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


									     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

 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
                            Angel Organizations Fill Capital Gap
     Stage              Pre-Seed     Seed/Start-                            Early          Later

    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

                                                                              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









         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
          Total US Angel Population 2007:
                         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

                                   Mostly later stage

                                      3,912 deals
                 $26.0 Bn

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

              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
    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

                      Investment Preferences: 2007 - 2008
 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

            Retail/ Distribution


                                   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
   Total European Angel Population 2007:
            €4.0 Bn

          ~23,000 deals        Mostly later stage

                                  5,920 deals

                                   €12.1 Bn
                                                        3,160 Seed
               Mostly                                     & Early

          seed & early stage                           Stage Deals

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

                                   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
                                                                            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
                                                 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

                                                          Angel                                Space
                                       Space                                                   Angel
                 Space       Angel

     Angel                                                                             Space

         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
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

                                                           UAVs                             Satellite
                                                                             Asian           & UAV
                                                  Air                                     Applications
                                         Sensors Taxis/                     Aviation
                                            &                                                Imaging
                              Sats               VLJs                                       Navigation
                                 Space Technologies                          SATMS        Asset Tracking

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

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

    “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

                                                                 Venture Capital
       Angel Groups
      S&T Agencies                                                Corporate M&A
                                                                & Venturing Groups
       Space Prize
                                                                     Private Equity
      State Space
     & Equity Funds
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
      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
                                           Business models: dual-use applications
                                            (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

+1 (703) 282-4513

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