Burton Lee - Angel Investing Globally - UCBerkeley Haas EMBA Lecture - 06.27.08 - Full Presentation by na3nsha1

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									     Haas School of Business
      University of California, Berkeley
               EMBA Progam




The Global Angel Investing Sector
           Status and Prospects

            Dr. Burton H. Lee PhD MBA
              Principal and Co-founder
                     June 27, 2008
                                              Space Angels Network
Overview



 Angel Investing in the Global PE Marketplace
  USA, Europe, India


 What are Angel Investor Groups?

 Space Angels Network
 Rationale, Market View and Investment Focus, Strategy
                                               Space Angels Network
 Goals for this Lecture


 Tutorial on angel investor group business models


 Brief overview of the growing importance and variety of angel
   investor groups in the US and internationally


 In-depth look at a new Sector-focused, National angel
   investor group:
     Space Angels Network LLC
                  Space Angels Network




Angel Investor Groups
       Tutorial
                            Angel Organizations Fill Capital Gap
     Stage              Pre-Seed     Seed/Start-                            Early          Later
                                        Up


    Source              Founders,
                         Friends      Individual   Funding Gap between
                           and          Angels          $300,000 and           Venture Funds
                         Family                    $2,000,000/$5,000,000
                          (FFF)                     (depending on region)
 Investment             $25,000 to   $100,000 to                            $2,000,000/$5,000,000
                        $100,000      $300,000                                     and up




Source: Angel Capital Association


                                                                                                   5
                                                                              Space Angels Network
  Angel Investor Group Business Models

 For-Profit vs Non-Profit
       USA: for-profit models dominate
       Europe: non-profit models most frequent, likely to shift to for-profit in future
       Russia: non-profit models most frequent
       India, China, Brazil and Other Countries: data not available
 Revenue Models
       Angel investor membership fees
       Entrepreneur application fees
       Corporate sponsorships
       Event sponsorships and fees
       National, regional and/or local government support
       Equity participation or Entrepreneur/Investor success fees
 Cost Models – Major expense categories
     Marketing to entrepreneurs and angel investors
     Staff (usually part-time)
     Operating/IT expenses
                                                                       Space Angels Network
  Angel Investor Group Models

 Local / Regional Focus
     Silicon Valley/NoCal: ~20 angel groups
     Europe: promoted by EU and local governments for local economic development
     Investors’ need to remain engaged with nearby ventures
 Broad Investment Preferences are the norm
     Most angel groups invest across 3-5 domains: software, IT, semiconductor, cleantech, etc.
     Three sector-focused groups: Life Sciences Angels, Film Angels, Space Angels
 Rapid growth in new angel groups
     Silicon Valley/NoCal: 5-10 new groups this year expected
 Major growth potential
     Vast majority of angel investors do not belong to an angel investor group
     New business opportunity for entrepreneurs: start a new angel group!
 Confluence of social networks and investing
     Groups forming around many different themes: university alumni, sector-specific interests,
      women investors, regional economic development, personal networks
  Investors Per Angel Group
 40

 35

 30

 25

 20

 15

 10

  5

  0

         2 to 10         11 to 25    26 to 50   51 to 75   76 to 100      101+

                                                                       Average = 55
                                                                       Median = 41
Source: 2008 ACA Confidence Survey                                               8
                    Space Angels Network




Angel Investing in the USA
          2007
          Total US Angel Population 2007:
                                   258,200
                         Investment Preferences:
                                                                   Industrial &
 Sector       Software     Healthcare   Biotech   Retail   Media     Energy
 Deals           27%         19%         12%       6%       5%         8%




                         $26.0 Bn in 57,100 Deals

Source: UNH CVR (2007)
        Angel and VC Markets Are Large, Complementary
Late




                                   Mostly later stage

                                      3,912 deals
                 $26.0 Bn
Early




                                       $30.5 Bn
                57,100 deals
                                                        1,400 Seed
                   Mostly                                 & Early
Seed




              seed & early stage                       Stage Deals

                Angel Investment      VC Investment
                     (2007)              (2007)
                                              Sources: UNH CVR, NVCA
ACA Membership: Networks and Funds




99   Angel Networks
12   Networks w/Sidecar Funds
17   Angel Funds
                                Full Members                      123
                                Provisional Members                12
                                Investors in Operating Groups   ~6,000
                                                                    12
    Profile of A Typical US Angel Investor
•   Years investing                                9
•   Number of investments                        10
•   Total exits/ closures                          2
•   Years as entrepreneur                        14.5
•   Number ventures founded                        2.7
•   Age                                           57
•   Percent of wealth in angel investing         10%
•   Education                              Masters degree

                                                            13
                      Investment Preferences: 2007 - 2008
               Biotechnology
 Business Products/ Services

     Computers & Peripherals
Consumer Products/ Services

  Electronics/ Instrumentation                                            ~6,000 Angel Investors
            Financial Services
          Healthcare Services
             Industrial/ Energy

                   IT Services

       Media & Entertainment
 Medical Devices & Equipment
     Networking & Equipment

                         Other
            Retail/ Distribution
             Semiconductors

                     Software
         Telecommunications


                                   0        10   20   30   40   50   60        70       80         90
                                                                                    Percent of Groups
Source: 2008 ACA Angel Group Confidence Survey                                                14
                   Space Angels Network




Angel Investing in Europe
          2007
   Total European Angel Population 2007:
                         75,000
            €4.0 Bn
Late




          ~23,000 deals        Mostly later stage

                                  5,920 deals
Early




                                   €12.1 Bn
                                                        3,160 Seed
               Mostly                                     & Early
Seed




          seed & early stage                           Stage Deals

           Angel Investment       VC Investment
                (2007)               (2007)
                                         Sources: EBAN, EVCA,
                                         Innovarium Ventures estimates
European Business Angel Network (EBAN)




                                     3
                                   Space Angels Network

European Business Angels
Network (EBAN)


• Location of members
• July 2007




• ~300 angel networks identified
• June 2008
                                          Sources: EBAN
                                                            Space Angels Network
Angel Investor Groups in Europe, by Country/Region - 2006


         Country/Region          # Angel Groups         # Angel Investors
     France                            34                    ~2100
     Italy                             11                     260
     Portugal                          6                      200
     Catalonia                         8                      401
     Sweden                            21                     600
     Netherlands                       4                     500+
     United Kingdom                    35                     4620
     Germany                           38                    ~1000


                                                                     Sources: EBAN
             EBAN Member Networks
 Investment Preferences - 2006




Other sectors: environment, films, games, tourism, food, electronics, culture and security


                                                                                      Sources: EBAN
                                                    Space Angels Network
 Angel Investor Group Trends in Europe - 2008

Major Trends
   Cross border investing is growing
   Sector-specific networks are appearing
   Syndication and co investment
   Collaboration with seed funds and VCs
   International collaboration
   Networks in mature markets receiving less support from regional or
    national authorities, and an increased share of budget from private
    sector sources
   Support from European funds is growing as new networks are being
    created in regions of Europe lagging behind the EU 15, i.e. Southern
    and Eastern Europe
                                                           Sources: EBAN
                                                Space Angels Network
 Angel Investor Group Trends in Europe - 2008


 Major Constraints
  27 different legal and fiscal environments
  Very fragmented and diverse European angel market
  Stigma of failure and lower culture of risk than the USA
  Up-front fiscal incentives available only in France & the UK
  UK enterprise investment scheme is the most
   advantageous tax break scheme but only applies to
   investments in UK companies


                                                       Sources: EBAN
                   Space Angels Network




Angel Investing in India
         2007
                                                                            Space Angels Network
 Angel Investor Group Trends in India - 2008
 Little data available – highly anecdotal
 “Extremely nascent” - Angel investing is new phenomenon in India
    “Both entrepreneurs and investors are trying to figure it out”
    Initial funding in India comes from four primary sources:
           Family
           Individual business networks and connections
           Two angel groups (see below)
           2-3 Seed stage funds
               DFJ-India, Canaan Partners-India and other funds

 Angel Investor Networks
    Mumbai Angels
    India Angels, Delhi (aka “Band of Angels”, founded 2005)
         Members: VC partners, corporate CEOs
         Areas of interest:
               IT products & services, Retail, Specialized BPO, Healthcare, Media and Entertainment
               Focus is on seed stage investments, typically in the Rs. 25 lacs to Rs. 2 crore range
                                                                                    Sources: DFJ India
                                        Space Angels Network




a National network of accredited investors
               focused on
  seed- & early-stage aerospace-related
        investment opportunities
           www.SpaceAngelsNetwork.com
                                                 Space Angels Network
US Aerospace Innovation and Finance Pipeline

               Chronic Structural Gap
 in Seed-stage Funding for Space-related Companies
          Angel Investors
           And Networks




    FFF      Seed           Early       Growth     Later Stage


                      Venture Capital


Angel Investors play a critical and growing role in the
         AeroSpace Innovation Ecosystem
                                                                  Space Angels Network
   Structure of Angel Finance in US Commercial Space - 2007



  $26.0 Bn                          258,200
57,100 deals                  Individual Investors



  $24.1 Bn       Independent Angels        ACA Angel Networks                     $1.9 Bn
~56,100 deals     (252,200 Investors)         (6,000 Investors)                 ~1,000 deals



  ~$10 Mn                 ~100 Active Space Angels                                 Order of
  ~10 deals         ~ 100 Entrepreneurial Space Companies                          Magnitude


                                                Source: UNH CVR/ACA/Innovarium Ventures estimates - 2008
                                                                           Space Angels Network
     Virtual Solution – National Network
                                                 An online platform and Deal-making EcoSystem

                                                          Space
                                                          Angel                                Space
                                       Space                                                   Angel
                                       Angel
                             Space
                 Space       Angel
                 Angel




     Space
     Angel                                                                             Space
                                                                                       Angel


                                                                                     Space
         Space                                                                       Angel
         Angel
                                        Space
                                                                             Space
                                       Venture
                                                                             Angel
                     Space
                     Angel
                                                                  Space
                                                                  Angel
 Collaborate on due diligence and deal negotiations.
 Find deal flow which is unavailable thru traditional angel channels.
 Access aerospace industry experts: technology, markets, legal, finance
              Space Angels Network




   Market View
       and
Investment Focus
                                                               Space Angels Network
  Major Market Trends

 Space-Information Technology convergence is primary driver
  Integrated telecommunications and imaging (Iridium, etc)
  Location-based services integrate imaging and telecom with GPS and RFID
  Desktop Google Earth, Microsoft Virtual Earth + migration to mobile platforms
  Commercial weather observation systems to replace government constellations
  Asset tracking and satellite-RFID applications coming to market
  Environmental sensing & climate change monitoring (CO2 emissions, C-trading)
 Space-Aviation convergence
  Combined aerial/space imagery (e.g. Google Earth, etc)
  Growing integration of hybrid technologies: aircraft, UAVs, LEO Sats, GEO Sats
 “Light Aviation” growth expected to be strong
 Asian Aviation boom (China, India)
 Space-Air Traffic Management System modernization - IP networks
                                                                                  Space Angels Network
                          Major Aerospace Investment Opportunities: 2008 - 2020
                                                                                    Qualitative Ranking
                                                                                   (Order of Magnitude)
Perceived Investor Risk




                            Space
                           Tourism
                                       Orbital
                                      Services
                                                           UAVs                             Satellite
                                                                             Asian           & UAV
                                                  Air                                     Applications
                                         Sensors Taxis/                     Aviation
                              Small
                                            &                                                Imaging
                              Sats               VLJs                                       Navigation
                                         Avionics
                                                                                             Telecom
                                 Space Technologies                          SATMS        Asset Tracking
                                                                                           Environment


                      $100Mn                $1Bn           $10Bn              $100Bn             $1Tn
                                                          Market Size
                                                                        Space Angels Network
Opportunity: “AeroSpace”


                  The “AeroSpace Innovation Ecosystem” –
                A Broad Spectrum of Investment Opportunities


                      Space-
    “Pure”                            Space           Space-
                      Based                                          Aerospace
    Space                           Components        Related                     Aviation
                       SatNav                                         Robotics
   Satellites                         Avionics         Retail                      Air Taxi
                   Asset Tracking                                     Avionics
   Rockets                            Sensors          Web                          UAV
                    Telemedicine                                      Sensors
   Services                            Lasers           IT                          VLJ
                      Tourism                                         Materials



                         Space-Air Traffic Management System Infrastructure
                                                                  Space Angels Network
  Emerging Future Markets – Environmental Monitoring and Carbon Trading

 Emerging federal, state and global carbon emissions monitoring and
  trading policies and mechanisms will promote development of major
  new markets – and investment opportunities:
    Environmental monitoring
        Aerial-, space- and ground-based systems and sensor networks
    Environmental compliance and certification
        Corporate, government and non-profit facilities
        Residential units
    Regional environmental data collection/fusion, modeling, prediction and measures
        Water, weather, solar irradiance, etc
        Crop yields and famine prevention
        Disaster mitigation and prevention

 Estimated global market size (long-term): > $100 Bn per annum
                                                                 Space Angels Network
  Major Space-related Investor Exits and Events: 2007 - 2008

 Scaled Composites (acquisition by Northrop Grumman)
    Aviation and space platform/composites manufacturer
 AeroAstro (merger with Radyne Corporation)
    Small satellites + telecommunications systems
 XCOR Aerospace (investment by Boston Harbor Angels)
 Payload Systems (acquisition by Aurora Flight Sciences)
    Space payloads + UAV manufacturer
 MicroSat Systems Inc. (acquisition by Sierra Nevada Corporation)
    Small satellites + electronics/sensors/IT/systems integration
 TerreStar (strategic investments by EchoStar, others)
    4G integrated mobile satellite and terrestrial communications network
                                                                 Space Angels Network
Venture Capital and AeroSpace Investing

 Astrolabe Ventures, Palo Alto, CA & Paris, France
  Formerly known as Red Planet Capital, intended to be NASA-sponsored VC fund similar to
   CIA’s In-Q-Tel, shut down by White House
  Aerospace is one investment area of interest
  Raising two funds at present
  Stanford connection thru Peter Banks, General Partner

 Atrium Capital, Palo Alto, CA
  Aerospace and Defense interests

 E-Synergy Ltd, London, UK
  European Special Applications Fund, backed by ESA ( €5 Mn )
  First €15 Mn raised, total fund size of €40 Mn is intended

 “Recent” space-related deals
  ProtoStar and New Enterprise Associates, Silicon Valley
  iOpener and Triangle Ventures, Germany
                 Space Angels Network




Strategy & Execution
                                                           Space Angels Network
 Strategic Relationships – Aimed at Deal Flow and Successful Exits

          Local
                                                                 Venture Capital
       Angel Groups
                                                                     Firms
        Federal
      S&T Agencies                                                Corporate M&A
                                                                & Venturing Groups
       Space Prize
      Organizations
                                                                     Private Equity
      State Space
       Authorities
                                                                      Investment
     & Equity Funds
                                                                        Banks
Research Universities
    & Non-profit                                                     Hedge Funds
  R&D Institutions


     Deal Flow                                                 Funds/Exits
                                                          Space Angels Network
  Deal Flow to Date – May 2008
 Satellite & UAV Applications (DVAS)
                                           Development stage: seed- and early-
      Aprize Satellite
                                            stage—from prototype development to
      GeoOptics
      Space Data Corporation                early revenue
 Cleantech                                Sectors: launch vehicles (space tourism,
      Assured Power                         consumer collectibles), satellite
 Aviation and UAV Platforms & Services     applications, aircraft components,
      EvoLux                                military/security, enterprise software,
      Gotham Studios                        semiconductors, air taxis, unmanned
      JIT Slipstream                        aerial vehicles (UAVs), cable television,
      Linear Air                            audio/video entertainment, retail, energy,
      R3 Scientific                         telecommunications
      WheelTug
                                           Business models: dual-use applications
      Lumedyne
                                            (terrestrial and space markets); aviation &
 Space Tourism
      Rocketplane Global                    space-only (consumer, enterprise,
 Retail/consumer                           government)
      Air & Space TV                       Capital requirements:
      Microgravity Enterprises                   $100,000 to $10 million
      Starport Café                        Domicile: US, Canada, Europe
      UP Aerospace
           Space Angels Network




Key Takeaways
                                                   Space Angels Network
  Outlook for US Angel Investing Climate - 2008


 Space Angels Network first deal in 2008
 Expect to see new angel investors playing a role in space sector
 Continuing momentum in formation of new angel groups
 Angel groups will capture a larger share of investor market
 Mobile social networking will drive continuing integration of
    Internet w/ satellite applications
 Tighter coupling of angel investing with prizes programs
 Growing appreciation of importance of angel finance by US govt.
 Growing US-Europe angel investor connections
                   Space Angels Network




Questions and Discussion
For more information, please contact:

Dr. Burton H. Lee PhD MBA
blee@spaceangelsnetwork.com

+1 (703) 282-4513

								
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