Benefits and Pitfalls of Syndicating Angel Deals

Transcription

1 Benefits and Pitfalls of Syndicating Angel Deals Welcome! March 25, 2015 Use chat to submit questions Yes, you ll get the slides We re recorded, so come back and listen again 1

2 Mission: Fuel the success of angel groups and accredited individuals active in the early-stage landscape World s largest trade group for angel investors o 220+ angel groups o 12,000 accredited investors o Voice of accredited individuals, portals, and family offices 50 US states + Canada Research/ education partner Member Groups & Accredited Platforms New Dominion Angels 2

3 ACA Partners Our Moderator Matt Dunbar Managing Director of the Upstate Carolina Angel Network (UCAN) in Greenville, SC Board of Directors of the national Angel Capital Association Co-Founder, South Carolina Angel Network Visiting lecturer in the Clemson University MBA program Chemical engineer with Eastman Chemical Company Boston Consulting Group in Atlanta B.S. in chemical engineering from Clemson University, Summa Cum Laude M.B.A. and master s degree in education from Stanford University 3

4 Topics We ll Explore Today Possibilities Why syndicate? What are the keys to success? Process How do you build trust? How do you syndicate efficiently? Pitfalls What are the risks? What mistakes should investors (and entrepreneurs) avoid? Our Speakers Jamie Rhodes Dick Reeves Faz Bashi 4

5 Dick Reeves Founder, Angel Investor Management Group Angel Capital Association Board Member, Governance Chair Co-founder and CEO, General Digital Industries Organized BizTech, Huntsville s hightechnology business incubator 10 THE SYSTEM FOR BRINGING A SUSTAINABLE BUSINESS MODEL TO ANGEL GROUPS IN SMALL CITIES Dick Reeves

6 Fundamentals Train all angel participants in advance 2. All syndicate groups operate together in parallel so as to reach a decision together Screening Diligence Investment 3. Angel Syndicates Central provides the administrative backbone and leads all activities Strengths of the Concept Pre-established operational & trust relationships through an opt-in & train process 2. Consistent deal product leads to trust Coaching and mentoring for all presenters Proven diligence process ASC responsible for quality of product at all levels 3. Concept will appeal to local group members who appreciate a high personal touch and high quality diligence reporting. 6

7 Ideal Candidate Syndicate Member 13 Located in a 2 nd or 3 rd tier market < 1,000,000 pop investor members, relatively inexperienced as angels Volunteer or inadequately paid part-time leader 0-3 deals sourced locally per year Additional Benefits from ASC 14 Access to the ASC online angel group management platform 1. Membership data management 2. Deal flow management 3. Investment process management 4. Portfolio management Free of cost for the first year, $500/year thereafter 7

8 Jamie Rhodes Founder, Alliance of Texas Angel Networks Founder, Central Texas Angel Network Board member, Angel Capital Association CEO, National NanoMaterials Houston Angel Network Central Texas Angel Network West Texas Angel Network North Texas Angel Network Baylor Angel Network Cowtown Angels Concho Valley Angel Network Texoma Angels Aggie Angel Network South Coast Angel Network Lubbock Angel Network ATAN Members Houston Austin Amarillo Dallas Waco Fort Worth San Angelo Wichita Falls College Station Corpus Christi Lubbock Soon To Launch El Paso Angel Network E3 Angel Network - (minority focus, based in Austin with national reach) 8

9 ATAN 2014 Statistics 11 Angel groups (2 more in 2015) Over 400 accredited investors Invested over $45,000,000 Invested in 100 +/- companies Largest syndicated round = $5M ATAN Principles Share best practices among Texas angel networks Syndicate deals among Texas angel networks Build relationships/trust among angel investors across Texas The executive directors make the above succeed Educate our investors to make smart money 9

10 Faz Bashi Life Science Angels (LSA) Board of Directors 2015 Chair of LSA Digital Health & Sciences Screening Committee 2013 Chair of LSA s Medical Device Screening Committee Chair of the Angel Capital Association's Life Sciences Syndication group Founding member of HealthTech Capital where he served on the Board of Directors for a 2 year term Berkeley Angel Network member WHERE DO WE GO FROM HERE Believing in the possibilities of SYNDICATING Life Science deals!!! Faz K. Bashi, MD E: faz@possibletarian.com 20 10

11 Life Science Ingredients : Focused science and innovation top scientists network Outstanding management team Been there. Done that. Complementary skill sets Passionate and dedicated STRONG Intellectual Property (IP) *** Open-minded Financial strategies Science, Management, Finance : must be sync d There are too many science projects masquerading as companies Karen Bernstein, PhD, BioCentury Magazine 21 Economic package : Investors perspective : inherent cost of capital is high (>20%) given life sciences risks (time value of money, no return of capital) * Long time to market * Fewer than 1% drugs make it to market * Several rounds of capital infusion * Fewer exits (eg. IPO, Acquisition, etc.) Investors need a high rate of return to make economic sense of the deal b/c cost of capital increases with risk Successful financing : Focus on the economics for win-win 22 11

12 LSA Deal structure : Members make their own investment decisions Strong preference for equity vs. debt Investments structured as an LLC to allow: Single investor, single check to company Avoids federal and state restrictions on number of investors Reduces logistics and expense issues Simplifies company s investor communications Increases leverage in terms negotiation Follow up information more readily available to investors Improves likelihood of participation in follow on rounds Greater public recognition of LSA participation Positions LSA to syndicate investment to other groups 23 GET OUT OF THE BUILDING G. O. O. T. B. Go visit other Angels! Lots of Angels! Develop your TEAM Skills T.E.A.M = Together Everyone Achieves More 24 12

13 DEAL MEMO : all the facts 25 Philosophy : Relationship, Friendship, and Trust Collaboration and Partnership! Angel Investing is a Contact Sport SYNDICATING is a verb, and should be spelled SYNDuCATING = SYN + EDUCATING 26 13

14 TEAM = Together Everyone Achieves More Collaboration: Partnership: Syndication Friendship + Relationship + Trust 27 Think Different (new models)! 28 14

15 Topics We ll Explore Today Possibilities Why syndicate? What are the keys to success? Process How do you build trust? How do you syndicate efficiently? Pitfalls What are the risks? What mistakes should investors (and entrepreneurs) avoid? Conclusion Relationship building, collaboration and cross fertilization are vital to syndication success for both investors and entrepreneurs. 15

16 Audience Resources Moderator Matt Dunbar - matt@upstateangels.org Upstate Carolina Angel Network Speakers Jamie Rhodes - jamie@nationalnanomaterials.com Alliance of Texas Angel Networks Dick Reeves - dick@huntsvilleangels.com AIM Group - Faz Bashi - faz@possibletarian.com Life Science Angels - Thank you! Audience Questions April 8, 2015: Impact Investing, noon 1pm ET May 13, 2015: Angel Investment Effects on Early Stage Companies, noon- 1 pm ET Webinar programs archived at: 16

17 Additional Resources Marianne Hudson Executive Director Angel Capital Association Christopher Mirabile Managing Director, Launchpad; Vice Chair, Angel Capital Association /news-forbes/ news-inc/ 2015 ACA Summit April 14-16, San Diego, CA Leverage Our Decade of Investing Expertise Summit Keynoter Steve Blank REGISTER NOW! ONLY 3 WEEKS LEFT! ACA Members: $895 Non-Members: $1195 ACCOMMODATIONS Act by March 27secure your discounted room ($229) or ($249). Reservations can be made by calling the San Diego Marriot Marquis at (reference ACA ) or via the ACA Summit website. LEARN THE LATEST ON ANGEL INVESTING FIND CONNECTIONS THAT MATTER PROGRAM HIGHLIGHTS Pre-Summit (April 14) ACA Summit (April 15-16) ACA Annual Partners Premier Summit Sponsors Summit Sponsors GOLD 17