Seattle's Alliance of Angels (AoA) sponsored webinar for startup founders and angel investors. July 15, 2020. Hosted by Dave Parker with guests, Mark Upson of NextPath Advisors, Gary Kocher, K&L Gates, and Yi-Jian Ngo of AoA.
Alliance of Angels – Dedicated to Funding
AoA is at the Center of Startup Funding in Our Region
◦ Largest Angel Group in the PNW with 140 members
◦ A member mix of angel investors (including many of the area’s
"super angels“), prominent family offices and local VC’s.
◦ #1 funder of female led startups in the PNW.
AoA Funds the Most Deals
◦ AoA invests in over 20 deals per year with total investment
over $10 million - more than any other angel group in the region.
◦ Average amount invested per deal ranges between $250 - 500k.
◦ 50% of companies presenting at AoA member meetings get funded.
◦ AoA members invest in startups across a wide range of business sectors.
Alliance of Angels – Dedicated to Funding
Having AoA Investors Builds Credibility for Further Fundraising
◦ AoA members are highly networked to other sources of capital.
◦ A number of area angel groups attend AoA meetings so they
can spot good startups to being to their investors.
◦ 80% of entrepreneurs who received AoA funding successfully
completed their round.
AoA Can Help With More Than Money.
◦ AoA members have deep business experience in a wide range
of sectors and disciplines.
◦ Many members are entrepreneurs currently or have been in the past
◦ They can provide invaluable business advice, useful contacts and
connections for further rounds of financing.
Mark Upson – Managing Partner, NextPath
Gary Kocher – Partner, K&L Gates
Dave Parker –Startup Founder & Community
• Predictable & forecastable revenue
• Marketing and Sales Motion
• >50% Annual Growth
• Raise $5M exit >$50M
Time to Sell?
• Support from existing investors or tired
• Not on the Unicorn track
• Solid growth <50% annually
• Ready for the next adventure?
• Material return for founders and team
Key Factors for
• Build vs buy to fill product gap
• Revenue/growth rate/profitability validate team, product,
• Prefer to acquire companies that they already have a
working relationship with
• Positioning for sale at best valuation can take 12 months or
• Typically looking for a minimum of $3-5M in revenue
• Rule of 40: Growth rate + EBITDA rate > 40%
• Breakeven or Profitable (path to $1M annual EBITDA)
• Buying based on financial model and sector potential
• Acquisition discussions can move much faster than those
Multiple Bidders can increase Exit Revenue Multiple by
Exit valuation drivers
PE firms into play)
Private Company multiples tend to run at 25% discount
to public due to lack of liquidity (Median private company
SaaS multiple is 4.5x TTM)
• Asset vs Share Purchase
• $ to shareholders upfront
• Move to market rate
• Time based milestones
and/or earn-outs over 2-3
Due Diligence Checklist
◦ Articles of Incorporation
◦ Stock Purchase Agreements
◦ Vesting Schedules
◦ IP Assignment Agreement
◦ Balance Sheet
◦ Income Statement
◦ Prior Funding docs
Employee /Service Provider Agreements
◦ List of all persons providing services
◦ Current and past employees
◦ Patents, Trademarks, Copyrights
◦ Domain Names
◦ Standard Form Agreements
◦ Real Estate
◦ Any correspondence or documents threatening action
◦ Inquires or applications
◦ CPA Firm
◦ Tax Returns
Link above includes 4-page detailed
downloadable Word Document
Inflated Exit Expectations
(“I wish I had taken the deal is #1 lament….)
Poor Corporate Hygiene
(Taxes, Corp Docs not in order)
Bad or Unknown News
(Moral is to get deal done ASAP)
Surprises in Diligence
(Better to confess than be found out)
Ongoing Business Development Discussions with
One strategic indicated working toward an LOI
Ran a Dual Process of Fundraising and M&A Discussions
Contacted all other strategics to assess their buy vs. build
Within 30 days, closed with a different strategic from the
initial bidder with an 88% premium over the initial bid
Extremely high TTM multiple based on technology fitting
Focus on Business Development with goal of M&A within 12 months
Identified 5 New Industry Segments and 57 Potential Partners
Revamped website, product roadmap, and demos to address overall
market positioning and new categories
Contacted the prioritized partners at senior executive level to assess fit
and partner interest. Developed GTM plans with engaged strategics
Drip marketed private equity firms
Unsolicited bid made for company as a result of process with a
negotiated exit well above market (8.3X TTM).
Partner Development Process – 7 months, M&A Process - 2 months
Build Market Map and prioritize
targets based on product fit and
Outreach to establish working
relationships (integration, OEM,
Focus on top 3-5 potential
acquirers and prove out the
Goal is to establish an anchor
bidder and then run process
Build list of relevant midmarket
private equity firms
Prepare diligence materials and
If running a strategic BD process,
can drip market PE firms along the