An Introduction to Angel Investing

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An Introduction to Angel Investing Dr. Tom McKaskill An Introduction to Angel Investing A GUIDE TO INVESTING IN EARLY STAGE ENTREPRENEURIAL VENTURES An Introduction to angel investing Angels invest to have fun, for the challenge, to get involved in doing deals and to give back but they only invest where they see a high potential return on their money. •••• Angels invest where they see passion, commitment and outstanding people. •••• The Angels bring funds, wisdom, mentoring and strategic input to the venture. •••• The investment evaluation takes a holistic view of the business. Every facet of the business model is important. It is not sufficient to just have a great product or service. •••• Angels look for venture potential and rarely invest where they can’t add value beyond their money. •••• Angels are active investors working alongside the entrepreneur and the management team to make the venture successful. •••• While luck always plays a part in any success story, a comprehensive and systematic evaluation by the Angel of the investment proposal will greatly improve the probability of success. The author hereby gives permission for any recipient of this publication to reproduce, store in a retrieval system, transmit in any form or distribute by any means for personal use of any recipient. This publication may not be sold or resold for any fee, price or charge without the permission of the copyright owner. ii An Introduction to angel investing “Amongst the spectacular successes, the Angel investing community is littered with corpses of those that have fallen victim to some very basic and preventable mistakes. This book provides the essential basic groundwork for anyone contemplating investing in the exciting world of Angel investing.” – John Mactaggart, Chairman Australian Association of Angel Investors “Tom newest book is another in his impressive list of publications for angel investors and entrepreneurs. He summarizes what it means to be an angel, how to get started and how to succeed. I recommend it to anyone who wants to learn more about angel investing.” – Basil Peters, Angel Investor, Fund Manager for Fundamental TechnologiesII author of ‘Early Exits – Exit Strategies for Entrepreneurs and Angel Investors (But Maybe Not Venture Capitalists)’ “Anyone considering Angel investment should read this book. Tom makes it clear what he sees as the role for Angel investors in the early-stage ecosystem and offers a pragmatic process which Angels can use to source deals, evaluate, negotiate and manage their investments through to a healthy exit.” – Jordan Green, Founder/Chairman Melbourne Angels, Co-Founder/Deputy Chairman Australian Association of Angel Investors Limited “An Introduction to Angel Investing by Tom McKaskill is a must read for any successful entrepreneur wishing to stay actively involved with early stage ventures. Tom provides a solid foundation from which to understand the process of Angel Investing. He clearly shows how an investor can make a positive difference to the success of an emerging business though an active mentoring and coaching role while at the same time achieving a good return from their investment portfolio. “ – Andrew Loch, Chair Gold Coast Angels, Angel Investor & CEO of the Gold Coast Innovation Centre iii An Introduction to angel investing “Tom’s latest book on Angel investing provides a thorough overview of the topic with some valuable personal stories. I tested the Angel investing Indices on a business that is currently looking for Angel capital. The Founding Board found it to be an invaluable tool for bringing together the different perspectives sitting around the boardroom.” – Dean Prebble, Entrepreneur and former Director, New Zealand Centre for Entrepreneurship, Unitec New Zealand “Having been involved in reasonably large growth business, government boards and a university business school, I am always on the lookout for practical, easy to read and well presented publications that focus on the direct issues that I need to comprehend. Tom McKasill’s book on Angel investing is a must read for both potential Angels, VC’s and those that are interested in securing an Angel, because it details a step by step approach to understanding the mindsets of the key stakeholders in the field and the basic requirements that need to be considered in the process of Angel investing. I found the book delivered a refreshingly practical approach to the key issues and kept me focusing on reading further on, without being distracted by an inordinate volume of footnotes. The book sits as a reference book for me in my work and I suggest it should for most accountants, lawyers and those in the financial industry involved in VC and Angel investing. The material is comprehensive and well presented in sufficient detail to enable the VC seekers and Angels to have a full understanding of the matters to be considered in the pre, during and post relationship.” – Alan Wein LL.B, Entrepreneur, Mediator & Business Commentator “This book is a must read for anyone contemplating venturing out into the exciting world of Angel investing. The world of Angels has many success stories and is also littered with spectacular failures. The book points you to the keys to success and the homework that is required to be done before you actually commit the money.” – Baboo Jeena, Executive Chairman, Jeena Partners, Financial Services iv An Introduction to angel investing “This book is a must read for any Angel looking to venture into the lucrative ‘Venture Capital Industry’.” – Ivan Kaye, CEO BSI “This could be considered as ‘the’ book on Angel investing. For both the Angel investor and entrepreneur looking for an Angel, this book gives an up-to-date commentary on the state of Angel and other new venture funding.” – Tony Falkenstein, Entrepreneur “Angel investing can be exciting, challenging, lucrative – and daunting. Dr. McKaskill’s book provides the ideal introduction to the ins and outs of private venture investment for entrepreneurs and investors. Packed full of practical hints, it’s the one book that provides a solid grounding on how to make your investment work. Plenty is known about how venture capital investors work, but not enough information is around to help start-up business Angels who want to invest their own funds in entrepreneurial projects. At last we have one book that gives the reader almost all the answers they need. If you’re planning to enter the Angel investment arena, don’t start until you’ve read this book.” – Dr Michael Schaper, Former Professor of Entrepreneurship “Easy to read, practical, hands-on, full of useful information and data, and a good resource for both Angel investors and those who may be seeking funds from them. Particularly valuable is the included Awareness and Alignment Index – an easy to use tool for assessing new ventures, suitable to both investors and investee companies and entrepreneurs. Highly recommended.” – Adolph M. Hanich, Chairman, Telematics Fund and the first Chairman of the Global Entrepreneurship Research Association v An Introduction to angel investing Dr. Tom McKaskill lobal serial entrepreneur, consultant, educator and Gauthor, Dr. McKaskill has established a reputation for providing insights into how entrepreneurs start, develop and harvest their ventures. Acknowledged as the world’s leading authority on exit strategies for high growth enterprises, Dr. McKaskill provides both real world experience with a professional educator’s talent for explaining complex management problems that confront entrepreneurs. His talent for teaching executives and his pragmatic approach to management education has gained him a reputation as a popular speaker at conferences, workshops and seminars. His approaches to building sustainable, profitable ventures and to selling businesses at a significant premium, has gained him considerable respect within the entrepreneurial community. Upon completing his doctorate at London Business School, Dr. McKaskill worked as a management consultant, later co-founding Pioneer Computer Systems in Northampton, UK. After being its President for 13 years, it was sold to Ross Systems Inc. During his tenure at Pioneer, the company grew from 3 to 160 people with offices in England, New Zealand and USA, raised venture capital, undertook two acquisitions and acquired over 2,000 customers. Following the sale of Pioneer to Ross Systems, Dr. McKaskill stayed with Ross for three years and then left to form another company, Distinction Software Inc. In 1997 Atlanta based Distinction raised $US 2 million in venture capital and after five years, with a staff of 30, a subsidiary in New Zealand and distributors in five countries, was sold to Peoplesoft Inc. In 1994 Dr. McKaskill started a consulting business in Kansas which was successfully sold in the following year. After a year as visiting Professor of International Business at Georgia State University, Dr. McKaskill was appointed Professor of Entrepreneurship at the Australian Graduate School of Entrepreneurship (AGSE) in June 2001. Professor McKaskill was the Academic Director of the Master of Entrepreneurship and Innovation program at AGSE for the following 5 years. In 2006 Dr. McKaskill was vi An Introduction to angel investing appointed the Richard Pratt Chair in Entrepreneurship at AGSE. Dr. McKaskill retired from Swinburne University in February 2008. Dr. McKaskill is the author of eight books for entrepreneurs covering such topics as new venture growth, raising venture capital, selling a business, acquisitions strategy and angel investing. He conducts
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