  8. 8. Company Pitches
  9. 9. Due Diligence Feedback
  10. 10. Detailed Event Program
  11. 11. Select an investment
  12. 12. Angel Investing Distribution of Returns 60 50 40 Percent of Exits US: Overall Multiple: 2.6X UK: Overall Multiple: 2.2X 30 20 10 <1X 1X to 5X 5X to 10X Exit Multiple 10X to 30X >30X
  13. 13. Distribution of Returns by Venture Investment 60 Hold: 3.0 yrs. 50 $80M Percent of Total Exits 40 Hold: 3.3 yrs. Overall Multiple: 2.6X Avg. Holding Period: 3.5 years 30 $60M 20 $40M 10 $20M Hold: 4.6 yrs. Hold: 4.9 yrs. Hold: 6.0 yrs. 0 < 1X 1X to 5X Blue bars: % of exits in that Category Green Bars: $’s returned in that Category 5X to 10X Exit Multiples 10X to 30X > 30X
  14. 14. Economic Impact of Angel Oregon Alumni 90 600 80 500 70 60 400 50 300 40 30 200 20 100 10 0 0 Revenue in (current portfolio): $84.6M +47% from 2011 FTE’s in (current portfolio): +16% Rev/FTE (current portfolio): Raised $7.1M 535 $158K +27% $88M cumulative
  15. 15. As a reminder: Angel Investor Performance Project More than half fail to return capital Wins take longer to exit than losses “Asset Class” return of approx 2.6X 10% of exits = 90% of cash returned www.AngelResourceInstitute.org
  16. 16. Estimated Multiple of AO as a Portfolio 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2006 2007 2008 Multiple by year, if portfolio were cut off after that year Assumes even investment in every presenting company Underspecified Terms/Dilution as an imaginary portfolio 2009 2010 2012 AIPP
  17. 17. 5 Types of Angel Groups      Angel Networks 98% Managed Angel Funds - Founders Coop Passive Angel Funds – Side car funds Active Angel Funds – Oregon Angel Fund Angel Conference
  18. 18. Cities with Angel Conferences  Portland ( Since 2003 )  Bend  Corvallis/Eugene ( Since 2009 )  The Gorge  Medford  Seattle ( Since 2012 )
  19. 19. WWW.SEATTLEANGEL.COM
  20. 20. Where are they now? Tracking the Angel Oregon Alumni Willamette University Angel Fund
  21. 21. Median Early Stage Pre-Money Valuation $2.5M $1.5M Median $3.7M 3rd Quartile $6.6M 1st Quartile $0.11M *Including all rounds with angel groups before Series A 6/2/13 *
  22. 22. Robert E Wiltbank, Ph.D. wiltbank@willamette.edu www.Willamette.edu/~Wiltbank
  23. 23. Angel Investing Distribution of Returns 60 50 40 Percent of Exits US: Overall Multiple: 2.6X UK: Overall Multiple: 2.2X 30 20 10 <1X 1X to 5X 5X to 10X Exit Multiple 10X to 30X >30X
  24. 24. Distribution of Returns by Venture Investment 60 Hold: 3.0 yrs. 50 $80M Percent of Total Exits 40 Hold: 3.3 yrs. Overall Multiple: 2.6X Avg. Holding Period: 3.5 years 30 $60M 20 $40M 10 $20M Hold: 4.6 yrs. Hold: 4.9 yrs. Hold: 6.0 yrs. 0 < 1X 1X to 5X Blue bars: % of exits in that Category Green Bars: $’s returned in that Category 5X to 10X Exit Multiples 10X to 30X > 30X
  25. 25. 60 50 Percent of Exits 40 2X better multiple for 20+ due diligence 30 20 10 <1X 1X to 5X 5X to 10X Exit Multiple 10X to 30X >30X
  26. 26. 60 50 60% better multiple for deals related to industry expertise Percent of Exits 40 30 20 10 <1X 1X to 5X 5X to 10X Exit Multiple 10X to 30X >30X
  27. 27. Follow-On Investment from Same Angel Investor 60 50 30% of deals had follow on investments. Percent of Exits 40 3X better multiple in deals where the investor did not make a follow-on investment. 30 20 10 <1X 1X to 5X 5X to 10X Exit Multiple 10X to 30X >30X
  28. 28. Diminishing Marginal Returns to Raising Capital 6/2/13
  29. 29. Diminishing Returns to Invested Capital Private Acquisition Size from ‘96 to ‘06 Only 15%> $50M 6/2/13
  30. 30. … But Trending Up at Year End Median Angel Round Size Reaches Five Quarter High in Q4 2012 $M $1.50 $1.25M $950K $950K $900K $850K $1.00 $500K $550K $550K $620K $690K $0.50 $0.00 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 *Angel rounds include angels & angel groups only *
  31. 31. Median Early Stage Pre-Money Valuation Stays the Same in 2012 $2.5M $1.5M Median $3.7M 3rd Quartile $6.6M 1st Quartile $0.11M *Including all rounds with angel groups before Series A *
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