Ten commandments of Angel Investing
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Ten commandments of Angel Investing

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The "Ten Commandments" for Angel Investors.

The "Ten Commandments" for Angel Investors.

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Ten commandments of Angel Investing Presentation Transcript

  • 1. “Ten Commandments of Angel Investing”What commandments might a “higher investing power”pass on to angel investors, to help in their quest forsuccess in early stage company investing?Although not necessarily etched in stone, we’ll take astab at what might be considered the “Ten Command-ments of Angel Investing”: a set of basic rules for earlystage company investing. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 2. I.“Profit is the ultimate goal.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 3. 1. “Profit is the ultimate goal.” Angel investing is not charity. Invest to create successful companies. Invest Create Grow Exit (M&A or IPO). The goal is to yield profits for future investments. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 4. II.“Invest in great teams.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 5. 2. “Invest in great teams.” Avoid single member “mad scientist” investment. Great entrepreneurs build great teams. Great teams can overcome most challenges. Try to find, and fund, great teams (business experience, business diversity, attitude). “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 6. III.“Invest in big ideas.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 7. 3. “Invest in big ideas.” “I skate to where the puck is going to be, not where it has been.” -- Former NHL hockey all star Wayne Gretzky Look for big idea, where market is heading. Avoid the “me too” investment (similar ideas in crowded field). But: big idea must be backed up with data. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 8. IV.“Invest in large markets.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 9. 4. “Invest in large markets.” Large markets allow for growing pains; “larger field”, more “playing time”. Large markets support inevitable competition. Even “somewhat successful” result might yield “large exit” in a large market. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 10. V.“Know the valuation range.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 11. 5. “Know the valuation range.” Angel investing is risky investing, don’t overvalue. Companies should be reasonably priced. Use “comps” of similar companies but always adjust for risk. Remember: failure more likely than success, don’t be afraid to walk away, there will always be another deal. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 12. VI.“Always do due diligence.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 13. 6. “Always do due diligence.” “There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we dont know.” -- Former United States Secretary of Defense Donald Rumsfeld Angel investing is full of “unknown unknowns”. Use your due diligence time to uncover them. Take nothing for granted, be thorough. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 14. VII.“Support your companies.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 15. 7. “Support your companies.” Keep “dry powder” for future investment rounds. Listen and advise where you add value. Help “keep the faith”: start-ups succeed with persistence and patience. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 16. VIII.“Create an investment portfolio.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 17. 8. “Create an investment portfolio.” If one or two out of ten or twenty are “homeruns”, you need a portfolio of co.’s to increase odds. Invest where comfortable but diversify. Be patient: a good investment portfolio takes time to develop. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 18. IX.“Know when to fold „em.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 19. 9. “Know when to fold ‘em.”“You got to know when to hold em, know when to fold em. Know when to walk away and know when to run.” --“The Gambler” by Kenny Rogers Don’t throw good money after bad in deals. Don’t just chase the “homeruns” (100X exits). Reasonable returns in a reasonable timeframe (doubles, triples etc. keep you “in the game”). “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 20. X.“Give more than you receive.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 21. 10. “Give more than you receive.” Always be teaching, as well as learning. Mentor and help entrepreneurs and startups, even those you may pass on, for investment. Those you help, may later help you one day. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 22. I. VI. “Profit is the ultimate goal.” “Always do due diligence.” II. VII. “Invest in great teams.” “Support your companies.” III. VIII. “Invest in big ideas.” “Create an investment portfolio.” IV. IX. “Invest in large markets.” “Know when to fold „em.” V. X.“Know the valuation range.” “Give more than you receive.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 23. Who are the Tech Coast Angels?Tech Coast Angels, www.techcoastangels.com, the largest angel investornetwork in the United States, provides funding and guidance to moreearly‐stage, high‐growth companies in Southern California than any otherinvestment group. Since its inception in 1997, TCA members have focused onbuilding valuable companies, personally invested more than $100M, andhelped portfolio companies attract more than $1B in additional capital, mostlyfrom venture capital firms.TCA members give companies more than just capital; they also providecounsel, mentoring and access to an extensive network of potential investors,customers, strategic partners and management talent.TCA has more than 300 members, including its venture capital affiliates, in fivenetworks in Los Angeles, Orange County, San Diego, Westlake/Santa Barbaraand the Inland Empire. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels