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<p>@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 </p>
