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					A Snapshot Of Status and Trends
            Among
 Formal American Angel Groups
                   October 8, 2007
              Dr. Ian Patrick Sobieski
        Managing Director, Band of Angels
     Vice Chairman, Angel Capital Association
 Band of Angels
• Formed 1994, pioneer angel group, 130 Members today
• High Tech Background Only, ex-CEOs or founders of : Symantec,
  Logitech, National Semiconductor, Intel, Sun, Apple, etc.
   – 60+ Media articles focused on Band; 3 Harvard Business School cases
• Meet monthly at Los Altos Country Club, Silicon Valley
• Track Record
   –   Invested $160M in 220 Startups;
       • 9 IPOs, all listed on Nasdaq
           – Digital Think 40:1
           – Keynote Systems 20:1
       • 40 Positive M&A Exits
           – Sandpiper Networks 30:1
       • 53% IRR since inception!
   –   Average Deal Size: ~$500k
   –   4,000 jobs created
   –   Ranked by PWC in top 10 of top 100 VCs in USA for 20022007
• Pioneered Side Fund Model: $50M side fund with institutional investors
  including 2 major University endowments, TVM, and Siemens.
          Angel Groups Perform Sourcing
          and Screening in a New Way
                       130 pairs of eyes
                                            ~50 deals/month


                  Reviewed by Pre-Screening Committee
                            (~35 members)
                                                             Fund Investment
                                                                Decision

                        10 deals/month
     Reviewed by                                ~1 deal/month
 Screening Committee
    (~6 members)                                        Individual Investment
                                                            Decision but
                                                        Coalition Negotiation;
           3 deals/month                                  Board Assignment



Dinner Meeting                 Follow up Luncheon
(~40 members)                  And ad hoc diligence
                                  (>5 members)
  Growth in North American Angel Organizations
            300

            250

            200

            150

            100

              50

               0
                   1999 2000 2001 2002 2003 2004 2005 2006
Sources: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-06 data)
Summary of ACA Membership – August, 2007
  Full Members                   124
  Provisional Members            11
  Investors in Operating Groups   6,000

  States & Provinces              43
  Affiliate Organizations         17
  International Partners           2
                                                              Average = 44
  Investors Per Group                                         Median = 38
    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+
                                                                         Percent of Groups
Source: ACA Conf survey and membership applications - 116 groups reporting (2006-2007)
Some of the Largest American Angel Groups
  Organization                                Accredited Investors
  TechCoast Angels (Southern California)              280
  North Dallas Investment Group (Dallas)              250
  Alberta Deal Generator (Calgary/Edmonton)           194
  Investors’ Circle (national)                        185
  Ohio TechAngels (Columbus)                          150
  Band of Angels (Silicon Valley)                     130
  ZINO Society (Seattle)                              125
  Pasadena Angels (Pasadena)                          114
  Alliance of Angels (Seattle)                        100
  North Coast Angel Fund (Cleveland)                   99
Members and Affiliates – August, 2007




                                    Full Members
                              Provisional Members
                                        Affiliates
2006 Group Investment Data
                                                  Average     Median
Number of investments                               7.4          5
Total monies invested                            $1.78 mil   $1.06 mil
Dollars invested per round                       $241,528
Dollars invested per angel                        $31,457
Number of new companies                              4

 • 72% co-invested with venture capital firms
 • 29% had distributions to investors
 • Investment up 23% from 2005

Source: 2007 ACA Angel Group Confidence Survey
Average Size Investment Per Round
             < $150,0000



     $150,000 to $250,000



     $250,000 to $500,000



     $500,000 to $750,000



              > $750,000



                            0   5   10   15   20   25   30   35   40   45   Percent of
                                                                            Groups
Source: 2007 ACA Angel Group Confidence Survey
  Investment Preference
              Biotechnology

 Business Products/ Services
    Computers & Peripherals

Consumer Products/ Services
 Electronics/ Instrumentation

           Financial Services
         Healthcare Services

           Industrial/ Energy
                  IT Services
      Media & Entertainment

Medical Devices & Equipment
    Netw orking & Equipment

                        Other
           Retail/ Distribution

            Semiconductors
                     Softw are

        Telecommunications

                                  0   10   20   30   40       50       60        70         80
                                                                            Percent of Groups
 Source: ACA Conf Survey and Membership applications - 86 groups reporting (2006-2007)
  Revenue Sources for Group Operation
Percent of Groups
   80
   70
   60
   50
   40
   30
   20
   10
    0
         Ec Dev     Events       Ents       In-Kind     Angel     Sponsors     Other
                                                        Dues
   Ec dev – Group receives money from state or local government
   In-Kind – Group receives support from “parent” entity
   Other – Half supported by management fees for funds
 Source: ACA Conf survey and membership applications – 105 groups reporting (2006-2007)
Annual Member Fees                                             Average = $1,135
                                                               Median = $1,000
  35

  30

  25

  20

  15

  10

   5

   0
           $0         $100-499     $500-999    $1000-1999   $2000-2999     $3000+


Source: ACA Conf survey and membership applications – 116 groups reporting (2007)
 2007 Prediction:
 How Many New Companies Will You Invest In?
Percent of   60
Groups
             50


             40


             30


             20


             10


             0
                    None     1 to 2      3 to 5    6 to 9   10 or more   Companies
  Source: 2007 ACA Angel Group Confidence Survey
  New Trend: Raise a Side Fund
               No change



            Industry prefs



         Change structure



           Raise new fund



            Raise sidecar



       Grow # of investors



                             0   10      20      30   40   50   Percent of
                                                                Groups
Source: 2007 ACA Angel Group Confidence Survey
Why? Sustainibility…
•   External Threats
     – Competition from Small VCs, individual angels, and other angel groups
•   Internal Threats
     –   Members become inactive, members quit
     –   Leader becomes tired
     –   Incentives are misaligned
     –   No Liquidity to Members
•   Answer to all these is to provide better services
     –   Web site, reputation, deal screening
     –   Better terms through pooled negotiation
     –   Collective due diligence
     –   Member Education
     –   Professional manager help
     –   Networking & social events
     –   Formalize relationship with VCs
     –   Institutional Support (memory, data)

•   This is a lot of work! How to pay for it?
Potential Sources of Cash

 •   Percentage of transactions
 •   Charge Companies to submit and/or present
 •   Membership Dues
 •   Sponsorship
 •   Management Fees on Fund
Potential Sources of Cash Continued…
  • Percentage of transactions (3->5%)
      –Pros: $5M investment = $250,000
      –Cons: probably illegal
  • Charge Companies to submit and/or present
      – Filing fees ($50$250), Presentation Fees
      ($100$3000)
      – Pro: 36 deals/year = $108,000/year
      – Cons: Selection Bias
  • Membership Dues TAM: $150,000
  • Sponsorship TAM: $150,000
  • Total TAM of all these approaches: $658,000
Potential Sources of Cash Continued…
•   Management Fee on $20M Fund: $500,000
     –Provides 10 year sustainable cash flow
     –Use of fees can provide useful services to members
     –Carried interest extra source of value
     –Aligns Manager and Member interests
     –Band of Angels great case study

•Manager led Side Fund
   –Manger raises funds from others invests alongside
   angels, and subsidizes group
•Manager led Pooled Fund Network
   –Members contribute to fund and deploy capital by
   majority vote
ACA Membership: Networks and Funds




99   Angel Networks
12   Networks w/Sidecar Funds
17   Angel Funds

                                                                  May 2007
                                Source: Membership Applications, 2006-2007
 Personal Predictions
• A “standard” business model will develop for angel
  groups
• Some mix of fee, fund, and sponsor
• Rise of a class of managers
• Some kind of economic sharing across entire group
• Hybrid angel groups that have many properties of angel
  groups as we know them but the stability, longevity,
  and upside economics of VC Funds
• When a model has been developed and is common and
  “standard”; when there is third party data to report IRR
  performance of groups; Angel Investing will be an
  Industry
• But then the last question: Will this still be fun? Do
  angels want to let this happen?
Potential Angels in the United States

       U.S.
   Millionaires      3 study
                  Estimates of Center for Venture
                    Informal      Research -
    4,200,000
                   Investors     Active Angels
                                     (est.)         Investors
                                                     in angel
                  1,000,000
                                                      groups
                                    225,000
                                                     10,000
Angel Capital Association
  • Annual Summit – professional development
      – May 7-9, 2008 in San Diego, CA
  •   Regional Meetings (co-investment, networking)
  •   2007 Angel Group Confidence Report (semi-annual)
  •   SEC accreditation proposal feedback
  •   Weekly PR, speaking engagements
  •   Discounts on Power of Angel Investing programs
  •   Branding, membership directory, recruit recommendations
  •   Members’ Only Web site
  •   www.angelcapitalassociation.org
Need More Information?
    Ian Patrick Sobieski, Ph.D.
    Managing Director, Band of Angels
    Vice Chairman, Angel Capital Association
    535 Middlefield Rd., Suite 190
    Menlo Park, CA 94025
    650.321.2221

    ian@bandangels.com
    www.bandangels.com

				
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