Alaska Angel Conference 2020 October 16, 2020 Angel 101 Will - PowerPoint PPT Presentation

Alaska Angel Conference 2020 October 16, 2020 Angel 101 – Will Fowler, S ignal Rock

How does AAC work?  Alaska Crowdfunding Act makes equity investing accessible to Alaskans  Investors commit $5,500 to an LLC.  Entrepreneurs apply to be a part of a 12-week conference.  Investors learn how to conduct due diligence on applicants.  LLC makes an equity investment in one startup. akangelconference.com @AlaskaAngel

Alaska Angel Conference 2019  Key Accomplishments  Created 10 new angel investors  S ome of those new investors invested an additional $100,000 shortly after the event  Built new networks between investors and entrepreneurs  Helped startups learn about funding options akangelconference.com @AlaskaAngel

AAC 2020 S chedule WORKSHOPS FINAL EVENT SELECTION Oct 9 th – Feb 4 th Oct 9 th – Feb 4 th April 23 rd Wed 5:30- 7:30pm Wed 5:30- Invest $100K+ 7:30pm In Person & In Person & Online Online akangelconference.com @AlaskaAngel

Signal al R Rock Cap apital al Trends and Tools for Early Stage Investing Groups

Will F ll Fowle ler Signal al Rock C Cap apital al Founder

Will’s B Background a nd and nd Experienc nce GRUBSTAKE S V VE NT NTURE S

Exper erien ence 30+ Holdings 5 Member Managed Funds Administered: Screening, Fund, Syndicate, SPVs SLO Angel Conference 2 Accelerator/Incubators

Angel 10 101

Wha hat is an A n Ang ngel? An accredited investor who wants to lose money

Why hy do do w we I Inv nvest? A. W e are Fools B. W e are Gamblers C. W e Love our Hometowns

How d do w we M e Make e Money ey? Exit or Bust

Ang ngel I Inv nvesting ng D Data 21%: Average Ownership/Round 81%: Preferred Stock 17% Convertible Notes 1.2% Priced Common

Ang ngel I Inv nvesting ng D Data 70%: Fail or return less than 1X 85%: Of returns come from less than 10% 21%: Average ROI 2.5X: Average Multiple

The e Most Likel ely O Outcome Is F FAILURE

You Need eed Many Inves estmen ents to Get a Return 10 10 is OK 20 i is B Bet etter er

How ow to G o Get P Por ortfol olio o Returns Returns are Positively Correlated with Three Things: 1. Time Held 2. Amount of Time Spent in Due Diligence 3. Post Investment Engagement

3 k keys to to Getti tting a R Retu turn 1. Get the Best Possible Deal Flow Available 2. Get Your Capital Deployed 3. Have a Systematic Approach to DD and Portfolio Management

Ho How We De Deploy Capital

Types es of I Inves estmen ent Veh ehicles es Passive Funds Managed Funds Active Funds Event Funds Groups/Networks Solo

Passi ssive F Funds Pros: s: Usually lly a and nd Automatic ic o or S Semi-au automat atic Little ● Trigge gger Overhead/Administration Preset Investment Criteria (No due ● Auto Diversification ● Diligence Cons: Co Automatic Terms (usually trailing) ● No Deal Choice ● Predetermined Amount ● Not Autonomous ● Very Low Administrative W ork ●

Mana naged F d Funds nds Pros: s: Someone else does the ● work All ll De Decis isio ions ns and nd Adminis inistratio ion n Auto diversification Hand ndle led by Professio iona nals ls ● Co Cons: No choice ● Less involvement ●

Active F Funds nds Pros Pr Group W ork ● Money is already “spent” ● Mem ember er M Managed ed: Group does es t the e Diversification ● work, the hen n votes to inv invest Co Cons Higher level of ● organizational support and administration

Event nt F Funds nds Pros Pr Group work (usually) ● Funding certainty ● Member Mana naged & Dr Driv iven n by an n Co Cons Event Ev Limited choice ● No diversification ●

Grou oups N Networ orks (Mos ost Com ommon on) Pros Pr Group work ● Individual choice ● Membership hip W it itho hout a Fund nd Co Cons Dinner club danger ● Needs strong organization ● and administration

So Solo Pr Pros Ultimate choice ● High engagement ● Lon one W W ol olf Co Cons Inv nvesting ing It’s a ton of work ● No network to leverage ●

Wha hat is G Going ng R Right ht

12,000 000 Angel Deals in 2017 (estimate)

$10 10B-$15 15B Angel Dollars Invested (Estimate)

VC v vs. A Ang ngel (20 2015) Natio iona nal: l: VC: $77.3B ● Angel: $24B (31%) ● San Die n Diego VC: $1.5B ● Angel: $134M (9%) ●

300, 00,000 000 Accredited Investors W rote Checks in the Last Two Years

40 400 Active Angel Groups

Wha hat is G Going ng W Wrong ng

5,000, 000,000 000 Accredited Investors in the US

.06% Number of “Activated” Angels

Ther ere e are e more e of us, why aren en’t we e writing chec ecks?

80 80% Of Accredited Investors are W orth LESS than $5M

Are W e We e Over erspen ending? Standard Round Minimum: $25,000 10 Investments = $250K or 5% of $5M 20 Investments - $500K or 10% of $5M For some, this is too high of a percentage of their assets

Are W e We e Under er D Diver ersifying? Many Angel Investors W rite 1-2 Checks, or Maybe 4-5 They hit their “Play Money” Threshold Most Likely Outcome is Failure They Then Stop W riting Checks

Common I Issu ssues

Ne Networks Don’t W rite Checks

Net etworks Don’t W Write C e Chec ecks Inves estors Sta tartu tups Too Much W ork Takes too long to get a ● ● Not enough “W inners” check ● Dinner Club vs. Investment The checks aren’t big ● ● Club enough Stop Participating Ugly Baby ● ● DD is a Pain ● Stop Applying ●

Winne nners Are Hard to Find

You can’ n’t Pick Winne nners You can o n onl nly Screen o n out the he Lose sers

We a e are E e Emotional Crea eatures es W e invest in people and teams It’s easy to fall in love W e are not used to falling in love frequently How many times do you buy a house? How many kids do you have? The answer is probably not 20

Screen eening for L Loser ers Do you know a loser when you see it????? Do you know a winner when you see it???? Stick with what you know Diversify to hedge your bets

Deal l Flo low Is Lumpy or Sparse

Dea eal F Flow is E Ever erything Connect to ALL of the Deal flow Sources Be Nice Take Time for Feedback Volunteer Give ”Coffee” Time Every Decision Affects Deal Flow

Ever ery Dec ecision A Affec ects D Dea eal Fl Flow

Th They Disap appear ar After They Get Your Money

Post I Inves estmen ent I Involvem emen ent Create an Approach/Committee Require Reporting Have a Face-to-Face closing Meeting Ask Them W hat You can do to Help Create Transparent Follow-on Criteria

Te Terms Are Not Standard and Hard to Understand

Educate e Yoursel elf o on Te Terms

Inv nvestor Friendl ndly I Isn’ n’t B Bad f d for S Startups Priced Rounds are Better: You know what you are buying ● The clock starts for 1202 Tax Exclusion ●

Member Mana naged F d Funds nds

Struc uctur ure Member Managed LLC Chair, and Other Committee Heads 20% Capital Calls as Needed 18-24 Month Deployment (could be annual)

Struc uctur ure Screening Committee General Meeting Due Diligence (Ad Hoc) Membership Votes Deal Leads and Portfolio Committee Co-Investment Committee

Angel el Confer eren ences es

Struc uctur ure Manager Managed LLC All Members Make up Committees W inner Take All Event Host Legal Back-end Sponsorships

Struc uctur ure Investors Meet Every W eek Learn ● Screen ● Due Diligence ● Vote to Invest (at conference) ●

Effe ffects New Active Investors Join Existing Groups/Funds ● Make New Funds/Groups ● Become Mentors, etc. ●

Angel el Confer eren ence D e Data Seattle Angel Conference San Diego Angel Conference 26 Companies Funded 4 Companies Funded ● ● $2.5M Invested $625K Invested ● ● 300 New Investors 30 New Investors ● ● 1 Fund Fund Manger Group ● ● 1 Group 1 New Managed Fund ● ●

How ow to o Get Som omething Started

It’s s Easi sier Thank Y You Thi hink nk

Fu Fund Find a Champion Design the Fund Understand the Costs Get Your Docs Recruit and Close

Confer eren ence PPM Interest Form LLC Manager Docs Education Sessions

Thank you for j oining us! Join us October 23 at 5:30 PM for “ What is due diligence? ” Thank you, Will Fowler, S ignal Rock akangelconference.com @AlaskaAngel