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Angel 101 – The Fundamentals of Angel Investing Is Angel Investing Right for You?

Angel 101 - Is Angel Investing Right for You?

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A presentation by MLA Chair Gerard Buckley on the fundamentals of angel investing.

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Page 1: Angel 101 - Is Angel Investing Right for You?

A n g e l 1 0 1 – T h e F u n d a m e n t a l s o f A n g e l I n v e s ti n g

I s A n g e l I n v e s ti n g R i g h t f o r Y o u ?

Page 2: Angel 101 - Is Angel Investing Right for You?

2

• I am Gerard Buckley– Founder & CEO of Jaguar Capital an Advisory Practice for Growth

Companies in Governance, Financial Management & Financial Structuring– Chairperson of Board of Directors, Maple Leaf Angels Corporation &

Investor in eight early stage companies– Certified Corporate Director of the Institute of Corporate Directors– Previously Entrepreneur in Residence with Incubes (An Internet Company

Accelerator)– Member of Small & Medium Enterprise Committee of The Ontario

Securities Commission– Investment Committee of MSV University, Halifax, NS– 32 yr. Career with Scotia Capital as a Financial Risk Management Advisor to

Fortune 200 Companies: Rogers, Irving Group, Empire Co., Four Seasons, Bruce Power, OPG, Province of Ontario, Ford etc.

Who Am I

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 3: Angel 101 - Is Angel Investing Right for You?

Agenda

• What is Angel Investing• Who are Angel Investors• Why would someone be an Angel Investor• What type of companies do Angels invest In?• Angel Network in Canada• Halo Report 2013• Who is Maple Leaf Angels and what are the

benefits of joining• Q & A

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 4: Angel 101 - Is Angel Investing Right for You?

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 5: Angel 101 - Is Angel Investing Right for You?

What is Angel Investing

• Angel Investing is individuals investing their personal money in the equity or debt of a Early or Growth Stage Company

• Often referred to as Smart Money, it is where an individual wishes to invest their time or experience as well money in a start-up company.

• People wishing to give back their experience so others may benefit which is often referred to as mentoring or serving on a company Advisory Board or BOD.

• Angel Investing is Active Investing not Passive

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 6: Angel 101 - Is Angel Investing Right for You?

Who is an Angel Investor

• A person prepared to invest their personal or family money

• A person who can add value to the company• An accredited investor as defined by OSC• A member of an angel network• The majority of angel investment in Canada is

completed by individuals >85%• Estimate of Cdn Angel Investment is 916mm in

approx 1500 companies (VC about 2b)

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 7: Angel 101 - Is Angel Investing Right for You?

Profile of an Angel - Median

Years investing 9Number of Investments 10Total Exits 2Years as a Entrepreneur 14.5Number of ventures founded 2.7Age 57Percent of net worth 10%Education Masters Degree

Angel Resource Institute Source: Wiltbank Study 2007

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 8: Angel 101 - Is Angel Investing Right for You?

Why Would Someone be an Angel Investor

• Qualified Opportunities• Opportunity referral• Increased Capital Diversification• High Risk Asset Class …. Seeking High Returns• Favourable Valuation and Terms in comparison to VCs• Networking• Portfolio company mentoring or engagement• Shared Due-Diligence• Advisory Board and Board of Director Roles

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 9: Angel 101 - Is Angel Investing Right for You?

What Type of Companies Do Angels Invest In?

• Companies who are in seed and early stage.• In technology, life sciences, ict, health care

devices, med tech, clean tech, power solutions, fin tech, …..

• Solve a Problem, Secret Sauce or technology ....... USP, validated business model, Great management team

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 10: Angel 101 - Is Angel Investing Right for You?

Equity Capital Life Cycle

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 11: Angel 101 - Is Angel Investing Right for You?

What Angels Look For

• High anticipated growth rate – Scalability • Experienced management team• Sustainable competitive advantage• Barriers to entry ie. Exclusive IP• Clear strategy for commercialization• Proof of concept or enterprise level validation• Business model anchored in Reality• Investor exit strategy in 5 to 8 years• Investing in what you know – vertical expertise• Coach ability of the entrepreneur• Amount of dilutive capital required

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 12: Angel 101 - Is Angel Investing Right for You?

Selection Criteria

• Seed investment should be from $250k to $500K and early stage investments should be from $350k to $1,500K

• Valuation 1 to 3.5 million (Halo 2013 median 2.5m)• The stage, quality of the management team, valuation

and technology of companies are more important than the sector criteria

• Quality is more important than quantity• In Canada 7.3% of companies get funded (93% don’t)• In Silicon Valley (1/300) get funded

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 13: Angel 101 - Is Angel Investing Right for You?

Investment Process

1. Pre-screening – MLA Staff2. Curbside Mentoring or Individual Member Mentoring3. Present to Investment Review Committee4. Present at members meeting5. Due-diligence Committee is formed and led by a member6. Term Sheet is negotiated & agreed between parties7. Investment is papered by lawyer8. Member is appointed to board9. Quarterly company reporting

Outlined on MLA Website

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 14: Angel 101 - Is Angel Investing Right for You?

Factors that appear to impact investor outcome

• Due diligence time: More hours of due diligence positively related to greater returns (> 40 hours)

• Experience: An angel investor's expertise in the industry of the venture being invested

• Participation: Angel Investors that interacted with their portfolio companies at least a couple of times per month mentoring, coaching, providing leads and monitoring performance experienced greater returns.

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 15: Angel 101 - Is Angel Investing Right for You?

Solo Angel Investing

• Process is time-consuming– Deal sourcing– Reading plans (MLA sees 250 Business Plans a year)– Meeting with entrepreneurs

• Due Diligence is difficult– Finding Vertical experience– May require using outside experts

• Legal Support is Expensive• Most have Family Offices – Super Angels

Angel Resource Institute

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 16: Angel 101 - Is Angel Investing Right for You?

Angel Network’s in Canada

• NACO – National Angel Capital Organization• 32 Angel Groups in Canada• They have collectively about 1000 to 1500 investors• Three large groups accounted for 58%• The majority have fewer than 50 members• 75% of groups set up since 2007• Vast majority do volunteer due diligence• 12 Angel Groups in Ontario• Keiretsu Forum & Golden Horseshoe Venture Forum are

Private For Profit Angel Groups

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 17: Angel 101 - Is Angel Investing Right for You?

Canadian Angel Group Investment Activity 2012

• 139 Investments in 2012 totaling 40.5 million, an increase from 2011 of 134 investments and a decrease in investment from 82.4M

• Average investment is $314k down fr $614k• 50% of angel groups made over 6 investments in 2012, an

increase of 20% over 2011• 82% - Ont & Que, 16% West, 2% Atlantic• ICT (54%), Life Sciences (23%), Clean Tech (10%)• Valuation – Median 1.55m, Mean 2.06m • 55% of transactions involved a co-investor

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 18: Angel 101 - Is Angel Investing Right for You?

Angel Resource Institute – Halo Report – 2013

• Median Angel Round Size trends up to $700K Q4 from $550K Q3• Early Stage Pre-Money Valuations remain stable at $2.5M;

however, top valuations increased from $6.6M to $9.3M• 72% of deals occur in angel groups’ home states• 73% of Angel Deals are Syndicated or Co-Invested• Median Round Size $1.7M up y/y from $1.5M when co-invested• Share of Deals by Sector - Internet 38.5%(+), Healthcare 19.6%

(-), Mobile & Telecom 16.2%(+), Software (non-Internet/mobile) 4.0%(-)

• Interesting that the top US angel group in 2013 is Golden Seeds with 300+ members invests predominately in women led & controlled companies

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 19: Angel 101 - Is Angel Investing Right for You?

Maple Leaf Angels Corporation

• Toronto based and in existence since 2007• MLA has invested in 23 companies since inception in 2007

for $10,000,000 +• Registered with the OSC as a Exempt Market Dealer• Currently 38 members• Open and transparent – published funding process• Continual Entrepreneur support: Curb Side Mentoring,

Volunteer Mentoring, Entrepreneur Workshops etc.

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 20: Angel 101 - Is Angel Investing Right for You?

Maple Leaf Angels - Connects

Our mandate is to connect experienced, accredited investors, and the brightest, most passionate entrepreneurs in an effective investment process.

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 21: Angel 101 - Is Angel Investing Right for You?

Maple Leaf Angels – Membership Benefits

• Opportunity to engage with other members with investment insights & ideas

• Give back and make a difference for entrepreneurs through mentoring and coaching

• Access to collaborative investment opportunities through MLA’s presence within the startup ecosystem

• Your investment dollars go further through government matching programs• You can take advantage of standardized initial screening processes and

thereby benefit from a consistent approach to due diligence • You can harness the power of syndication that comes about when multiple

members invest together. • Due diligence support• You have access to a common term sheet that is negotiated by MLA

members

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 22: Angel 101 - Is Angel Investing Right for You?

The Entrepreneur Application Process

• Start with www.mapleleafangels.com• There is a full education section for

entrepreneurs• Companies apply using MLA’s Private Platform• Investment Review Committee• Monthly Member Investment Meetings• Due Diligence• Term Sheet

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels

Page 23: Angel 101 - Is Angel Investing Right for You?

Contact Information

Gerard Buckley, BBA, FICB, ICD.DManaging DirectorJaguar Capital Inc.(C) 416-884-9522(W) 416-646-6789

[email protected]@mapleleafangels.com

www.jaguarcapital.ca

Twitter: @jaguarcapital Twitter: @gerardbuckleySlideshare: Jaguar Capital

www.mapleleafangels.com | [email protected] | 416.646.6235 | @mapleleafangels