A Snapshot of
Angel Investing
In America
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Venture Capital
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DCNteam.com
DCN History
Year
Program Launched
1997
National Association of Seed and
Venture Funds
2002
Latin American Venture Capital
Association
2002
WBTshowcase
2005
Technology Commercialization
Services
2010
WBTangels
Important Things
for Entrepreneurs
to Know about
Angel Investors
HAIL TO THE JOB CREATORS
From 1980 to 2005, firms less
than five years old accounted
for all net job growth in the
United States.
Business Dynamics
Statistics Briefing: Jobs
Created from Business
Start-ups in the United
States, January, 2009.
Companies Backed by American Angels
Why Angels Matter:
More than Money
A really great angel helps an entrepreneur:
1. See around the corner
2. Gain a sober second opinion
3. Network with people who can help build
the business
4. By being an ambassador
5. Gain credibility in a field
Source: David Pecaut, Boston Consulting Group, 9/06 NAO
The Capital Lifecycle
Investigation
Feasibility
PROFIT
Proof of Pre-Seed
concept
Development
Seed &
Start-up
Government
Sources
Friends & Family
Self
Angel Investors
VALLEY OF DEATH
TIME
Introduction
Early
Growth
Maturity
First, Second, etc...
Venture Capital
IPO,
Banks
Sources of Early Stage/
Seed Equity Capital
Founder,
Friends &
Family
Government
Grants
Angel
Investors
Venture
Capital
How are Angels Different?
Friends
Family
$25K-$100K
Angels
100K-$1 M
Venture Funds
$3 Million +
Not accredited
Unsophisticated
Investing in a friend
Passive
Only one investment (<$5,000)
Accredited
Expertise and personal money
Active
Investing in entrepreneur
Portfolio of angel deals
Limited partnership
Institutional money
Gen. Partners active
Invest in company
Large portfolio
History of building companies
57,000 deals
$17.6 B
Mostly early stage
Avg.: $310K
2,917 deals
$18.25 B
Avg.: $ 6.26M
Mostly later stage
Early
Stage
Late
Equity Capital Markets
Large & Complementary
2009 Angel
Investment
2009 VC
Investment
source: UNH CVR
source: NVCA/PWC/VE
VC Deals by State
WASHINGTON
MONTANA
NORTH
DAKOTA
MAINE
MINNESOTA
VT
OREGON
NH
WISCONSIN
SOUTH
DAKOTA
IDAHO
NEW YORK
MICHIGAN
WYOMING
IOWA
PENN
NEBRASKA
NEVADA
UTAH
OHIO
ILLINOIS
COLORADO
KANSAS
OKLAHOMA
VIRGINIA
KENTUCKY
NORTH
CAROLINA
TENNESSEE
ARKANSAS
SOUTH
CAROLINA
NEW MEXICO
MISS
ALABAMA
GEORGIA
TEXAS
LOUISIANA
RI
CONN
NEW
JERSEY
DELAWARE
MARYLAND
WV
MISSOURI
CALIFORNIA
ARIZONA
INDIANA
MASS
FLORIDA
Avg. Yr.
>100 deals
25-100 deals
< 25 deals
< 10 deals
ALASKA
HAWAII
Who Are These Angels?
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“Been there and done that” entrepreneurs
Roughly 400,000 active angels in the US
“The Millionaire Next Door”
Average age: 47
9 out of 10 investments are devoted to
small, start-up firms with < 20 employees
• Accept roughly 3 deals for every 10
considered
• Average investment <$40K ($25K to
$250K)
Myths: Angel Investing
• Investments are large
• Done mostly in the form of equity
• Terms Sheets are detailed and
complicated
• Investments result in IPO
• There is a shortage of Angel capital
• Angels are very wealthy people
• Angels are mostly retired
Shane, Scott A. Fool’s Gold: The Truth Behind Angel Investing in America. 2009, NY: Oxford University Press
Financially Successful
Angel Investors…
• Are Accredited Investors (rather than “informal
angels”)
• Have Experience …
– Starting Companies
– Investing in Start-ups
– Working in the Industries in which they invest
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Are Highly Selective
Look for Financial Deal with High Returns
Do Not Overvalue Companies
Diversify their Early Stage Investments
Shane, Scott A. Fool’s Gold: The Truth Behind Angel Investing in America. 2009, NY: Oxford University Press
Achieving Liquidity
Sale or
Merger
Initial
Public
Offering
Buy Out
Redemp
- tion
Why Do They Do It?
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“Psychic income”
Social responsibility
Networking among peers
Affection for Entrepreneurs
Fun factor
Return on Investment - from one’s
own account
Growth of Angel Market
• Number of active angels: 400,000
• Number of Angel groups: 340
• Angel investments totaled $8.5
billion across 25,200 ventures in
the first half of 2010
• Some states have enacted tax
breaks for angel investors
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Growth in Number of American Angel Groups
Sector Activity
58% of 2011 angel group
investments are in
healthcare and internet.
60% of healthcare deals were
in medical device &
equipment companies.
Premise on Angel Groups
• Creating new class of investor
– Entrepreneur-friendly
– Developing sophistication/ excellent
processes
– Growing geographic diversity
• Market efficiencies developing
– Entrepreneurs can locate more easily
– Investors get better quality deal flow, while
individuals maintain anonymity
– Building partnerships w/ other angel groups
& VC community for follow-on funding
• Beginning to close capital gap
Networks vs. Funds
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Angel Networks
More informal (e.g.,
dinner club)
Individual decisionmaking
Tend to be memberled
Deal-making outside
Angel Funds
• More structured
• Group decisionmaking
• Can be member-led
or manager-led
• Deal-making inside
Member-led vs. Manager-led
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Member-led
Share the work:
finding, vetting,
pricing, negotiating
Relies on camaraderie
Leadership is elected
Admin tasks by
volunteers
Member involvement
can wane
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Manager-led
Manager does the
work
Relies on Manager
Leadership is
employed
Admin tasks by
Manager
Member involvement
can wane
New Approach - Facilitated
• Member-led but professionallyfacilitated & administered
• Supports member-led collaboration
with a more intentional approach
• Builds knowledge and skill
• Sustains long-term viability
WBTangels
www.wbtangels.com
Role of Facilitator
• Help the Fund Get Organized
• Facilitate the Investment Process
– Methods and Disciplines
• Support Logistics
– Communications, Website
– Administrative Services
– Templates
• Facilitate Network Linkages
– Technology
– Capital
Recap:
Characteristics of
Angel Investors
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Business Builders
Prosperous
Give Back to Young Entrepreneurs
Spend Time
Contribute Knowledge
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The Task of a Regional
Economic Development
Strategy
is to Build an
Entrepreneurial
Ecosystem
Commercializing
Oklahoma
Technology and Research
through
university-connected
angel funds
Thank You
Jim Troxel
Team Leader
WBTangels, a unit of
Development Capital Networks, LLC
jtroxel@dcnteam.com
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