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Angels vs VC\'s Ishai Green Forum Mit Israel

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Angels vs VC\'s Ishai Green Forum Mit Israel

  1. 1. Angel VS. VC Ishay Green
  2. 2. <ul><ul><li>Angel </li></ul></ul><ul><ul><li>VS. </li></ul></ul><ul><ul><li>Venture Capital </li></ul></ul><ul><ul><li>(And some tips about both…) </li></ul></ul>
  3. 3. Disclaimer <ul><ul><li>Entrepreneurship is a game of imagination – The following are my opinions </li></ul></ul>
  4. 4. TERMINOLOGY 1
  5. 5. Terminology <ul><ul><li>Valuation </li></ul></ul><ul><ul><li>Shares </li></ul></ul><ul><ul><li>Dilution </li></ul></ul>
  6. 6. ANGEL VS. VC MONEY 2
  7. 7. Angel VS. VC Money <ul><ul><li>VC’s are professionals who invest other people’s money </li></ul></ul>
  8. 8. Angel VS. VC Money <ul><ul><li>Angels are private people investing their hard earned money </li></ul></ul>
  9. 9. ANGEL VS. VC PROFIT EXPECTATIONS 3
  10. 10. Profit Expectations <ul><ul><li>VC’s look for double digits profit multipliers </li></ul></ul><ul><ul><li>(10 Times) </li></ul></ul>
  11. 11. Profit Expectations <ul><ul><li>Angles would usually be happy in low end of a single digit </li></ul></ul><ul><ul><li>(3 Times) </li></ul></ul>
  12. 12. ANGEL VS. VC INVESTMENT RISKS 4
  13. 13. Investment Risks <ul><ul><li>The Angel is risking their own money </li></ul></ul>
  14. 14. Investment Risks <ul><ul><li>The Angel is usually less knowledgeable than a VC in most aspects </li></ul></ul>
  15. 15. Investment Risks <ul><ul><li>The Angels tend to follow their gut feeling </li></ul></ul><ul><ul><li>(So you better be damn sure you know what you’re doing…) </li></ul></ul>
  16. 16. Investment Risks <ul><ul><li>The Angel knows where you live </li></ul></ul>
  17. 17. Investment Risks <ul><ul><li>The VC risk is divided through a larger portfolio </li></ul></ul>
  18. 18. ANGEL VS. VC EXCEPTED HOLDINGS 5
  19. 19. Excepted Holdings <ul><ul><li>VC’s expect a minimum of 20%-25% share holdings </li></ul></ul><ul><ul><li>(They will ask for much more) </li></ul></ul>
  20. 20. Excepted Holdings <ul><ul><li>Angles are agnostic. </li></ul></ul>
  21. 21. TIMING 6
  22. 22. Timing <ul><ul><li>Angels can afford investing in the scenarios of: </li></ul></ul><ul><ul><li>Seed </li></ul></ul><ul><ul><li>Down-round </li></ul></ul><ul><ul><li>* Angels will usually not execute their preemptive right </li></ul></ul>
  23. 23. Timing <ul><ul><li>VC will usually require a more mature company, and even a proof of concept before investing </li></ul></ul>
  24. 24. Timing <ul><ul><li>Angel money is faster </li></ul></ul><ul><ul><li>(For most Angels a meeting or two is sufficient to decide) </li></ul></ul>
  25. 25. Timing <ul><ul><li>“ Some VC’s will yes you to death” </li></ul></ul><ul><ul><li>- Adi Pundak-Mintz </li></ul></ul>
  26. 26. WHY DO ANGELS EXIST? 7
  27. 27. Why do Angels Exist? <ul><ul><li>Potential for large multipliers on their investment outside of the stock markets </li></ul></ul>
  28. 28. Why do Angels Exist? <ul><ul><li>The investment is not liquid – When it is gone it is gone </li></ul></ul>
  29. 29. Why do Angels Exist? <ul><ul><li>The Google – Facebook – The Marker Effect </li></ul></ul>
  30. 30. Why do Angels Exist? <ul><ul><li>Tax Benefits </li></ul></ul>
  31. 31. Why do Angels Exist? <ul><ul><li>It’s Fashionable </li></ul></ul><ul><ul><li>& Cool </li></ul></ul>
  32. 32. VC TYPES – ENTREPRENEUR POV 8
  33. 33. VC Types – Seed Funds <ul><ul><li>Invest small amount of money in early stage, with no promise for recurring investment </li></ul></ul>
  34. 34. VC Types – Israel Top Five <ul><ul><li>- Has more then $100M fund </li></ul></ul><ul><ul><li>- Known for its smart and beautiful partners* </li></ul></ul><ul><ul><li>* Yaron from Giza VC is a great example </li></ul></ul>
  35. 35. VC Types – International <ul><ul><li>Enables you to tell everyone you now have direct access to Steve Jobs, Balmer and God </li></ul></ul>
  36. 36. VC Types – Famous <ul><ul><li>Proven winners - Index Ventures invested in </li></ul></ul>
  37. 37. VC Types – Top Tier <ul><ul><li>Sequoia </li></ul></ul><ul><ul><li>Draper Fisher Jurvetson </li></ul></ul>
  38. 38. ANGEL TYPES – ENTREPRENEUR POV 9
  39. 39. Angel Types I <ul><ul><li>Rich Industry Expert / Entrepreneur </li></ul></ul><ul><ul><li>(Eduardo Shoval) </li></ul></ul>
  40. 40. Angel Types II <ul><ul><li>Super Angel </li></ul></ul><ul><ul><li>(Yossi Vardi / Paul Grahm) </li></ul></ul>
  41. 41. Angel Types III <ul><ul><li>Richie Rich </li></ul></ul><ul><ul><li>Oil / Real-estate / </li></ul></ul><ul><ul><li>Diamonds / Weapons </li></ul></ul>
  42. 42. Angel Types IV <ul><ul><li>The Gambler </li></ul></ul>
  43. 43. Angel Types V <ul><ul><li>Family </li></ul></ul>
  44. 44. BOARD OF DIRECTORS 10
  45. 45. Board Of Directors <ul><ul><li>The board represents the share-holders (investors) </li></ul></ul>
  46. 46. Board Of Directors <ul><ul><li>The board devises tactics and strategies for the company </li></ul></ul>
  47. 47. Board Of Directors <ul><ul><li>The CEO is responsible for executing board decisions </li></ul></ul>
  48. 48. Board Of Directors <ul><ul><li>Entrepreneurs & CEO keep the board up-to-date </li></ul></ul>
  49. 49. Board Of Directors <ul><ul><li>An effective board: </li></ul></ul><ul><ul><li>Smart and self-conscience members </li></ul></ul><ul><ul><li>One member+ is an industry expert </li></ul></ul>
  50. 50. INVESTOR RIGHTS 11
  51. 51. Investor Rights <ul><ul><li>Voting Rights Are Dangerous </li></ul></ul><ul><ul><li>(Try to avoid them) </li></ul></ul>
  52. 52. Investor Rights <ul><ul><li>Veto Rights Are Lethal (Unacceptable) </li></ul></ul>
  53. 53. ANGEL-MAINTENANCE TECHNIQUES 12
  54. 54. Angel-Maintenance Techniques <ul><ul><li>Angel turns into Devil: </li></ul></ul><ul><ul><li>Conflict of Interest </li></ul></ul><ul><ul><li>Disappointment </li></ul></ul><ul><ul><li>Greenmail </li></ul></ul><ul><ul><li>Ignorant / Boarder Line Disorder </li></ul></ul>
  55. 55. Angel-Maintenance Techniques <ul><ul><li>Proxy Mechanism - </li></ul></ul><ul><ul><li>Protect the company from its investors </li></ul></ul><ul><ul><li>Protect the investors from themselves </li></ul></ul><ul><ul><li>Protect the individual investor from himself </li></ul></ul>
  56. 56. Angel-Maintenance Techniques <ul><ul><li>Define a board representative for the angels with past experience </li></ul></ul>
  57. 57. ANGEL VS. VC VALUATION 12
  58. 58. VC <ul><ul><li>VC allocates ~$10M total for an investment </li></ul></ul><ul><ul><li>The money is divided between rounds </li></ul></ul><ul><ul><li>The VC needs to maintain 25% holdings in the company – unless you go to huge valuations. (*) </li></ul></ul>
  59. 59. Angel <ul><ul><li>The Tomer-Ishay Method™ </li></ul></ul><ul><ul><ul><li>Find a prominent lead investor and then negotiate </li></ul></ul></ul><ul><ul><ul><li>Talk to the rest of the investors only after valuation was set </li></ul></ul></ul><ul><ul><ul><li>Raising money in chunks </li></ul></ul></ul>
  60. 60. Angel <ul><li>What should you tell the Angels before closing </li></ul><ul><ul><li>Make sure they understand the business plan </li></ul></ul><ul><ul><li>Tell them they need to consider the money as gone. </li></ul></ul><ul><ul><li>Say that you do not take money from widows and orphans. </li></ul></ul>
  61. 61. SUMMARY &
  62. 62. Summary <ul><ul><li>There are not definite pros & cons </li></ul></ul><ul><ul><li>Angels are a great way to start </li></ul></ul><ul><ul><li>Do you believe in Angels? </li></ul></ul>
  63. 63. I do
  64. 64. THANK YOU !#%

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