Angel VS. VC Ishay Green

Angel VS. Venture Capital (And some tips about both…)

Angel

VS.

Venture Capital

(And some tips about both…)

Disclaimer Entrepreneurship is a game of imagination – The following are my opinions

Entrepreneurship is a game of imagination – The following are my opinions

TERMINOLOGY 1

Terminology Valuation Shares Dilution

Valuation

Shares

Dilution

ANGEL VS. VC MONEY 2

Angel VS. VC Money VC’s are professionals who invest other people’s money

VC’s are professionals who invest other people’s money

Angel VS. VC Money Angels are private people investing their hard earned money

Angels are private people investing their hard earned money

ANGEL VS. VC PROFIT EXPECTATIONS 3

Profit Expectations VC’s look for double digits profit multipliers (10 Times)

VC’s look for double digits profit multipliers

(10 Times)

Profit Expectations Angles would usually be happy in low end of a single digit (3 Times)

Angles would usually be happy in low end of a single digit

(3 Times)

ANGEL VS. VC INVESTMENT RISKS 4

Investment Risks The Angel is risking their own money

The Angel is risking their own money

Investment Risks The Angel is usually less knowledgeable than a VC in most aspects

The Angel is usually less knowledgeable than a VC in most aspects

Investment Risks The Angels tend to follow their gut feeling (So you better be damn sure you know what you’re doing…)

The Angels tend to follow their gut feeling

(So you better be damn sure you know what you’re doing…)

Investment Risks The Angel knows where you live

The Angel knows where you live

Investment Risks The VC risk is divided through a larger portfolio

The VC risk is divided through a larger portfolio

ANGEL VS. VC EXCEPTED HOLDINGS 5

Excepted Holdings VC’s expect a minimum of 20%-25% share holdings (They will ask for much more)

VC’s expect a minimum of 20%-25% share holdings

(They will ask for much more)

Excepted Holdings Angles are agnostic.

Angles are agnostic.

TIMING 6

Timing Angels can afford investing in the scenarios of: Seed Down-round * Angels will usually not execute their preemptive right

Angels can afford investing in the scenarios of:

Seed

Down-round

* Angels will usually not execute their preemptive right

Timing VC will usually require a more mature company, and even a proof of concept before investing

VC will usually require a more mature company, and even a proof of concept before investing

Timing Angel money is faster (For most Angels a meeting or two is sufficient to decide)

Angel money is faster

(For most Angels a meeting or two is sufficient to decide)

Timing “ Some VC’s will yes you to death” - Adi Pundak-Mintz

“ Some VC’s will yes you to death”

- Adi Pundak-Mintz

WHY DO ANGELS EXIST? 7

Why do Angels Exist? Potential for large multipliers on their investment outside of the stock markets

Potential for large multipliers on their investment outside of the stock markets

Why do Angels Exist? The investment is not liquid – When it is gone it is gone

The investment is not liquid – When it is gone it is gone

Why do Angels Exist? The Google – Facebook – The Marker Effect

The Google – Facebook – The Marker Effect

Why do Angels Exist? Tax Benefits

Tax Benefits

Why do Angels Exist? It’s Fashionable & Cool

It’s Fashionable

& Cool

VC TYPES – ENTREPRENEUR POV 8

VC Types – Seed Funds Invest small amount of money in early stage, with no promise for recurring investment

Invest small amount of money in early stage, with no promise for recurring investment

VC Types – Israel Top Five - Has more then $100M fund - Known for its smart and beautiful partners* * Yaron from Giza VC is a great example

- Has more then $100M fund

- Known for its smart and beautiful partners*

* Yaron from Giza VC is a great example

VC Types – International Enables you to tell everyone you now have direct access to Steve Jobs, Balmer and God

Enables you to tell everyone you now have direct access to Steve Jobs, Balmer and God

VC Types – Famous Proven winners - Index Ventures invested in

Proven winners - Index Ventures invested in

VC Types – Top Tier Sequoia Draper Fisher Jurvetson

Sequoia

Draper Fisher Jurvetson

ANGEL TYPES – ENTREPRENEUR POV 9

Angel Types I Rich Industry Expert / Entrepreneur (Eduardo Shoval)

Rich Industry Expert / Entrepreneur

(Eduardo Shoval)

Angel Types II Super Angel (Yossi Vardi / Paul Grahm)

Super Angel

(Yossi Vardi / Paul Grahm)

Angel Types III Richie Rich Oil / Real-estate / Diamonds / Weapons

Richie Rich

Oil / Real-estate /

Diamonds / Weapons

Angel Types IV The Gambler

The Gambler

Angel Types V Family

Family

BOARD OF DIRECTORS 10

Board Of Directors The board represents the share-holders (investors)

The board represents the share-holders (investors)

Board Of Directors The board devises tactics and strategies for the company

The board devises tactics and strategies for the company

Board Of Directors The CEO is responsible for executing board decisions

The CEO is responsible for executing board decisions

Board Of Directors Entrepreneurs & CEO keep the board up-to-date

Entrepreneurs & CEO keep the board up-to-date

Board Of Directors An effective board: Smart and self-conscience members One member+ is an industry expert

An effective board:

Smart and self-conscience members

One member+ is an industry expert

INVESTOR RIGHTS 11

Investor Rights Voting Rights Are Dangerous (Try to avoid them)

Voting Rights Are Dangerous

(Try to avoid them)

Investor Rights Veto Rights Are Lethal (Unacceptable)

Veto Rights Are Lethal (Unacceptable)

ANGEL-MAINTENANCE TECHNIQUES 12

Angel-Maintenance Techniques Angel turns into Devil: Conflict of Interest Disappointment Greenmail Ignorant / Boarder Line Disorder

Angel turns into Devil:

Conflict of Interest

Disappointment

Greenmail

Ignorant / Boarder Line Disorder

Angel-Maintenance Techniques Proxy Mechanism - Protect the company from its investors Protect the investors from themselves Protect the individual investor from himself

Proxy Mechanism -

Protect the company from its investors

Protect the investors from themselves

Protect the individual investor from himself

Angel-Maintenance Techniques Define a board representative for the angels with past experience

Define a board representative for the angels with past experience

ANGEL VS. VC VALUATION 12

VC VC allocates ~$10M total for an investment The money is divided between rounds The VC needs to maintain 25% holdings in the company – unless you go to huge valuations. (*)

VC allocates ~$10M total for an investment

The money is divided between rounds

The VC needs to maintain 25% holdings in the company – unless you go to huge valuations. (*)

Angel The Tomer-Ishay Method™ Find a prominent lead investor and then negotiate Talk to the rest of the investors only after valuation was set Raising money in chunks

The Tomer-Ishay Method™

Find a prominent lead investor and then negotiate

Talk to the rest of the investors only after valuation was set

Raising money in chunks

Angel What should you tell the Angels before closing Make sure they understand the business plan Tell them they need to consider the money as gone. Say that you do not take money from widows and orphans.

What should you tell the Angels before closing

Make sure they understand the business plan

Tell them they need to consider the money as gone.

Say that you do not take money from widows and orphans.

SUMMARY &

Summary There are not definite pros & cons Angels are a great way to start Do you believe in Angels?

There are not definite pros & cons

Angels are a great way to start

Do you believe in Angels?

I do

THANK YOU !#%