Angel Network. Carolina. Judith Cone Bryan McGann Don Rose. August carolinaangelnetwork.com

Transcription

1 Carolina Angel Network Judith Cone Bryan McGann Don Rose August 2016 carolinaangelnetwork.com

2 With an estimated 70,000 accredited angel investors in the alumni base, the Carolina Angel Network provides a new mechanism for engaging these individuals with UNC s entrepreneurial ecosystem.

3 Table of Contents Overview Operations CAN Members Deal Flow Overview CAN Process CAN Membership Benefits

4 Overview The funding gap for startup companies is well documented as a major deterrent to realizing the social and economic benefits from the entrepreneurial sector. The Carolina Angel Network (CAN) is designed to help close that gap by connecting alumni, donors, parents and other members of the University of North Carolina at Chapel Hill s innovative, entrepreneurial, investment community with promising UNC-affiliated, early-stage, private companies for the purpose of facilitating angel investments. The CAN operation will facilitate these transactions through screening of investment opportunities, conducting initial assessment through both outside contacts and student teams (MBA, Law, PhD) and facilitating the communication between CAN members and company representatives. CAN will provide angel investing educational and networking opportunities for members. CAN does not provide advice, recommendations, or any other indication of appropriateness or inappropriateness of a particular investment. The benefits of CAN will be numerous, and CAN members will make investments directly in the companies Members 100 Members 150 Members Members FIGURE 1. CAN ENROLLMENT FORECAST Alumni Investors New opportunities for investing in and mentoring Carolina startup companies and the ability to network with like-minded alumni. University Advancement Potential new avenues for engagement with the estimated 70,000 alumni who potentially qualify as accredited investors. Students Real-world experience and education on facilitating investing and due diligence as well as connecting with alumni. Carolina Entrepreneurs Access to investment dollars from and connections to the CAN investor networks. Faculty A new source of funding for startup companies created to commercialize their research discoveries. Overview 4

5 Operations The structure of CAN will consist of the Carolina Angel Network members, the CAN Operations Team, several University departments, and the early-stage, UNC-affiliated companies seeking investment from CAN, as shown below. We anticipate a wide array of UNC-affiliated startup companies seeking angel investment will apply to CAN. Eligibility will be determined by the following criteria: a founder, executive, or board member must be part of the Carolina Community: UNC alumnus, faculty, staff, student, parent or donor. These deals can come from across the nation, are at the stage appropriate for an angel investment, and be in industry sectors attractive to the members. This will create a diverse mix of deals including: startups based on UNC research innovations, companies born in dorm rooms by students with exciting business ideas, or ventures established by our entrepreneurial Carolina Community, both locally and nationally. The Carolina Angel Network, LLC will be a university associated entity, with a Board of Directors to establish and monitor the performance of the CAN mission. The Board will be comprised of external-to-the University members of the Carolina community as well as the UNC Vice Chancellors for Development, Finance, and Administration and Innovation, Entrepreneurship, and Economic Development. The Board will establish a Membership Committee responsible for recruiting new members, approving member applications, and overseeing member relation activities such as on-campus networking events and educational opportunities. This committee will be composed of a member of the Board of Directors, the CAN Managing Director (MD), and an advisory person from the UNC-CH Vice Chancellor s Office for Innovation, Entrepreneurship, and Economic Development (OIEED). The Managing Director (MD) will report to the Board and oversee the operational activities of CAN. The MD will be hired by UNC with input from the Board since that person will be an employee of UNC. The Managing Director will establish a Screening Committee, composed of experienced angel investors that will work with the MD and the student diligence teams and provide input on which deals should be presented to the members. Working closely with CAN will be several University units. The Vice Chancellor s Office for Innovation, Entrepreneurship, and Economic Development will provide guidance, leadership, and initial support as CAN becomes established. The Office of Finance Administration (OFA) will provide initial financial support for CAN operations along with initial capital for a side-car investment fund (see below). The Office of University Development will work with CAN on member recruitment and will help support on-campus events for members. These three units are executing a memorandum of understanding to outline these roles and support. In addition, student teams will be drawn from the UNC School of Law and the Kenan-Flagler Business School to assist in screening and due diligence of the deals. Operations 5

6 Operations CAN Members Alumni Parents Friends $$$ $ Carolina Angel Network Overview Deal Flow Due Diligence Valuation Deal Structure Carolina Angel Network, LLC Board of Directors Director Screening Committee UNC-CH Office of Commercialization and Economic Development (OCED) Office of Finance and Administration (OFA) UNC-Affiliated Early-Stage Comapnies Office of University Development (OUD) $$$ Carolina Growth Fund (Sidecar Fund) Kenan-Flagler Business School UNC Law School FIGURE 2. Carolina Angel Network Overview Operations 6

7 CAN Members CAN Members will consist of UNC-CH alumni, faculty, staff, parents, and donors (the Carolina Community) who self-certify that they are accredited investors. Since the deal flow management will be accomplished via a software platform, members can be located in any part of the world (see more on members and member benefits below). In addition to the structure described above, several other key initiatives are anticipated through CAN: Carolina Growth Fund. The CGF will be a sidecar fund that will invest alongside member investments for deals that close through CAN. Minimum criteria will be established for investments made through CGF. The source funding will be two-fold: UNC (OFA) and UNC donors. The amount of investment will be proportional to the total investment amount, and all investment gains remain within UNC. Triangle Venture Alliance. The TVA is an alliance of the four regional universities and their angel networks, Carolina Angel Network, Duke Angel Network, and the Wolfpack Investment Network. In addition, it is expected that North Carolina Central University will be part of the TVA through working with one of the three other angel networks. Since each of these networks will be using a common software platform (ProSeeder), deals can be shared among the alliance members. Additional synergies and economies of scale will be explored as each network becomes functional. Wolfpack Investor Network (WIN) Duke Angel Network (DAN) Triangle Venture Alliance (TVA) Carolina Angel Network (CAN) CAN Members 7

8 Deal Flow Overview Carolina Angel Network Deal Flow Overview Deal Sources Angel Groups Due Dilligence Commitment? Company Pitch Member Interest? Referrals Application & Pre-Screening Member Interest? CAN Members Deal Close Web Searches Rejected Deals 2-3 Months FIGURE 3. Carolina Angel Network Deal Flow Overview Deal Flow Overview 8

9 CAN Process Application and Pre-Screening CAN will source deals from a variety of channels. The CAN website will be the main portal for companies to learn about CAN and for submitting an application for consideration. This site will also include information about the CAN team, becoming a member, criteria for company selection, and news of recent investments. Applicants seeking investment will be directed to a landing page provided by PROSEEDER. The Managing Director and the Screening Committee will utilize the PROSEEDER platform which is used by a number of angel groups across the country, and will help manage and streamline the entire deal flow process, including member communication and management of due diligence materials. For a company to be eligible for consideration, the venture must meet the following criteria: 1) have a founder, executive, or board member who is a UNC alumnus, faculty, staff, student, or parent; 2) is in need of raising seed or Series A equity capital of $100,000 to $3 million; and 3) located in the United States. Eligible companies will complete an application, which, when complete, will be initially evaluated by a graduate student team of mostly MBAs and Law students. The student team will sort the companies into yes, no, and maybes. The yes s and maybe s will go to the Managing Director. He/She will work with the Screening Committee to determine which deals are suitable for member consideration. They will use the following criteria to screen companies: Potential for high growth and significant financial returns; A dedicated and high quality management team, or one that can be formed; A large market opportunity; A unique value proposition; Proprietary technology, intellectual property, or other basis for sustained competitive advantages; A corporate structure that allows for equity investment at defined terms and conditions; A strategy and plan that has the potential to produce venture grade returns; Member preferences. Deals deemed suitable for member consideration will be posted for members to review. Deal Screening When a deal is made available for member review, members will be notified by . Interested members will log into the secure PROSEEDER site and review the company-supplied information. After a period of time, members will signify via PROSEEDER their interest by choosing to follow the deal. Companies that receive a significant following (e.g. 3-4 members) will then be invited to pitch to interested members, via the web. If member interest remains high, the deal enters the due diligence phase. CAN Process 9

10 CAN Process Due Diligence and Deal Close The due diligence phase will be managed by the Managing Director, working with the interested members and the student team formed for the deal. At certain times in the process the Screening Committee will assist the Managing Director in the evaluation of the opportunity and a review of the due diligence. The due diligence process seeks to understand both the risks associated with the deal (technical, market, IP, management) as well as the potential return (revenue, partnering, exit). The process begins with the establishment of a due diligence plan, reviewed by the interested members, followed by execution and modification of the plan as needed, and concluding with a summary report and detailed findings (Note: this report does not make any investment recommendations). For those deals where CAN Members are the sole investors, the Managing Director, working with interested members and outside counsel, will structure and negotiate the terms of the transaction (capital requested, board seats, valuation). All interested ( following ) members will receive the due diligence report and proposed transaction terms. Those members will be polled for a commitment. If the level of commitment meets or exceeds the capital requested, the deal will be finalized. Consistent with its role in facilitation, CAN will not be responsible for closing the deal. A lead member will work with the company (and, where applicable, another investor) and outside counsel to finalize documents, wire money and issue stock or convertible notes. After deal close, CAN will issue a press release and update its deal portfolio. The goal will be to complete a deal from start to finish within a two-month time frame. Once a CAN member commits to fund a venture, he/she becomes a shareholder and CAN s role ends. Transactions that follow are between the member and the company receiving the angel investment. In addition, at the member s discretion, and based on the needs of the company, the member may provide support and guidance to the company. This could include advice on business strategy and tactics, introductions to potential customers or partners, assistance with recruiting, and facilitation of future financing rounds or exits. When appropriate, members may be asked to serve on a company s board of directors. CAN members may consider investments in follow-on financings on a case-by-case basis. In general, companies should assume that CAN will not be a source for significant additional capital as CAN is focused on companies at the early stages of growth. In addition, by virtue of the partnership between UNC-CH and the Blackstone Entrepreneurs Network, Blackstone Entrepreneurs will be available to assist in the mentoring of portfolio companies. CAN Process 10

11 CAN Membership Benefits CAN Membership will provide the following benefits: Exclusive access to high-growth investment opportunities; Professional management of the deal flow process; Access to a private portal for communicating with other members and reviewing investment opportunities and associated documentation; Due diligence provided by student teams that are enthusiastically engaged, smart, and cost-effective; Networking with other Carolina alumni, parents, and friends interested in early-stage investing through online communications and on-campus events, and; Educational opportunities to learn about early-stage investing. Potential to invest in high quality companies curated by the Duke Angel Network and the Wolfpack Investor Network. Accredited investors with an affiliation with UNC-Chapel Hill will be eligible to join CAN. Affiliation will be defined as UNC-CH alumni, faculty, staff, parents, and donors. To be an accredited investor, an individual must have over $200,000 in annual earned income (or $300,000 together with a spouse) or have a net worth of over $1 million (excluding the value of their primary residence). Members will be responsible for self-reporting their accreditation qualifications.* *Potential CAN members should always seek advice from their personal tax and legal professionals. CAN Membership Benefits 11

12 Carolina Angel Network