The document provides an overview of trends in startup investing and advice for entrepreneurs. It discusses how: 1) Society is rapidly changing due to increased connectivity and mobile technology which is disrupting hierarchies and transforming how we work and live. 2) Government is ill-equipped to keep up with technological and social changes happening quickly. This rise new business models like Uber and Airbnb. 3) Angels should invest in "gazelles", companies with the potential for 30x returns, rather than "unicorns" which have billion dollar valuations but lower odds of success. The document provides an example of angel investment math. 4) When angels say yes to an investment, it is because

1. Table of Contents
1.Is there a Bubble?
2.Emerging Opportunities
3.What do Angels Look For in A Startup?
4.NDAs-Why they hurt you
5.Counter Intuition
6.Q+A

2. Jeff Carter
Thought leader. Co-Founded Hyde Park Angels in April 2007 (Angel #1),
the Midwest’s leading angel group. Helped start other angel groups.
Successful. Has made over 19 successful early stage investments, many getting follow
on rounds.
Highly competitive. Works. Knows how to win. Self employed since 1986.
Respected. Elected by peers to CME Board and ran several committees.
Strategic Planning and Budget Committee
High integrity. Tells you straight, means what he says and follows through.
BS University of Illinois and Chicago Booth MBA;
Member of the National World War Two Museum Board
LinkedIn.com/in/jeffreyrcarter/en
blogs every day at PointsAndFigures.com
@pointsnfigures on Twitter

3. Why The Time
Is Now

4. “Startups are transforming our
society. Over the past 100 years,
we’ve gone from an industrial era
to a post information era where
the network is rapidly disrupting
the hierarchy and transforming the
way we work and live.”
-Brad Feld, Foundry Group
Society is Rapidly
Changing

5. Faster Bigger Better
Everyone connected all the time. Bandwidth and speed are getting
exponentially faster allowing for more transaction volume.

6. Speed and Mobile

7. Sales In Mobile Growing

8. Slope of curves shows valuation up,
But investors assume risk later

9. Angel/Seed Stage Unchanged
Average pre-money valuation is $2.5M

10. What Kind of
Business Should
You Build?

11. Networks not Hierarchies
Organizations operate from top down. Software and technology enables them to be
flatter, fleeter, and first.
Everything Will Be Unbundled
Organizations that are generalists will be disintermediated by focused competitors that
engage specialized business silos
Everyone is a Node on the Network
Mobile technology makes everyone a node on the network they operate in. This has
deep ramifications for companies and society
Software is Eating the World
Technological changes are changing the way we produce, interact and transact enabling
flatter, customized chains of distribution and peer to peer networks.
“What’s different today is that we are seeing on a daily basis
revolutionary new ideas, devices, and form factors, not evolutionary
enhancements.”-Arvind Sodhani Intel Capital in the WSJ (Jan 1. 2014)
The MegaTrends

12. Government is ill equipped to keep up with rapid
change
Technological and social change is happening so fast, government bureaucracy is too
large and inefficient to keep pace. 63% of the federal budget goes to entitlements
today. (Uber, Airbnb)
Rise of the Solopreneur
Mobile technology makes everyone a node on the network they operate in. This has
deep ramifications for the way we work, where we work, when we work, and how we
work. It also has implications to how we raise and educate our children.
(Food Trucks, Independent Consultants, RIAs)
Bitcoin and Mobile Payments
new technology is mobile enabled, closes loopholes and strings in internet technology,
and provides a searchable, online, transparent accountability function
The Minor Trends

13. Math Sucks

14. Angel Math
Angels need to invest in Gazelles, not Unicorns
Gazelles are 30x
Invest in a 3M post valuation company, sells for
$90M you get 30x. Most angel deals exit at
$20M-$60M
Unicorns are Billion dollar plus firms. There aren’t
many of them, although they are more prevalent

15. Angel Math
Assume $1,000,000 to invest in 10 companies
Probability at seed is equal. All companies are Identical
and Independently Distributed
Goal=27% IRR over 5 years
5=0% return
2-4= Some return
1=30x
Hence, Angels look for Gazelles!

16. Investment Thesis
Invest in People first, that use technology
to transform existing industries.
.
Risk Reward for seed stage startup investing beats risk reward for other
asset classes in the current financial environment

17. .
Why We Say No
Red flag #1 is team. We bet on people first.
Red flag #2 is product. We bet on
unique solutions to big problems.
Red flag #3 is structure. Risk vs reward.

18. .
Why We Say No
Red flag #4 is time. Sometimes it’s just too early
Red flag #5 is “coachability”.
Can we work with this
Person over the long haul?
Red flag #6 Salesmanship. Can this person sell?

19. .
Why We Say Yes
Product is Live
Valuation
Roadmap
Adoption rate is growing,
Or Product is sticky. For SaaS 40%
Monthly growth/low churn; If Social 30/30/10
Salesmanship.
Technical Co-Founder

20. Non-Disclosure
Means
No Dough
Venture Capitalists and Angels
Won’t Sign Them

21. 1. Dealing with a Lawyer and paperwork is time consuming.
Would rather talk to entrepreneur about their business
2. Would have to keep track of all NDAs signed.
3. Value is in execution and creating the thing, not the idea
4. Starts “Trust Relationship” off on the wrong foot.
5. Reputation Cost to the VC if they divulge or act on
Information
Problems With NDAs
for Investors

22. Startups Are
Counter Intuitive
They think they know everything and are
outfitted with all they need
When they launch all hell breaks loose

23. Startups
Look More
Like This
The best laid plans almost never work out the way they were drawn up

24. You Won’t Have Everything You Need
At Launch
Be Flexible. Add as You Go
Listen to Your Customers
Be Intuitive and ProActive

25. Don’t Focus on Exit
Focus on Building Something Great
Focus on Survival
Get to the Next Round

26. Questions
And
Answers