This presentation is Based on the book “Angel Investing - The Gust Guide to Making Money & Having Fun Investing In Startups” by David S. Rose @davidsrose CEO of Gust and Founder of New York Angels angelinvesting.com It is for a Masterclass designed for practising and potential business angels who want to understand the basics of angel investing. It is a comprehensive guide that walks students through every step of the way to becoming a successful angel investor. The class exposes students to fundamental strategies and specific tools required to take full advantage of this rapidly growing asset class, from building your reputation as a smart investor, to negotiating fair deals and adding value to your portfolio of companies through to helping them implement smart exit strategies.

1. © H. Tomi Davies 2018
Introduction to Business Angel Investing
Based on the book
“Angel Investing - The Gust Guide to Making Money & Having Fun Investing In Startups”
by David S. Rose @davidsrose CEO of Gust and Founder of New York Angels
angelinvesting.com
TOMI DAVIES
@TomiDee
Lagos Angel Network (LAN)
African Business Angels Network (ABAN)

2. © H. Tomi Davies 2018
What’s a Business Angel Investor?
Business Angels Invest their
personal capital made up of:
• Time – Mentoring & Advising
• Industry, Sector, Segment
• Expertise, Specialisation, Skills
• Experiences
• Relationships - Access
• Business & Personal Networks
• Events, Phone & eMail
• Online & Social Media
• Money – Funding
• Equity – Shareholding
• Debt – Notes
in…
• Seed (StartUp) & Early Stage
(ScaleUp) companies
An individual that invests personal capital in a seed or early stage company!
• …and get their “Return on
Investment (ROI)” from:
• Keeping up with the world from
exposure to entrepreneurs
• Practicing entrepreneurship without
responsibility
• Experiencing the joy of giving back
to society
• Exchanging thought leadership in
panels, speaking and judging
competitions at events
• Enjoying the social side of Angel
Investing in an ecosystem
• Receiving average annual returns
of about 25% from a carefully
selected and managed portfolio
over a long run.

3. © H. Tomi Davies 2018
Curriculum
• Introduction
• Who’s here?
• Part 1
• The Basics of Angel
Investing
• Part 2
• The Nuts & Bolts
• Part 3
• Your Place in the World of
Angels
© David S. Rose

4. © H. Tomi Davies 2018
About Me: Harry ’Tomi Davies (TD)
• Blue chip Enterprise
Technology Management &
Big 5 Consulting background
• Strategic Advisor (Tech),
Mentor, Board Member, Public
Speaker & Author
• Co-Founder, Lagos Angel
Network, Lagos Nigeria
• President, African Business
Angels Network (ABAN)
• Board Member, World
Business Angels Forum
(WBAF), Global Business
Angel Network (GBAN)
Angel Investor with growing
portfolio of Nigerian early stage
Tech ventures:
SupaStrikas, Sproxil, Hutbay,
TextNigeria, Big Cabal Media, Café
Neo, Versecom, Mines.io, Vconnect,
FlexiSAF, SCDL, TeraRave, 2iLabs

5. © H. Tomi Davies 2018
About this Masterclass
• This Masterclass is for practising and potential
business angels who want to understand the
basics of angel investing. It is a comprehensive
guide that walks students through every step of the
way to becoming a successful angel investor.
• It exposes students to fundamental strategies and
specific tools required to take full advantage of this
rapidly growing asset class, from building your
reputation as a smart investor, to negotiating fair
deals and adding value to your portfolio of
companies through to helping them implement
smart exit strategies.

6. © H. Tomi Davies 2018
PART 1 - The basics of angel investing
• The 25 Percent Annual Return
• Plus, It’s Really Fun
• Angel Investing Portfolio Theory
• The Financial Life of a Startup

7. © H. Tomi Davies 2018
The 25%Annual Return
• What Exactly is Angel
Investing?
• Can You Really Make 25
Percent a Year?
• Who Can Be an Angel?
• …..And Who Should Be an
Angel?
• Getting Started in Angel
Investing
• Risks in Angel Investing
• Types of Angel Investors
Why Everyone with Six Figures to Invest Should Consider Angel Investing

8. © H. Tomi Davies 2018
What exactly is Angel Investing?
• An Individual
• Investing
• Personal Capital (typically in
small amounts of time &
money)
• In
• Seed (i.e. StartUp) Or Early
Stage (i.e. ScaleUp)
• Companies
• Limited Liability
Investing personal capital in a seed or early stage company!

9. © H. Tomi Davies 2018
Can you really make 25% a year?
• An average annual return
of 25% or more comes
• Over a long run (>10yrs)
• With a carefully selected
and managed portfolio of
at least 20 companies of
which:
• 50% will fail completely
• 20% will return original
investment
• 20% will return 2/3x
• 9% will return 10x
• 1% will return >20x
How to get 25% annual returns on your investment

10. © H. Tomi Davies 2018
Who are Business Angels?
• Who can be a Business
Angel?
• Commitment
• Passion for Human Development
• Competence
• Knowledge, Experience & Expertise
• Capacity
• Patient Personal Capital
• Compliant
• Accreditation & Regulation
Who should be a Business
Angel?
• Do you have….
• Long term view (years/decades)
• Strong Economic Base
• High tolerance for risk and failure
• Even temperament
• Strong people skills
• Self-discipline
• Willingness to learn
• Genuine love and respect for
entrepreneurs and startups
• Teaching/Mentoring Ability
• Domain Expertise
• Business Experience
• Financial Savvy
• Personal Networks
Those with a passion for developing the next generation

11. © H. Tomi Davies 2018
Getting Started as a Business Angel
• Specialize in an industry you
know well and Invest inside
your domain of experience
• Do thorough Due Diligence and
have lawyers review company
documents
• Don’t invest at too high a
valuation
• Invest in convertible notes only
if capped
• Reserve capital for the
inevitable follow-on round
• Plan to invest in at least 20
deals to build your portfolio
• Have a long-term (<10 years)
commitment
• Don’t drag out the investment
process unnecessarily
• Be in constant search for the
“big vision” investment

12. © H. Tomi Davies 2018
What are the risks in Angel investing?
• Investing in Early stage
(ScaleUp) companies is
high risk
• Investing in Seed stage
(StartUp) companies is
even higher risk
• Angel investing is an
unregulated market
• Uncertainty of investing
• Startup Valley of Death
• “This is Africa!” (Policy)
Potential risk of total loss of investment

13. © H. Tomi Davies 2018
What types of Business Angels are there?
• Return on Investment (ROI)
Angels
• Focus is on financial rewards from
each addition to a diversified
portfolio.
• Corporate Angels
• Former business executives making
investments for profitability and
possibility of paid role with investee.
• High -Tech Angels
• Value profitability as much as the
exhilaration of introducing innovation
to the market.
• Entrepreneurial Angels
• Run their own successful
businesses, which enable them
invest and support investees without
getting involved in operations.
• Core Angels
• Have extensive business experience,
and wealth accumulated over time.
Make useful knowledge and cash
investments that add to their
diversified portfolio in spite of losses.
• Professional Angels
• Professionally employed as lawyers,
physicians, accountants etc, these
angels are extremely valuable for
initial capital investments.
• Micromanagement Angels
• Considered the most serious types of
angels. Usually seek board position
& tend to replicate business
strategies they have successfully
used in their own companies into the
startups they are investing in.
Affluent Individual with investible personal capital! - Young, Old, Male, Female…

14. © H. Tomi Davies 2018
How does Angel Investing work?
1. Sourcing & Identifying High
Potential Opportunities
2. Evaluating Entrepreneurs
and Picking the Right Ones
to Back
3. Negotiating Win/Win
Relationships with
Entrepreneurs
4. Closing deals after
Valuation & Due Diligence
of the StartUp’s claims
5. Investing in Ordinary or
Preferred Shares,
Convertible Notes etc.
Find, Assess, Invest, Manage, Exit a seed or early stage companies!

15. © H. Tomi Davies 2018
Plus, Its Really Fun!
You have the joy of…
• Keeping Up with the World
• Entrepreneurship without
Responsibility
• Giving Back to Society
• Participating in
Entrepreneurship
Competitions
• The Social Side of Angel
Investing
The Nonfinancial Rewards of Being an Angel

16. © H. Tomi Davies 2018
Angel Investing Portfolio Theory
• The Truths:
1. Most Startups Fail!
2. No One Knows Which Startups
Are Not Going to Fail
3. Investing in Startups Is a Numbers
Game
4. What Ends Up, Usually Went
Down First
5. All Companies Always Need More
Money
• If You Understand and
follow 1-5 Angel investing
can be very lucrative
Why Every Angel Needs to Invest in at Least 20 Companies

17. © H. Tomi Davies 2018
The Stages of Sourcing
Capital investment for
Startups:
• Founder
• Family & Friends
• Grants & Competitions
• Incubator/Accelerator
• Angel Investor(s)
• Venture Capital Series A
• Growth Capital Series B-Z
NB: Some ventures may skip
stages!
The Financial Life of a Startup
Where Angels Fit in the Big Financing Picture

18. © H. Tomi Davies 2018
PART 2 - The nuts and bolts
• Develop Your Deal Flow
• Bet the Jockey, Not the Horse
• Here Comes the Pitch
• Look Under the Hood and Lead a Deal
• Valuations & Expectations
• Investment Rounds and Their Forms
• The Art of the Angel Deal
• Term Sheets and Closing
• After the Investment
• Exits and Other Unicorns

19. © H. Tomi Davies 2018
Develop Your Deal Flow
• Personal Connections
• Angel Group Meetings
• Business Plan
Competitions
• Start-up Conferences &
Launch Events
• Hubs/Incubator/Accelerator
Demo Days
• Online Deal Sources
• VC4Africa
• Gust
• Angels List
• What to Expect When You
Meet a Founder
Sourcing and Identifying High Potential Opportunities

20. © H. Tomi Davies 2018
Bet the Jockey, Not the Horse
• What Makes a Great
Entrepreneur?
• Are Start-Ups a Young
Person’s Game? How
Young?
• Serial Entrepreneurs
versus First Timers
• What About Tech Savvy?
• What About Education
• Warning Signs of a Weak
Founder
Evaluating the Entrepreneur and Picking the Right One to Back

21. © H. Tomi Davies 2018
Assessing a Founder!
• Are Start-Ups a Young Person’s
Game?
• No, personality traits count more
• Serial Entrepreneurs versus
First Timers
• Both count!
• What About Tech Savvy?
• Only to required level of
appropriateness
• What About Education
• University education preferred
but not necessary
• Warning Signs of a Weak
Founder
• Unrealistic assessments and/or
projections
• Lack of key greatness traits
• What Makes a Great
Entrepreneur?
• Lookout for these traits:
• Integrity & Passion
• StartUp Experience
• Domain Expertise
• Operating Skills
• Leadership Ability
• Commitment to venture
• Long-term Vision
• Realism & Pragmatism
• Flexibility
• Even Temperament
• Execution Track Record
Evaluating the Entrepreneur and Picking the Right One to Back

22. © H. Tomi Davies 2018
Here Comes the Pitch
• Size of the Opportunity
• Product or Service
• Strength of the Founding
Team
• Where Is My Money Going?
• Attracting Customers
• Funding Alternatives
• Execution Strategy
• Exit Strategy
• Pitch Process Materials
• Online Content
• Written Documentation
• Live Presentation
• Financials
Does the Pitch Story Make Sense for Your Portfolio?
• Other Issues
• Sales Channels
• Stage of Business
• Size of investment round
• Needs for future financing
• Quality of business plan &
presentation
• Location of company
• Type of Industry

23. © H. Tomi Davies 2018
Look Under the Hood and Lead a Deal
1. Curation
• identify deal worth looking at
2. Validation
• Due Diligence
3. Negotiation
• investment amount & startup
valuation
4. Funding
• writing your own cheque
5. Sherpa-ing
• filling out the round with other
angels
6. Cheerleading
• herding angels
7. Mediating
• angels vs startup
8. Communicating
• point of contact
Leading the deal means coordinating others

24. © H. Tomi Davies 2018
Due Diligence
• Review & Assessment
covers:
• Commercial
• Industry Market Size, Trends,
Competition, Regulation etc.
• Financial
• Operations including
customers, revenue &
expenses, founders etc.
• Legal
• Company structure,
ownership, employment,
assets, agreements etc.
Due Diligence is an Independent Review of the StartUp’s claims

25. © H. Tomi Davies 2018
Valuations & Expectations
Discovering the Secret Economics of the Angels
• The Four Simple Numbers: Basics
of Investment Math
1. The value of the company when you invest
2. The value of the company when you sell
3. The number of years between the two events
, which together, give you your rate of return
4. Bottom Line = Rate of Return x Amount
Invested
• How Much Should You Invest?
• What Target Rate of Return Should
You Aim For?
• What is the Company Worth When
You Invest?
• How Do Initial Valuations Affect
Angels Ultimate IRR?
• Changing Valuations During a
Round

26. © H. Tomi Davies 2018
Investment Rounds and Their Forms
Equity
• How Equity Investments
Work
• Ordinary Shares (Common
Stock)
• Preferred Shares (Preferred
Stock)
• Series Seed
• Series A, B, C….
• Convertible Equity (e.g. SAFE)
Debt
• The Discounted Convertible
Note
• Convertible Debt
• Capped Convertible Debt
• Promissory Note
• Secured Promissory Note
Ordinary Shares, Convertible Notes, or Preferred Shares?

27. © H. Tomi Davies 2018
The Art of the Angel Deal
• Integrity and
Knowledge
• Relative Power Position
and Personal Style
• The Question of Control
• Red Flags in Deal
Negotiation
Negotiating a Win/Win Relationship with Your Entrepreneur

28. © H. Tomi Davies 2018
Term Sheets & Closing
There are two main elements that
must be considered in negotiations:
• Economic conditions refer to the
return on investment (ROI) for
investors in a liquidity event.
• Control conditions refer to the
mechanisms that allow investors to
influence the strategic direction of
the company.
Term Sheets can be broken down
into a series of clauses in 4 key
areas:
1. Offer Terms
2. Compliance Terms
3. Shareholding Terms
4. General Terms
If it has been written it hasn’t been agreed!

29. © H. Tomi Davies 2018
Post Investment Activities
• Monitoring Your Company
• Performance Data
• Thinking About Your
Portfolio as a Whole
• Synergies not Competition
• Making Follow-On
Investments
• Watch out for pay2play
• Adding Value to Your
Investment
• Mentoring Management
• Relationships Access
• Serving on a Company
Board
• Do you really need to?
Manage Your Portfolio and Add Value as an Active Angel

30. © H. Tomi Davies 2018
Exits and Other Unicorns
• When a company fails
• Investors v Creditors
• Bankruptcy/Firesale –
percent of investment
• Serial Entrepreneurs
• When a company is
acquired
• Cash, Shares or both?
• Payout Sequence
• Debt, Preferred, Common
(including Converted)
Getting Your Money Out Makes All Things Right

31. © H. Tomi Davies 2018
Safeguarding Returns
• Reliable data on early
stage investing anywhere
is scarce!
• Long-term investments
(>10 year) is not the goal
of angel investing
• 20% annualized return from
investment in 10 companies,
need 200% per year ROI!
• Consider exit strategy
BEFORE investing!
• Salability is the key
• Strategic (corporate fit)
• Financial (future cash flow)
Outcome Percentage
Goes out of business 50.0
Sale to larger company 20.0
Acqui-hire 15.0
Walking Dead 7.0
Soft landing with competitor 3.0
Bought out by later investor 2.0
Bought out by lifestyle entrepreneur 1.0
Becomes part of a roll up 1.0
Disappears 0.9
Initial Public Offering (IPO) 0.1
Total Portfolio 100.0
Investing in pre-profitable companies is risky!

32. © H. Tomi Davies 2018
PART 3 – Your Place in the World of Angels
• The Entrepreneurship Financing Ecosystem
• Building Your Angelic Reputation
• Joining an Angel Group
• Impact Investing
• Sit Back and Let Someone Else Do the Work
• Crowdfunding and the Global Revolution
• Capital for the decentralized future

33. © H. Tomi Davies 2018
The Entrepreneurship Financing Ecosystem
• Government Grants
• Economic Development
Agencies
• Business Plan
Competitions
• Accelerators
• Funding Platforms
• Intermediaries
• Super Angel Investors
• Angel Groups
• Venture Funds
• Venture Debt Lenders
• Private Equity
• Corporate Venture Groups
Grants, Venture Capital, Accelerators, and Other Players

34. © H. Tomi Davies 2018
Building Your Angelic Reputation
• Create Your Profile
• Write a Blog
• Answer Questions
Online
• Attend Events in Your
Local Startup
Community
• Participate as a Judge,
Mentor or Panelist
• Pay it Forward by
Advising Startups
Getting the Best Deals to Come to You

35. © H. Tomi Davies 2018
Joining an Angel Group
• How Angel Groups
Operate
• How Smart
Entrepreneurs Work
with Angel Groups
• Angel Group Money
Matters
• The Future of Angel
Groups
Increasing Your Opportunities and Reducing Your Risks

36. © H. Tomi Davies 2018
Impact Investing
• Social Venture Capital
• The Double Bottom
Line
• Impact Investing Matrix
• Social Seed Funds
Doing Well While Doing Good

37. © H. Tomi Davies 2018
Sit Back and Let Someone Else Do the Work
• Venture Capital Funds
• Micro VC Funds
Investing in Startups through Seed Funds and Venture Funds

38. © H. Tomi Davies 2018
Crowdfunding and the Global Revolution
• But Wait! Here comes
Equity Crowdfunding
• What Can We Expect
to See with Equity
Crowdfunding
Angel Investing for Everyone

39. © H. Tomi Davies 2018
Capital for the decentralized future
• Cryptocurrencies have opened a
new era of Angel Investment
• Transition from traditional angel
to crypto angel already
underway
• Cryptocurrency investments
soaring due to ICOs with
projected return on the average
angel investment shrinking from
> ten to < four years
• The Attractiveness of ICOs
• Liquidity of Investment
• Democratization of Angel Investment
Blockchain, AI and Cryptocurrency investments

40. © H. Tomi Davies 2018
Reference Material
More on Angel Investing …. angelinvesting.com

41. © H. Tomi Davies 2018
Web: tomidavies.com
Twitter: @TomiDee
Facebook: TomiDee
Linkedin: TomiDee
eMail: td@tvcng.com
I’d love to hear from you
THANK YOU!