43 East 7th Avenue
Oshkosh, WI 54902
920.232.8904
www.angelsonthewater.com
Welcome to AoW Briefs
Volume 2
Board of Directors
Chair
Al Hartman, Dean Emeritus
University of Wisconsin Oshkosh
Treasurer
Mickey Noone, President
First Business Bank Northeast
Secretary
Paul Jones, Attorney
Michael Best & Friedrich LLP
Larry Bittner, Director
Baker Tilly Virchow Krause, LLP
Phil Florek, Executive in Residence
University of Wisconsin Oshkosh
Susan Neitzel, Director Emeritus
University of Wisconsin Oshkosh
Dave Omachinski
Management Consultant
Tim Cook, Board Member
CEO of Clarity Clear
Gerald Sevick, Senior Consultant
& Board Member
Foth & Van Dyke, LLC
Fund Administrator
Elizabeth Hartman
CEO & General Counsel
Chamco, Inc.
March 2014
Updates from the Board
Fellow investors,
We are coming up on our Annual Meeting April 10 with
the Board meeting at 4:00 which you are welcome to attend. Hors
d’ouerves and cash bar to follow with the annual investor meeting
beginning at 5:15. We will have some of our entrepreneurs attending to share their vision
and passion for their business.
As you know, we have had some good news with one of our investments about to close on
second round of funding at about 4.5 times value of what we invested and other at 50%
more than when we invested. We will have more news at the annual meeting with some of
our investments doing well while a couple of them are not. To date we have not had a
failure but two of our investments are struggling.
We will soon provide to you a list of our investments with a brief description of what they
do. We will also provide a summary of what you have invested to date given the level of
your initial commitment.
Many of the businesses we have invested in have gone on to get funding from other wellknown angel funds or networks with Baird investing after we did in two cases. This
certainly adds support for the quality of the decisions made by our Investment Committee.
We continue to request K1s from our entrepreneurs and will get you ours as soon as we
get theirs. Elizabeth, who does this without compensation, has been working hard with the
entrepreneurs who are eligible for Act 255 tax credits to get them to complete their
paperwork. Our paperwork has been complete for some time. If we do not get all of the
K1s very soon we will send each investor an individual letter/email with estimated K1
information so you may file your taxes.
The Board of Directors will meet at the beginning of the Annual Meeting.
Director of Marketing
Gracie Wardin, student
University of Wisconsin Oshkosh
Current Investments
We continue to develop relationships with other angel funds and networks. We will be
seeking a partnership with the new state entity which will be managing the $25M of state
funds for investment in early stage opportunities. Also for Fund II are seeking matching
funds from WEDC for help launch that fund. Of course I hope all of you will invest in Fund
II.
Thank you for reading and please feel free to contact me if you have any questions.
- Al Hartman, Chairman
Angels on the Water II?
By the end of May of 2014
we will have invested 60% of
our committed funds.
Sometime in 2014 we will
likely reach the critical point
of 70% invested. The
benchmark in the Angel
investing arena is that you
keep in reserve about 30%
of your fund for follow-on
investments in some of your
portfolio businesses. If we
adhere to the approach of
keeping some “dry powder”
we will need to begin
seeking investors for Angels
on the Water II sometime in
2014. If we wait until we are
completely out of money to
invest we will be out of the
deal flow stream and will
have to rebuild our
network.
“Price Protection” in Venture Capital Financings: What Entrepreneurs Should Know
- A Blog Posting Written by Paul Jones
“Venture capital investors are not like the rest of us. When regular folks buy a
share of stock and the stock subsequently trades for a lower price, they take their
losses. All of them. When a venture capitalist buys a share of stock, and the
company subsequently sells shares at a lower price, the venture capitalist doesn’t
usually feel the full loss. Sometimes, the VC doesn’t take any loss at all.
Welcome to the world of “price protection.”
You’ll find price protection in the “Anti-Dilution” section of the term sheet. It is the long, usually
complicated and sometimes controversial part of that section that protects a venture capital
investor in a prior round from some of the depredations of a subsequent down round financing (a
round priced lower than the current round). Consider this is example of price protection in
action; in its simplest (and most deadly) form. A VC buys 1 million shares of Series A Preferred
Stock for $1.00 per share, with each A share convertible into one share of Common Stock at the
option of the VC or automatically upon a qualifying IPO. The entrepreneur owns the 1 million
shares of Common Stock that are outstanding, so in this example the VC and the entrepreneur
each own 50% of the company. A year later, the company sells one share of Series B Preferred
Stock for $0.50. With that, each share of A Preferred held by the VC is now convertible into two
shares of Common Stock. The VC now owns, in effect, 2 million shares on an as converted basis,
while the entrepreneur still owns 1 million shares, and the B shareholder owns 1 share. Which
means our A shareholder now own almost 67% of the company, and our entrepreneur now owns
about 33%. The entrepreneur is not happy. Continue Reading: http://bit.ly/1ii1f73
Paul Jones, Investment Advisor
A Glimpse Into Aver Informatics
Read AoW Briefs online Kurt Brenkus, CEO of Aver Informatics, describes himself as a philosopher rather than a “business
and share it with your guy.” “Business is a set of rules,” he says, “which comes into play after building relationships and
friends and colleagues! understanding the human condition.” This unique perspective is the basis for the company’s
www.angelsonthewater.com
AoW Briefs
March 2014
Managing Editor
Susan Neitzel
Associate Editor
Gracie Wardin
products - the next generation of healthcare analytics technology – with a goal of solving problems
and seizing opportunities in the rapidly changing healthcare industry. In healthcare and beyond,
Aver assists organizations that have large amounts of information to be analyzed.
Founded in 2010, Aver, Green Bay, WI, is the fastest growing provider of user-friendly big data
analysis tools in the US. Driven by the implications of the Affordable Care Act and with key
metrics of efficiency and cost control in mind, Aver’s niche of “episodes of care” pricing reflects
the reality of each patient in terms of reimbursement for over 70% of medical expenses. Within
five to eight years, the health insurance industry will be using a trillion dollars (a third of all
payments) to convert from “fee for service” to “episodes of care” pricing. Aver, one of only five
software vendors currently participating in this arena, has a successful lead in the market and
expects to continue rapid growth.
With the business based on Brenkus’ philosophy, a great team of individuals, a solid product, and a
head start in the lucrative healthcare game, it’s clear to see why Aver is achieving record growth.
- Associate Editor, Gracie Wardin