THE STATE OF ANGEL INVESTING
BREAKING: OUR DEAL FLOW IS ABOUT TO EXPLODE Q2 2020 You’ve heard me say it time and time again: Things move fast around 3 The Private Equity here. Since we first launched just one year ago, we’ve seen and done it Landscape all, from launching three deals in one day to featuring a raise that filled in under 10 hours. 4 Meet David Weisburd But there’s another big change coming soon… and it’s going to completely revolutionize equity crowdfunding in ways we’ve never seen before. 5 Digging Deeper I’m talking about major regulatory changes that were just proposed by Bright Futures for the SEC – and that could take effect as soon as this September. These EdTech and Its changes could have an immense impact on the private equity world – not just for startup founders and CEOs but for angel investors too. Students Let’s explore some of the ones that are most important for us. 7 Ask Neil The Amount You’re Allowed to Invest Each Year Could Go Up 7 Pro Tip Right now, nonaccredited investors are limited in the amount they can invest each year by the SEC. That amount is based on either their net 8 Deal Snapshots worth or income (whichever is lesser). The proposed changes would flip the script – basing annual limits on the greater of the two. angels + This could make a world of difference for those with disparate numbers. entrepreneurs Think about it – someone with $750,000 in the bank but a $100,000 salary network can only invest $10K per year right now (10% of the lesser of the two). The proposed changes would allow them Raise Maximums Could to base their limits on the higher of those two numbers, leaving them with $75K to Increase by Millions of Dollars invest each year. You’ve probably noticed that the majority of Meanwhile, accredited investors will see crowdfunding deals have the same upper their annual limits waived entirely. That limit: $1.07 million. That’s because $1.07 means more freedom to handle your million is the maximum amount any startup assets exactly the way you think is best. can raise via Reg. CF in a year, per the SEC. Startups Raising via Reg. CF Sometimes, $1.07 million is plenty. There are lean companies out there that can operate Could “Test the Waters” First for well over a year on that kind of cash. But most of the time, $1 million is just scratching Currently, startups that are planning a crowdfunding raise are under strict legal the surface of what a startup needs. obligations to keep quiet. Not only are they If the proposed changes are implemented, barred from advertising an upcoming raise that cap will jump to $5 million per year online or elsewhere… they’re technically – which means that bigger, more mature not allowed to say a word to anyone, startups could flock to crowdfunding including their friends and families. instead of running private raises behind Other types of raises (including Reg. A+) allow closed doors. companies to “test the waters,” meaning Making Reg. CF more attractive to startups is that they can engage in communications to going to be the absolute best way to continue feel out investor interest before they take bringing world-class deal flow to our Network… the plunge. This process removes a layer of not to mention that more investors will be risk; if testing the waters shows low investor able to participate in each raise. Like I said, interest, that startup can save a lot of time, we once saw a crowdfunding raise fill in money, and resources that would have been wasted on an ill-timed raise. less than 10 hours!
Early-stage companies already face enough And while we don’t have an exact timeline risk without having to worry about whether for when these changes will take place, or not they’re wasting cash marketing a raise we do know that the SEC typically rolls out that won’t work out. In fact, that’s one of the regulatory updates in September, following main complaints I hear from founders and a 60-day comment period. That means CEOs who actively avoid trying out Reg. CF. we could be seeing more and better deal opportunities in just a few short months. Without that risk, I expect to see a substantial uptick in the number and quality of startups We’ll be the first to let you know exactly that decide to give crowdfunding a shot. And how to take advantage once these changes that means more deal flow for us. Which brings take effect. Until then, stay tuned – we have me to the next – and biggest – change… plenty of exciting updates on the way. +
2 THE PRIVATE EQUITY LANDSCAPE
DraftKings (Nasdaq:DKNG), a fantasy WeWork, the company providing sports and sports betting provider, debuted shared workspaces for startups, faces a on the Nasdaq exchange on April 24, receiving lawsuit from investors claiming executives a market value of more than $6 billion. exaggerated WeWork’s business plans and Following a December 2019 merger with minimized losses in order to sell stock. The blank-check company Diamond Eagle complaint, filed in San Francisco’s federal Acquisition Corp., the Boston-based company court, also named Japanese conglomerate is the only publicly traded company of its kind. holding company Softbank as a defendant.
Palantir Technologies, the big Curaleaf (CURLF), the leading medical data analytics company co-founded by cannabis operator in the U.S., has signed an amended agreement to acquire GR Peter Thiel, will reportedly file initial public Companies Inc. (Grassroots), the country’s offering paperwork within the next few largest private vertically integrated multistate weeks. Palantir recently raised $500 million operator. The deal, valued at approximately from Japanese insurance holdings company $875 million, will secure Curaleaf as the world’s Sompo Holdings, bringing the company’s largest cannabis company in terms of revenue. total funding to about $2.5 billion. Fusion Pharmaceuticals, an Microsoft (Nasdaq:MSFT) announced Ontario-based biotech company developing plans to acquire CyberX, an Israeli cybersecurity treatments for solid tumor cancers, announced startup, on June 22. The acquisition will its IPO terms on June 22. The company, bolster Microsoft’s current efforts to manage founded in 2014, plans to raise $125 million, systems within the Internet of Things, or IOT, offering 8.4 million shares priced at $14 to $16. adding additional technology to monitor and prevent industry-level security vulnerabilities. Albertsons Companies (ACI), the grocery giant with a previous Safeway merger, Snowflake, a cloud data platform backed is expected to go public this week, with plans by Salesforce (NYSE:CRM), has reportedly to raise $1.3 billion at a valuation of $19 billion. filed initial public offering paperwork with The corporation previously abandoned a the Securities and Exchange Commission. 2015 IPO due to market conditions but has Snowflake raised $479 million in a February seen accelerated same-store sales growth raise, with a total valuation of $12.4 billion. during the COVID-19 pandemic.
3 MEET DAVID WEISBURD Your Newest Angel Investing Advisor
Dear Reader, We raised over $16 million for isocket, and it was eventually acquired for an eight-figure David Weisburd here – sum. I decided at that point that I needed an serial entrepreneur, co- Ivy League MBA… so I packed up and headed head of venture capital out to business school at Dartmouth. at 10X Capital, and the newest member of the Not too long after, I founded RoomHunt.com, Angels & Entrepreneurs a site that completely revolutionized the advisory board. roommate and rental experience. After expanding into 72 geographic markets Earlier this quarter, I introduced myself to around the world, Roomhunt was acquired everyone here on the Network, and I want to by RentLingo… and that’s when I decided to thank you all for the warm welcome. I’m so move to the other side of the table. impressed with the community that you’ve built here, and I’m thrilled to be a part of it. With the help of my mentor, Errik Anderson I’ve been an entrepreneur since my (co-founder of Adimab, Compass Therapeutics, sophomore year of high school when and Alloy Therapeutics), I joined the world of I chose to work for myself rather than venture capital investing through my investment relying on others to tell me what to do. into Compass Therapeutics, Fidelity, Orbimed, My first company, TicketCelebration. and Google Ventures. com, saw incredible success – growing Since then, I’ve invested in almost 50 venture- into a multimillion-dollar business that backed companies, including some of the eventually became StubHub’s largest world’s most renowned startups – think inventory supplier. companies like 23andMe, DraftKings, I was a self-made millionaire by the time Headspace, Palantir, and Wish – alongside I was 21, at which point I decided to pack the “who’s who” of venture capitalists. all of my stuff and head out west to Silicon Through this experience, I’ve learned Valley with a few of my friends. There, exactly how to source and vet the best we started a brand-new marketing tech opportunities out there. I can’t wait to company called isocket. share those opportunities with you as Times were tough at the beginning… we were your newest Advisory Board member. rejected by VC funds close to 100 times. But Very best, that changed quickly after securing capital from some of the world’s most prominent investors, like Peter Thiel, Tim Draper, Jeff Clavier, and David Blumberg. David Weisburd
4 DIGGING DEEPER Bright Futures for EdTech and Its Students
We’ve reached the end of a long – and which helps colleges and universities offer unprecedented – school year for millions online degree programs. of students around the world. COVID-19 Of course, things are a little more volatile in forced more than 1.4 billion students across 2020. During a market downturn, it’s natural the globe to bring their classrooms home… for investors to be wary of pushing capital into forcing dozens of edtech startups to scale companies that may not make it through. And their businesses at lightspeed to meet the in a time where many companies are choosing sudden demand. to conserve cash rather than get pummeled on But even before this rapid change, edtech the trading floor, there may be fewer VC dollars had been steadily gaining momentum for a floating around for the little guys. while. Classroom technology that used to Edtech is an industry that has seen promising comprise simple multimedia content has growth, even this year. A TechCrunch survey expanded dramatically over the last five to 10 of top investors indicated that VCs are now years to provide fuller learning experiences, spending more time in the edtech sector more personalized and interactive services, than ever before, and EdSurge reports that and more effective outcomes. some of the top VC firms have raised large And investors have hopped on the bandwagon education-focused funds within the last year. too. HolonIQ reported that in 2018, global And despite the inhospitable markets, there education VC investments reached $8.2 are still plenty of large-volume deals taking billion – more than eight times the investment place. Let’s take Mathway, for example, a amount recorded in 2014. The same report private company whose website acts as an estimates that the global edtech market will online mathematical assistant. Mathway hit $341 billion by 2025. provides students with a wide range of In the U.S., the 2019 edtech market raised math problems and tools to help increase a record $1.7 billion in funding, with four their understanding functions. The company “megadeals” (deals exceeding $100 million) was acquired by Chegg (NYSE:CHGG) on going to Guild Education, BetterUp, Coursera, June 4, 2020, for $115 million. and Andela, according to a report by EdSurge. Technology will continue to play a role in The U.S. is also home to the fourth most- education long after the COVID-19 crisis funded edtech company in the world, 2U, subsides, and its evolution will coincide
5 with massive growth in dozens of industries. download speeds and seamless connection In fact, most believe that edtech is a for even more devices at once. complementary industry to sectors like In the edtech space, increased speeds will cybersecurity and big data management – improve student and faculty experiences both both of which will be essential to keeping remotely and in the classroom. 5G will support emerging edtech secure as it continues a blended classroom environment of in-person to expand. and innovative web-based approaches to Cybersecurity, for example, will need to learning that are already gaining popularity. become a priority for educational institutions as Alongside cybersecurity and data they rely more heavily on online and software- management, edtech’s growth will also based technology. Since 2016, there have been complement multi-billion dollar industries nearly 800 cyberattacks on K-12 institutions. like e-commerce and Software as a Service It’s reasonable to assume that security threats (SaaS), all of which will require new will only increase as edtech expands – which technology and experts trained to work is exactly why cybersecurity tech will need within an increasingly digital economy. to grow to keep up. Luckily, cybersecurity Simply put, edtech is growing rapidly, spurring is a global industry that’s already growing innovation in dozens of critical industries. If rapidly, valued at $104 billion in 2017 current market projections are any indication, and projected to hit $259 billion by 2025, we’ll be seeing a whole lot more innovation according to Allied Market Research. coming out of the edtech world – whether 5G tech and big data will work alongside organically or accelerated by the post- education to improve student outcomes and COVID-19 landscape. That could mean big personalize curricula for students around the things for some of our portfolio companies, world. EdTech Magazine reports that 5G will like Caribu, Digital Dream Labs, and Everydae – provide data speeds 100 times faster than so we’ll be keeping an eye out for some major our current data systems – allowing for faster movement in this space very soon. +
350B 34 B 300B
250B 25 B
200B 22 4B