TECH COAST ANGELS 1TECH COAST ANGELS MONEY OPTIONSConsiderations for START UPSJohn BraschAssociate Vice Chancellor Office of Technology DevelopmentUniversity of Nebraska -LincolnPresident of Nebraska Angels, Inc.TECH COAST ANGELS 3 OPTIONS•FFF•Angels Investors•Venture CapitalTECH COAST ANGELS 4 FFFTECH COAST ANGELS 5 What are Angel investorsTraditionally 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 confidentMembers of Angel networks gain confidence from the shared expertise of other Angels.TECH COAST ANGELS 6 6 Things You Need to Know About Angel Investing1. They expect to 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 opportunity1. The team is critical to success2. Candor is essential 1. Problems are normal2. Hiding the ball is fatal5. They often provide management assistance with their money.1. Coachable venture leadership is essential2. Angels are often players on a board of advisors6. Too many FFF investors can be a turn-offTECH COAST ANGELS 7 The Nebraska AngelsFounded in August 2006 as an investor network with a Nebraska development agendaNow has 31 accredited investor members and is growingMembers are from Lincoln, Omaha and KearneyMembership 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 LincolnPrefers rapid growth companies vs. life style companiesHas screened 7 deals at its meetingsHas participated in the funding of one deal out of UNL-UNMCReceives deal funding proposals on its website www.nebraskaangels.orgMembers review deal material, dialog, exchange information and expertise on a members only website. Investments are made individually at the discretion of individual investors.TECH COAST ANGELS 8 Proposed Legislation􀂙Will give angel 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 NebraskaTECH COAST ANGELS 9 Venture CapitalAre funds with a lot of money…. Typically exceeding $100MVC companies and private equity will invest in NebraskaSeek a portfolio of companies that:Need at least $5M, sometimes $50M or moreHave reduced the risk of failureNeed a big cash infusion to grow to the next levelWill produce a large return on investmentCan justify the time of a portfolio manager