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Becoming an Angel Investor
1. Becoming an Angel Investor
January 26, 2022
Graham & Walker Roundtable
elaine@elaingelinvest.com
2. My Personal Journey
Learned I was an Accredited Investor
Found an Angel Group where I could learn
Active with Angel Groups and on own for last 6 years
Have a portfolio of over 20 Startup Investments
See positive results in progress and returns
Excited to share with you what I have learned
5. Angel Investors are
individual accredited investors
who provide financing
with their own money
for early-stage start-ups
usually in exchange for
convertible debt or ownership equity
3
Who are Angel Investors
6. Definition of who is an Accredited Investor
• ANNUAL INCOME: An individual who made a gross income of more than
$200K ($300K with spouse) for at least 2 years with ongoing expectations for
the next year
• NET WORTH: An individual (or married couple) whose (joint) net worth
exceeds $1M, excluding the value of a primary residence.
• TRUST MGT: Someone managing a trust with more than $5M assets
3
7. Increase Awareness of Opportunity to Angels that simply
don’t have their wings yet
5.3 Million*
individuals are “defined as those having
investable assets of US$1 million or more,
excluding primary residence
Source: *2018 World Wealth Report compiled by Capgemini; **2010 Census
4.5 Million**
Households made over $200K (3.9% of US
HH)
Only capturing
3%-6%
Of this potential
today
8. Women Angel Investors now represent ~30%
of all Angels in the US
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
CY 2004 CY 2005 CY 2006 CY 2007 CY 2008 CY 2009 CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CY 2020
Angel Investor Trend 2004-2020
All Other Angels Female Angels
29%
20%
26%
25%
26%
19%
22%
12%
13%
11%
17%
12%
14%
9%
5%
30%
30%
Source: Center for Venture Research
9. Angels are responsible the Largest % of Deals
with the important role igniting innovation
Source: Q2 2021 Venture Monitor by PitchBook and NVCA
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
$0
$10
$20
$30
$40
$50
$60
$70
$80
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2015 2016 2017 2018 2019 2020 2021
Deal value ($B) Deal count Angel/Seed Early VC Later VC
10. Angels vs VCs
• Who’s Money: Angels invest their own money while VCs invest other people’s
money while
• Check Size: Individual Angel Check size is smaller than that of a VC since they
have larger amounts of money to deploy. They need appropriately sized deals so
their check size is usually bigger.
• Stage: Angels start the ecosystem spark and invest in more, earlier stage
companies while VC funds invest typically invest in fewer, later stage companies
• Outcome: Angels are more often invested in the sweet spot of acquisitions,
around $50M while VC are looking for huge exits. They usually look for “unicorn”
potential (over $1B).
10
12. Series B+
$25K - $1.5M $2M - $5M $10M+
Series A
Customer/Problem Fit
Source: iBusinessAngel.com
Problem/Solution Fit Product/Market Fit Product/Channel Fit Expansion
@Elaingelinvest
$100M
$10K
$1K
15. Two Main Type of Angel Groups
Network Funds
Pitch then Fund
Individual Choice
Fund first
16. There are also different types of funds
Active Passive Event
Significant portion of
the member
investors actively
involved in the
screening, deal flow,
due diligence and
investment decision.
Investor are passive
in the selection of
which relies on
rules, algorithms or
others to do the
fundamental due
diligence and
investment
selection.
Both the investment
is taken up front and
the date of when the
investment will be
decided are defined
up front before the
companies are
known
Managed
Provides for General
Partners who
manage the
investment analysis
and decision
process.
18. What do Angel Investors do?
Review Founder Pitches Perform Due Diligence Invest their own money
19. Due Diligence
• An investigation or audit of a potential investment to confirm facts and
assumptions
• Usually includes discussions with founders and reviewing documents in the areas
of market problem, product solution and differentiation, Market Size, traction, team,
competition, moat, GTM strategy, financial model, investment ask and use of funds
• The purpose is to assess whether to write that check
19
20. Amount of Due Diligence Matters
Source: Return to Angel Investors In Groups 2007, Robert Wiltbank & Warren Boeker
@Elaingelinvest
Spending time on
due diligence is
significantly
related to better
outcomes.
22. Distribution of Returns by Investment
$20M
$40M
$60M
$80M
Hold:
3.0Y
Avg. Holding Period: 3.5 years
Overall Multiple: 2.6X
Hold:
3.3Y
Hold:
4.6Y
4.9Y
6.0Y
Percent
of
total
raise
<1X 1X to 5X 5X to 10X 10X to 30X >30 X
Exit Multiples
Blue: % of exits in that category
Green: $’s returned in that category
Source: Rob Wiltbank
23. Include Angel Investments in your Portfolio
• Angel Investing is risky as more startups fail than make it every year
• Invest only a portion of your net worth dependent on your risk tolerance
• Typical guidelines: 5% - 10% of net worth
• If $500K Total Net worth ~ Up to
$50K towards Angel Investments
• If $1M Total Net worth ~ Up to
$100K towards Angel Investments
24. Diversify the Angel Portion of your Portfolio
• Create an Angel Portfolio and diversify within that
• Your associated Check Size ~$5K
if Portfolio is $100K
• Recommended number of investments
to spread out risk is ~20+
• Diversification Dimensions can include
Stage, Industry, Founder diversity
28. Follow the Money..From Where? California Angel Groups
are responsible for over 27% of $ Invested
Seed/Series A Deals and $ invested by investor location
Source: 2020 Halo Report with 2,198 deals
24%
11%
11%
6%
9%
7%
8%
6%
3%
11%
3%
2020 % of all Seed/Series A Deals by Investor Location
California New York Southeast Mid-Atlantic Southwest Northwest
Great Lakes NorthEast Outside US Texas Great Plains
27%
10%
10%
10%
9%
9%
7%
6%
5%
5%
2%
2020 % of Dollars Invested by Investor Location
California New York Southeast Mid-Atlantic Southwest Northwest
Great Lakes NorthEast Outside US Texas Great Plains
29. From Where? The vast majority of Northwest Angel Groups deals are
homegrown while Angel Groups in New York aggressively invest
outside their home region 51% of the time – similar to last year
Source: 2020 Halo Report with 2,198 deals
90% 88% 88% 88% 87%
79%
73% 69%
62%
49%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
30. To Where: California remains a draw for investors with 16% of
out of home region deals being invested in companies there.
9% from other regions comes to the Northwest
Where Out of Home Region Deals Go -
% Deals
Where Out of Home Region Deals Go -
% $ Invested
Source: 2020 Halo Report with 2,198 deals
31. To Where? 21% of all Angel Group backed deals were
located in California down to 4% in the Great Plains
Source: 2020 Halo Report with 2,198 deals
11.% -3% 0% 1% 14% -5% 0% -9% -7% -12%
21.1%
15.7%
10.3% 10.2%
8.9% 8.4% 7.7% 7.6% 7.2%
4.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
32. What? National Average focus by Industry Sector
Source: 2020 Halo Report with 2,198 deals
27%
25%
24%
16%
3% 3% 2%
0%
5%
10%
15%
20%
25%
30%
Information Technology Consumer Products and
Services (B2C)
Healthcare & Biotech Business Products &
Services (B2B)
Financial Services Energy/Enviro Materials & Resources
33. How Much? Pre-Money Seed Round Valuation in Northwest was at
the National Median of $6M and below the National Average with
$7.3M
Source: 2020Halo Report with 1,921 deals
-8% -30%
23% 1% -13% -29% -3% 58% 20% -24% -23%-50% -25% -34% 0% -9% -44%-15% -23% -25% 79% -14%
YOY Growth%
$8.0
$7.0
$6.0 $6.0 $6.0 $6.0 $6.0
$5.0 $5.0 $5.0
$6.0
$10.0
$7.0
$13.3
$9.0
$8.2
$7.6 $7.3 $7.3
$6.6
$4.8
$8.5
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
Seed Round Pre-Money Valuation ( in Millions)
Median Pre-Money Average Pre-Money
34. How Much? Both Pre-Money Series A Round
Valuation National Median and Average increased
Year over Year
Series A Pre-Money Valuation Medians Series A Pre-Money Valuation Averages
$10
$10.6
$14.0
$-
$2
$4
$6
$8
$10
$12
$14
$16
CY 2018 CY 2019 CY 2020
Series A Median Pre-Money
$13
$18.2
$22.2
$-
$5
$10
$15
$20
$25
CY 2018 CY 2019 CY 2020
Series A Average Pre-Money
32%
22%
35. How Big? Seed Round - National Median Actual was only 50%
of Funding Round Size
Funding Round Size
National:
• Median = $1.0M
• Average = $1.9M
When the Average is larger than the Median value, we have outliers at the high end of the
distribution that are pulling up the averages
Source: 2020 Halo Report with 2,198 deals
National:
• Median = $500K
• Average = $1.6M
Actual Investment
36. How Big? Series A- National Median Actual was only 10% of
Funding Round Size
Funding Round Size
National:
• Median = $4.0M
• Average = $5.9M
When the Average is larger than the Median value, we have outliers at the high end of the
distribution that are pulling up the averages
Source: 2020 Halo Report with 2,198 deals
National:
• Median = $400K
• Average = $2.7M
Actual Investment
37. More Who? Northwest is at the National
Average for Female CEOs in the Region
% of Female CEOs across Regions % of Female CEOs within Region
22%
20%
18%
16% 16%
14% 14% 14%
12%
10%
16%
0%
5%
10%
15%
20%
25%
% of Female CEOs within Regions
26%
11% 11%
9% 9% 9% 8%
6% 5%
4%
0%
5%
10%
15%
20%
25%
30%
% of Female CEOs across Regions
38. More Who? Northwest is slightly below the
National Average for Minority CEOs in the Region
% of Minority CEOs across Regions % of Minority CEOs within Region
29%
13%
12% 10% 9%
6% 5% 5% 5%
2%
0%
5%
10%
15%
20%
25%
30%
35%
% of Minority CEOs across Regions
22% 22% 21%
16%
13%
12% 12%
10%
8% 8%
12%
0%
5%
10%
15%
20%
25%
% of Minority CEOs within Regions
39. How Much? National Mix is 70/30 New Co/Follow-on Funding
Source: 2020 Halo Report with 2,198 deals
76% 74% 72% 72% 70% 70% 66% 66% 66%
58%
69%
24% 26% 28% 28% 30% 30% 34% 34% 34%
42%
31%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Great Lakes New York California Texas Southeast Mid Atlantic SouthWest Northeast Northwest Great Plains National
New Co Follow-on
40. How? Convertible Notes continues as the most common
Funding Type followed by Preferred Equity
Source: 2020 Halo Report with 2,198 deals
64%
58% 57% 56% 54% 53% 53% 51% 50%
40%
54%
20% 29%
28% 29% 33%
29% 27% 32%
29%
38%
30%
10%
7%
9% 8%
9%
12% 12% 9%
10% 15%
10%
6% 5% 7% 7% 4% 6% 8% 8% 10% 7% 6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Great Lakes SouthWest Northwest Northeast Texas Southeast Mid Atlantic New York California Great Plains National
Convertible Note Preferred Equity Common SAFE
44. There is a positive cycle between Angels and
Entrepreneurs that creates long term growth
Angels
Entrepreneurs
55% of Angel Investors were
previously a founder or CEO
of their own startup
Increasing number of
successful Entrepreneurs in
the short run can help the
number of Angels in the long
run
Source: The American Angel: Report from ACA and Wharton Entrepreneurship
45. Why Do Angels Invest?
Financial Return
Diversification of net worth
Help new job growth – local economy
Have a front seat on latest innovation trends
Meet like minded colleagues who have become friends
Expand Personal Growth and Learning
A way to Give Back via Leverage Experience through advise and mentorship to Start-ups
Share learnings with new Angel investors
High Energy and the Enthusiasm is contagious
Personal happiness and fulfillment – in making a difference
Making a Difference
Its Fun!
46. Getting Started
• Angel Capital Association www.angelcapitalassociation.org
• Education through Workshop and Videos
• Gust Groups www.gust.com
• Angel List www.angel.com
• Syndicates on Angel list
• Women only groups
• Pipeline angels www.pipelineangels.com
• Golden Seeds www.goldenseeds.com
• Seattle Angel Conference – www.seattleangelconference.com
• Angel Investing by David Rose (book)
• Graham & Walker Accelerator
47. Graham & Walker Accelerator
• 6 pre-seed or seed-stage companies with open rounds
• Live pitches with full Q&A, small-group investor meetings week of
February 21
• Accredited? You’re invited!
• Private registration link to be shared over email.
• https://www.eventbrite.com/e/investor-showcase-for-gw-accelerator-cohort-
4-tickets-240428005637