Tech Coast Angels
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TECH COAST ANGELS 1 MONEY OPTIONS TECH COAST ANGELS Considerations for START UPS John Brasch Associate Vice Chancellor Office of Technology Development University of Nebraska - Lincoln President of Nebraska Angels, Inc. OPTIONS TECH COAST ANGELS • FFF • Angels Investors • Venture Capital 3 FFF TECH COAST ANGELS 4 What are Angel investors TECH COAST ANGELS Traditionally angel investors are wealthy individuals willing to invest in very early stage businesses before venture capital or banks. Angel investors act as individuals who make investments quietly, or in a group… for example in an angel fund or as part of an angel network. Most wealthy individuals are not skilled angel investors. That causes most individuals to avoid deal discussions or simply to be reluctant without saying why. When are involved they prefer to remain anonymous. Managers of Angel funds are more skilled and more confident Members of Angel networks gain confidence from the shared expertise of other Angels. 5 6 Things You Need to Know About Angel Investing 1. They expectTECH COAST to ANGELS write off 5 of 10 investments; hope for a big win on one in 10. Several deals will survive as the living dead. 2. They will insist on an exit strategy in 3 to 5 years. 3. They are looking for a 20X return on investment at exit. 4. They invest in people and the opportunity 1. The team is critical to success 2. Candor is essential 1. Problems are normal 2. Hiding the ball is fatal 5. They often provide management assistance with their money. 1. Coachable venture leadership is essential 2. Angels are often players on a board of advisors 6. Too many FFF investors can be a turn-off 6 The Nebraska Angels Founded TECHin August COAST ANGELS 2006 as an investor network with a Nebraska development agenda Now has 31 accredited investor members and is growing Members are from Lincoln, Omaha and Kearney Membership dues are $1500/ year. Members agree to a minimum of 2 x $25K units invested in the deal flow over a 2 year period. Meets monthly in Lincoln Prefers rapid growth companies vs. life style companies Has screened 7 deals at its meetings Has participated in the funding of one deal out of UNL-UNMC Receives deal funding proposals on its website www.nebraskaangels.org Members review deal material, dialog, exchange information and expertise on a members only website. Investments are made individually at the discretion of individual investors. 7 Proposed Legislation Will giveTECH COAST angel ANGELS investors a 25% tax credit on investments of as much as $500,000 in start up companies. Small business owners seek the break believing that it will spur investment when firms need it most. Some observers are concerned that the tax break could lead to reckless investing Still much to do in Congress There are no proposals in Nebraska 8 Venture Capital Are fundsTECH COAST with ANGELS a lot of money…. Typically exceeding $100M VC companies and private equity will invest in Nebraska Seek a portfolio of companies that: Need at least $5M, sometimes $50M or more Have reduced the risk of failure Need a big cash infusion to grow to the next level Will produce a large return on investment Can justify the time of a portfolio manager 9.