@AngelAcademe www.angelacademe.com
@AngelAcademe www.angelacademe.com
2.00 Introductions
2.20 Context
2.30 Case study
2.50 Due diligence exercise
3.20 BREAK
3.35 Process to completion
4.05 Pitch exercise
4.25 Post investment
4.55 BREAK
5.10 Valuation & Dilution
5.20 Theory into action
5.35 Lessons & next steps
5.50 Wrap-up
6.00 Q&A/Networking
Agenda
! About us and our investing experience
! Our objectives for this workshop:
" Inspire more people to become angel investors
" Help make more investments happen
" Support syndicate formation
" Give practical experience
! About you
! Your investment objectives and motivations
! Your angel investing experience
Introductions
! Very loosely based on a couple of real businesses
! ALOHA! has been through the AA screening process
! You'll hear the CEO pitch now, with time for questions
! Then we'll start DD on it
! It's about the process and questions
! Circa 2013
Case study: ALOHA!
7
GIVING FANS A VOICE
ARTISTS CAN HEAR
www.alohafans.com
@alohafans
8
1. Celebs and
brands create a
challenge on the
dashboard
2. Advocates join the
challenge & spread
the word via their
social networks
3. Followers see
content, interact &
become advocates
themselves
4. Celebs & brands
monitor results on
dashboard & reward
top advocates
Team:
Franny Rounds, CEO: biz dev for Microsoft & BSkyB
Jimmy Hills, CTO: agile developer & project manager, Samsung & Skype
1 biz dev, 2 Rails developers, 1 iOS developer, 2 social media managers
Advisors: startup CFO, former Head of A&R EMI
Thank you!
Questions?
franny@alohafans.com
www.alohafans.com
@alohafans
Objectives:
! Team
! Technology
! Traction
! Market opportunity
! Financials
! Legal
! Exit potential
! The offer to investors
Due diligence
! You're interested in this opportunity
! You're planning your first follow-up meeting with Franny
! What are your DD questions for her?
10 mins prep; 15 mins Q&A
Due diligence exercise
Syndicate formed:
! Lead investor
! What needs to be done agreed
By who?
By when?
Establish:
! What's up for negotiation valuation, terms, deal structure?
!
Is there a term sheet, investment agreement?
! Do these need a review or re-write?
Process to completion
Investment documents:
! Term sheet
!
Investment agreement
! Cap table
! Articles of Association
Mark Rathbone, Brabners
! You're at a dinner party
! There are other angel investors there
! How would you pitch Franny's business to them?
10 mins prep; 10 mins pitch & discussion
Pitch exercise
! Keeping updated
! Strategic influence
! Adding value
! Follow-on funding
! Exit
Post investment
EIS & SEIS Tax Breaks
Tax Breaks:
!
Income tax relief EIS 30%, SEIS 50%
! SEIS - Relief for re-investment of capital gains 50% exempt
from CGT
! Capital gains disposal relief CGT exemption if held for 3 years
and income tax relief claimed
! Loss relief income tax relief if investment fails
EIS & SEIS Tax Breaks
SEIS
EIS
Investment
10,000
10,000
Income tax relief
5,000
3,000
CGT reinvestment (10k x 28% x 50%)
1,400
-
Total tax relief
6,,400
3,000
Loss relief
(10k less 5k/3k x marginal rate, 45%)
2,250
3,150
Total tax relief
8,650
6,150
Risk
13.5%
38.5%
! Valuation and valuation methods
! The impact of dilution on our investments
! Managing risk:
" Due diligence
" Portfolio strategy
" Tax breaks
Valuation, dilution, risk
Will you invest in ALOHA?

If yes, why and how much?

If not, why not?
What would it take to invest or put in more?
Theory into Action
! Year 1: Raised 310k in 1st round at 1m valuation
! Year 2: Raised 100k "bridge" at 1.5m valuation
! Year 3: Sold for 2.5m cash and shares
! Lawyers paid first #
! Approx x2 for investors in both rounds
What happened to ALOHA!?
! Think about your strategy: how much, how often, sector etc
! No standard journey each business is different
! There WILL be failures, even for experienced investors
! Rarely 1 thing that goes wrong it's often about people
! There's little data about the industry and returns
! Like and trust the team you're investing in - tough & resilient, but
coachable. Skills gaps can be filled
! Like the product and market opportunity - would you use/pay for
this and do you see a wide need?
! Exits are unpredictable patient capital
Lessons from investing
! Are the revenue forecasts realistic?
! Don't rely on other peoples' due diligence
! Who are the other investors? Do they have preferential rights?
What do they bring to the business?
! Who's looking after your investment? NED/Observer/information
rights. Set reporting requirements - nothing too onerous
! Be an advocate for your portfolio businesses and follow-on if
possible
! Learn about the wider investment environment and trends
! You'll only know if it's a good/bad investment at exit
Lessons from investing
Angel: How to Invest in Tech Startups, Jason Calcanis
The Gust Guide to Making Money & Having Fun, David S Rose
The Lean Startup, Eric Ries
Good Strategy Bad Strategy, Richard Rumelt
The Founders Dilemma, Noam Wasserman
The Hard Thing About Hard Things, Ben Horowitz
Valuation: Measuring & Managing the Value of Companies,
McKinsey
Financial Intelligence for Entrepreneurs, Karen Berman & Joe
Knight
The Startup Game, William H Draper
http://www.paulgraham.com/angelinvesting.html
Reading List