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Angel Investing: Fear is Good
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Tytus Michalski
June 13, 2013
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Angel Investing: Fear is Good
Angel Investing: Fear is Good
Tytus Michalski
June 13, 2013
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Transcript
Angel Investing Fear is Good
There is no scientific evidence to support these ideas; use
them at your own risk. DISCLAIMER
Agenda Why Angel Investment How to Get Started Good Deal
Flow Investment Terms Post Investment
Why Angel Investment
Why Angel Investment Some people make (a lot of) money
Why Angel Investment Studies of long term average returns: 18-38%
per annum
Why Angel Investment But nobody really knows
Why Angel Investment And some of people lose (a lot
of) money
Why Angel Investment The economics of startups have changed
Why Angel Investment 50x cheaper vs. 1999
Why Angel Investment 3x faster to market vs. 1999
Why Angel Investment 10x bigger markets vs. 1999
Why Angel Investment 1,500x better economics vs. 1999
Why Angel Investment Contribute back to society
Why Angel Investment Have an impact on the system
Why Angel Investment Think of it as education
Why Angel Investment Meet interesting people
Why Angel Investment Startups ain’t boring
Why Angel Investment Logic and emotion
Getting Started
Getting Started What you need
Getting Started Some money
Getting Started Returns are highly skewed
Getting Started More than some time
Getting Started Willingness to learn
Getting Started Research the market
Understand the basic legal issues Getting Started
Getting Started Meet entrepreneurs
Getting Started Meet co-investors
Getting Started Due diligence is important
Getting Started Due diligence ain’t just numbers
Getting Started Diversification is important
Getting Started More than just money
If you don’t have time consider a fund Getting Started
Good Deal Flow
Without good deal flow you have no chance Good Deal
Flow
Quality over quantity Good Deal Flow
Without quantity there is no quality Good Deal Flow
Warm intros vs. cold intros Good Deal Flow
Build a trusted network Good Deal Flow
Meet random people and help them Good Deal Flow
Share your ideas Good Deal Flow
Give straight feedback Good Deal Flow
Be fair to entrepreneurs Good Deal Flow
Set high standards for entrepreneurs Good Deal Flow
Find great co-investors Good Deal Flow
Be fair to co-investors Good Deal Flow
Support your companies Good Deal Flow
People, people, people Good Deal Flow
Investment Terms
Don’t reinvent the wheel Templates do exist Local variation is
real Investment Terms
Lawyers give legal perspective, not business perspective Investment Terms
The honeymoon is a preview of the marriage Investment Terms
Equity vs. convertible Both can be great Both can be
terrible Investment Terms
Good lead investor makes a huge difference Investment Terms
Every term sheet is a bundle of terms not separate
terms Investment Terms
Valuation 100% of 0 is still 0 Investment Terms
Liquidation preference Alignment of interests Keep it simple Investment Terms
Pro-rata / follow on rights Plan for the future Communicate
clearly Investment Terms
Board of directors Definitely doesn’t scale Run a modern version
Investment Terms
Information rights Transparency is good Except for competition Investment Terms
Anti-dilution Stick with broad based Don’t make it complicated Investment
Terms
Drag along / tag along No small investor veto Many
variations Investment Terms
Founder vesting Life is messy Co-founders do split up Investment
Terms
Dividends Cost of time Analogy with team salary Investment Terms
Option pool Talent is hard to get Also useful for
partners Investment Terms
Cap table Cleaner is better Time magnifies mistakes Investment Terms
Make term sheets as simple as possible but not simpler
Investment Terms
Post Investment
Time for a Reality check Post Investment
Identify gaps and needs Post Investment
Investors are part of the team Post Investment
Communication Frequency Style Post Investment
If you like lean startups try lean boards Post Investment
Sophisticated tools vs. Google docs Post Investment
Metrics What’s really going on? What’s the core score? Post
Investment
The dip hits every company and it ain’t fun Post
Investment
Identify your specific value added Post Investment
Maximum support at inflection points Post Investment
Sometimes best to simply get out of the way Post
Investment
Time to begin the real hard work Post Investment
“Education consists mainly in what we have unlearned.” - Mark
Twain
[email protected]