A Snapshot of

Angel

Investing In America

--------------------------------------------------------------------

1

For over 15 years, our team has provided specialized products, management and training to development associations and entrepreneurial networks relevant to our expertise: • • • Regional Economic Development Technology Transfer Development Finance • • • Entrepreneurship Venture Capital Capital Formation Our services enhance our partners' efforts to: • • • • Commercialize new technologies Attract capital for business development Invest capital in entrepreneurial ventures Build communities with development finance and advanced business skills

DCNteam.com

Our offices are located throughout the US.

DCN History

Year Program Launched

1997 2002 2002 National Association of Seed and Venture Funds Latin American Venture Capital Association WBTshowcase 2005 2010 Technology Commercialization Services 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

Growth Investigation Feasibility Development Introduction Maturity Proof of concept Pre-Seed Seed & Start-up Self Government Sources Friends & Family Angel Investors Early First, Second, etc...

Venture Capital IPO, Banks VALLEY OF DEATH TIME

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

Equity Capital Markets Large & Complementary 57,000 deals $17.6 B Mostly early stage Avg.: $310K 2,917 deals $18.25 B Avg.: $ 6.26M

Mostly later stage

2009 Angel Investment source: UNH CVR 2009 VC Investment source: NVCA/PWC/VE

VC Deals by State

WASHINGTON OREGON IDAHO NEVADA CALIFORNIA ARIZONA MONTANA WYOMING UTAH COLORADO NEW MEXICO ALASKA NORTH DAKOTA SOUTH DAKOTA NEBRASKA KANSAS MINNESOTA OKLAHOMA IOWA WISCONSIN ILLINOIS MISSOURI ARKANSAS MICHIGAN INDIANA OHIO KENTUCKY TENNESSEE WV MAINE VT NH MASS NEW YORK PENN RI CONN NEW JERSEY DELAWARE MARYLAND VIRGINIA NORTH CAROLINA SOUTH CAROLINA MISS ALABAMA GEORGIA Avg. Yr.

TEXAS

>100 deals

LOUISIANA FLORIDA

25-100 deals < 25 deals < 10 deals

HAWAII

Who Are These Angels?

• “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 • 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?

• “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 19

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

Angel Networks

• More informal (e.g., dinner club) • Individual decision making • Tend to be member led • Deal-making outside

Angel Funds

• More structured • Group decision making • Can be member-led or manager-led • Deal-making inside

Member-led vs. Manager-led

Member-led

• Share the work: finding, vetting, pricing, negotiating • Relies on camaraderie • Leadership is elected • Admin tasks by volunteers • Member involvement can wane

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 professionally facilitated & 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

• Business Builders • Prosperous • Give Back to Young Entrepreneurs • Spend Time • Contribute Knowledge 28

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 [email protected]

31