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“Icebergs and Angel Investing”
©2013 Tech Coast Angels
“Icebergs and Angel Investing”
This presentation details the relationship between angel
investing (early stage company investing) and icebergs.
How can one have anything to do with the other, you ask?
Let’s follow the ice flow and discover…
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
Sourcing Deals
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
Finding great startups for investment
can be like navigating through a field
of icebergs…
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
…and a large number of
startups you review are
companies you WON’T want
to “sink your money” into.
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
…and a large number of
startups you review are
companies you WON’T want
to “sink your money” into.
A small number of
startups may interest
you …
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
…and a large number of
startups you review are
companies you WON’T want
to “sink your money” into.
A small number of
startups may interest
you …
… and an even
smaller portion
you may
consider
“investable”.
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
Sourcing Deals
 Cast a wide net: join local angel group, online angel group etc.
 Find “deal flow” that meets your interest (volume/startup type).
 Starting angel investing: most deals sound good, but most fail.
 “Learn the ropes”: take your time, read and research.
Use online resources like the “Angel Capital Association”
(http://www.angelcapitalassociation.org/), books and other angel investor’s
experience: there’s lots of information easily accessible to help.
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
Due Diligence
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
“The shape of the underwater portion can
be difficult to judge by looking at the portion
above the surface. This has led to the
expression "tip of the iceberg", for a
problem or difficulty that is only a small
manifestation of a larger problem.”
http://en.wikipedia.org/wiki/Iceberg
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
The potential success of a
startup is difficult to judge
simply by the initial
company presentation or
the initial “visible portion” of
the company…this is just
the “tip of the iceberg”…
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
The potential success of a
startup is difficult to judge
simply by the initial
company presentation or
the initial “visible portion” of
the company…this is just
the “tip of the iceberg”…
… angels must use a
“diligence” or “due
diligence” check to
uncover the
underlying details.
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
Due Diligence
 Check background/work history of team members.
 Investigate product and any IP (software, patents, trade secrets etc.)
 Validate market: size, potential acceptance of product, competition.
 Verify financials: business model, financial plan, see their “books”.
 Check for legal encumbrances: prior actions, existing lawsuits etc.
This is a minimal list: use your due diligence time to uncover as much of
the “non-visible” portion of the company’s history as possible.
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
Startup Investment
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
Angel investors typically
invest in “seed” or “series A”
rounds: smaller rounds of
investment as companies
first start-up…
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
Angel investors typically
invest in “seed” or “series A”
rounds: smaller rounds of
investment as companies
first start-up…
…VCs (Venture
Capitalists) typically
invest in larger
rounds as company
expands to bring
product to market…
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
Angel investors typically
invest in “seed” or “series A”
rounds: smaller rounds of
investment as companies
first start-up…
…VCs (Venture
Capitalists) typically
invest in larger
rounds as company
expands to bring
product to market…
…the more money a VC
invests, usually the more
the iceberg “sinks” and
“melts”, “diluting” the
angel’s investment.
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
Startup Investment
 Know startup’s capital requirements (future rounds required?).
 Use “preferred stock”: anti-dilution, other protection features.
 VCs can be very good (deep pockets, good guidance, contacts).
 VCs can be very bad (over spending, bad guidance).
The longer the iceberg floats, generally the more it melts: dilution and
death are more common than exit to M&A (Merger or Acquisition) or IPO
(Initial Public Offering).
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
Investment Portfolios
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
Maybe 1 or 2 out of
ten or twenty startup
investments yield a
large return on
investment…
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
…most startup
investments end up
“under water”: partial
return of investment or
total loss.
Maybe 1 or 2 out of
ten or twenty startup
investments yield a
large return on
investment…
“Icebergs and Angel Investing”
©2013 Tech Coast Angels
Investment Portfolios
 Build a portfolio of investments to increase odds of success.
 Vary investment targets: software, hardware, internet, biotech etc.
 Invest at different startup stages: seed, series “A”, follow-on rounds.
If you are “very good” or “very lucky”: you can choose to concentrate in
one technology area, startup stage or market.
Tech Coast Angels, www.techcoastangels.com, the largest angel investor
network in the United States, provides funding and guidance to more
early‐stage, high‐growth companies in Southern California than any other
investment group. Since its inception in 1997, TCA members have focused on
building valuable companies, personally invested more than $100M, and
helped portfolio companies attract more than $1B in additional capital, mostly
from venture capital firms.
TCA members give companies more than just capital; they also provide
counsel, 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 five
networks in Los Angeles, Orange County, San Diego, Westlake/Santa Barbara
and the Inland Empire.
Who are the Tech Coast Angels?
“Icebergs and Angel Investing”
©2013 Tech Coast Angels

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Icebergs and Angel Investing

  • 1. “Icebergs and Angel Investing” ©2013 Tech Coast Angels “Icebergs and Angel Investing” This presentation details the relationship between angel investing (early stage company investing) and icebergs. How can one have anything to do with the other, you ask? Let’s follow the ice flow and discover…
  • 2. “Icebergs and Angel Investing” ©2013 Tech Coast Angels Sourcing Deals
  • 3. “Icebergs and Angel Investing” ©2013 Tech Coast Angels Finding great startups for investment can be like navigating through a field of icebergs…
  • 4. “Icebergs and Angel Investing” ©2013 Tech Coast Angels …and a large number of startups you review are companies you WON’T want to “sink your money” into.
  • 5. “Icebergs and Angel Investing” ©2013 Tech Coast Angels …and a large number of startups you review are companies you WON’T want to “sink your money” into. A small number of startups may interest you …
  • 6. “Icebergs and Angel Investing” ©2013 Tech Coast Angels …and a large number of startups you review are companies you WON’T want to “sink your money” into. A small number of startups may interest you … … and an even smaller portion you may consider “investable”.
  • 7. “Icebergs and Angel Investing” ©2013 Tech Coast Angels Sourcing Deals  Cast a wide net: join local angel group, online angel group etc.  Find “deal flow” that meets your interest (volume/startup type).  Starting angel investing: most deals sound good, but most fail.  “Learn the ropes”: take your time, read and research. Use online resources like the “Angel Capital Association” (http://www.angelcapitalassociation.org/), books and other angel investor’s experience: there’s lots of information easily accessible to help.
  • 8. “Icebergs and Angel Investing” ©2013 Tech Coast Angels Due Diligence
  • 9. “Icebergs and Angel Investing” ©2013 Tech Coast Angels “The shape of the underwater portion can be difficult to judge by looking at the portion above the surface. This has led to the expression "tip of the iceberg", for a problem or difficulty that is only a small manifestation of a larger problem.” http://en.wikipedia.org/wiki/Iceberg
  • 10. “Icebergs and Angel Investing” ©2013 Tech Coast Angels The potential success of a startup is difficult to judge simply by the initial company presentation or the initial “visible portion” of the company…this is just the “tip of the iceberg”…
  • 11. “Icebergs and Angel Investing” ©2013 Tech Coast Angels The potential success of a startup is difficult to judge simply by the initial company presentation or the initial “visible portion” of the company…this is just the “tip of the iceberg”… … angels must use a “diligence” or “due diligence” check to uncover the underlying details.
  • 12. “Icebergs and Angel Investing” ©2013 Tech Coast Angels Due Diligence  Check background/work history of team members.  Investigate product and any IP (software, patents, trade secrets etc.)  Validate market: size, potential acceptance of product, competition.  Verify financials: business model, financial plan, see their “books”.  Check for legal encumbrances: prior actions, existing lawsuits etc. This is a minimal list: use your due diligence time to uncover as much of the “non-visible” portion of the company’s history as possible.
  • 13. “Icebergs and Angel Investing” ©2013 Tech Coast Angels Startup Investment
  • 14. “Icebergs and Angel Investing” ©2013 Tech Coast Angels Angel investors typically invest in “seed” or “series A” rounds: smaller rounds of investment as companies first start-up…
  • 15. “Icebergs and Angel Investing” ©2013 Tech Coast Angels Angel investors typically invest in “seed” or “series A” rounds: smaller rounds of investment as companies first start-up… …VCs (Venture Capitalists) typically invest in larger rounds as company expands to bring product to market…
  • 16. “Icebergs and Angel Investing” ©2013 Tech Coast Angels Angel investors typically invest in “seed” or “series A” rounds: smaller rounds of investment as companies first start-up… …VCs (Venture Capitalists) typically invest in larger rounds as company expands to bring product to market… …the more money a VC invests, usually the more the iceberg “sinks” and “melts”, “diluting” the angel’s investment.
  • 17. “Icebergs and Angel Investing” ©2013 Tech Coast Angels Startup Investment  Know startup’s capital requirements (future rounds required?).  Use “preferred stock”: anti-dilution, other protection features.  VCs can be very good (deep pockets, good guidance, contacts).  VCs can be very bad (over spending, bad guidance). The longer the iceberg floats, generally the more it melts: dilution and death are more common than exit to M&A (Merger or Acquisition) or IPO (Initial Public Offering).
  • 18. “Icebergs and Angel Investing” ©2013 Tech Coast Angels Investment Portfolios
  • 19. “Icebergs and Angel Investing” ©2013 Tech Coast Angels Maybe 1 or 2 out of ten or twenty startup investments yield a large return on investment…
  • 20. “Icebergs and Angel Investing” ©2013 Tech Coast Angels …most startup investments end up “under water”: partial return of investment or total loss. Maybe 1 or 2 out of ten or twenty startup investments yield a large return on investment…
  • 21. “Icebergs and Angel Investing” ©2013 Tech Coast Angels Investment Portfolios  Build a portfolio of investments to increase odds of success.  Vary investment targets: software, hardware, internet, biotech etc.  Invest at different startup stages: seed, series “A”, follow-on rounds. If you are “very good” or “very lucky”: you can choose to concentrate in one technology area, startup stage or market.
  • 22. Tech Coast Angels, www.techcoastangels.com, the largest angel investor network in the United States, provides funding and guidance to more early‐stage, high‐growth companies in Southern California than any other investment group. Since its inception in 1997, TCA members have focused on building valuable companies, personally invested more than $100M, and helped portfolio companies attract more than $1B in additional capital, mostly from venture capital firms. TCA members give companies more than just capital; they also provide counsel, 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 five networks in Los Angeles, Orange County, San Diego, Westlake/Santa Barbara and the Inland Empire. Who are the Tech Coast Angels? “Icebergs and Angel Investing” ©2013 Tech Coast Angels