the changing nature of angel investing in the bay area (and the syndication opportunities it...

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The Changing Nature of Angel Investing in the Bay Area

(And the syndication opportunities it provides)

Angel Capital SummitMarch 21, 2012

Denver

Angel Investing in the Bay Area

• Bad Old Days In the last quarter of the last century Between 20 and 30 angel groups Ranged from moderately active to social gatherings Met once a month, some charged (a lot) Individuals invested a small amount, usually less than $20k

• In the last 18 months the ecosystem has evolved significantly We will focus on these changes, and the opportunities they

pose

Most Active Bay Area Angel Groups*

Firm $ Invested

# Deals

$ Range Syndicate ?

K-4 (4 chapters) $33M 31 $250k - $3M No

Investors’ Circle $9M NA Max of $5M No?Band of Angels $6.5M 19 $500k Yes?Angels’ Forum $5M 5 $200k - $1M No?Life Science Angels $4.5M 7 $100k - $1M Yes?Golden Gate Angels $2.5M NR $50k - $1M ?

* Data from 2007

New Players in the last 18 MonthsProliferation of New Players

• On-line Angel.co (Angel List) Caplinked Both are loose

communities of accredited investors and entrepreneurs

• Super Angels / Micro VCs Mainly ex-entrepreneurs Who got bought out Invest as individual angels

& in small groups

• New models Y-Combinator BAE Workshop

• Large VC firms Set up small funds to

invest in seed stage, even pre-revenue

What Drove the Change?

• eBay bought PayPal for $1.5B Created excess executives with cash to burn Reid Hoffman started LinkedIn Elon Musk started Tesla and Space X Peter Thiel started investing in start-ups

• Google had an IPO A lot of early employees entered the 1% New angel groups sprouted XG Ventures, XG Silicon Valley, XG North Bay, etc.

• Other IPOs and acquisitions added to the mix

• Suddenly a lot of new faces entered the arena, and some with new business models, too

New Entrants Filled a Void• Most angel groups became more conservative

At least with their tech investments Looked for market validation, or traction Started to look like VCs, but with less money

• Few if any remained true seed-stage investors Created classic Catch 22 for entrepreneurs Can’t get money without customers – Can’t get customers

without money

• Micro VCs & Super Angels filled that void Both invest in pre-revenue companies Form a viable bridge between F&F and Series A

Syndication Opportunities Vary Greatly• Traditional angel groups have limited syndication

opportunities Keiretsu Forum syndicates only with other chapters Most others rarely syndicate outside their organization Of course they may bring in a personal friend Not fertile ground

New Groups Offer Varied Opportunities• On-line

Unlimited ability to syndicate – in principle Most deals gravitate to a few individuals Little screening of start-ups or investors that register I know there must be some good companies there, but I’ve

never encountered one The couple of companies I’ve suggested register, all highly

fundable, went nowhere.

• Big-Dog VC firms New small funds Little data on their syndication habits Less likely to syndicate than with Series A or B – can do the

whole thing themselves

Various Opportunities• Super Angels

Vary in degree of diligence performed More “smart money” than most angel groups Wide open to syndication

Willing for you to invest in their companies Open to investing in your companies

• Micro-VCs Similar in most respects to Super Angels Often from same background They invest other people’s money in addition to their own Similarly open to syndication

Super Angels & Micro VCs• I have found so far 157

• But with more big name IPOs in the offing, likely to be new surges of new angels

• Looks like a growing presence

• Looks like has staying power

• In short, with this group, the syndication opportunities look strong and stable

Super Angels / Micro VCs – a Snap Shot

Company Contact Title E-Mail Focus RangeCamp Ventures

Jerome Camp

Founder jerry@campventures.com

Agnostic $500k - $1M

Cardinal Ventures

Christian Borcher

Co-Founder

christian@cardinalvc.com

Wireless, internet SW

$500k - $3M

Catamount Patrick Fitzgerald

Partner patrick@catamountventures.com

Information Technology

??

Crosslink Capital

Jim Feuille General Partner

jmpf@crosslinkcapital.com

Energy, IT ??

Defta George Hara

Chair-man

ghara@deftapartners.com

Information Tech

$500k - $3M

Felicis Ventures

Aydin Senkut

Founder aydin@felicisvp.com Consumer Internet

$25k - $100k

Floodgate Mike Maples

Founder mike@floodgate.com ? $200k - $500k

Founders Fund

Ken Howery

Managing Partner

khowery@thefoundersfund.com

Internet $500k - $1M

New Business Models• Screen companies to those that fit the model

• Invest same amount in all companies chosen

• Y-Combinator Restricted, in principle, to start-ups who know what a

Y-combinator does Investments only by the founders and Peter Thiel No opportunity to syndicate that I can see Have produced some real winners

Xobni Dropbox A few others

A combination of micro-VC and super angel

New Business Model• Bay Area Entrepreneurs Workshop

Agnostic regarding technical area and stage Screen companies for ‘fundability’ in two ways

Executive Summaries 30-minute investor pitch w/ 30-minute Q&A

Focused on getting participants funded at VC level Use micro VCs and super angels to let participants get enough

traction to become attractive to VCs Invest same amount in each participant – ensuring our

investors are invested in winners Open to investors from anywhere

• Partnered for success Business Catapult Start-up Weekly LinkSV

Bay Area Entrepreneurs Workshop• Eight three-hour sessions, weekly

Lead attendees in creating all plans and documents needed to secure VC funding

Sessions led by domain experts in go-to-market, marketing, finance, etc. Plus VCs and angels

• We invest $10k - $20k in each company that qualifies for the workshop. We know our investors are invested in the winners

• Post-workshop we match graduates to VCs who invest in their space, at their stage, and in the amount they are looking for

• Based on past results, we expect to get ~ 40% of our attendees funded

• Consequently our investors can expect an increase in value of ~ 5X in a time of 9 - 24 months

Thank You

Ralph PattersonCEOBAE Workshop & Investmentswww.baeworkshop.com925-200-1895