Comprehensive Guide on Angel Investors by Pat Loftus

Learn all about angel investors from expert Pat Loftus, including where to find them, what companies they invest in, and tips for securing angel investment. Discover the differences between angel investors and venture capitalists, the process of angel investing, and available entrepreneurial resources. Explore angel investing basics and valuable resources for entrepreneurs provided by Tamiami Angels and the Angel Capital Association.

• Angel Investors
• Venture Capital
• Entrepreneurship
• Funding Options
• Investment

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1. Everything You Need to Know About Angel Investors Pat Loftus Angel Investor & SCORE Volunteer 1 Funded in part through a Cooperative Agreement with the U.S. Small Business Administration.

2. Todays Presenter is Pat Loftus Investor and Investment Committee Member with New World Angels SCORE Foundation Board Chair, SCORE Association Board Director, & SCORE mentor More than 35 years global nuclear energy industry technical & business leadershipexperience including strategy, business development, product management and innovation combined with 6 years in a small businessenvironment Advisor to early-stage companies BS/MS Nuclear Engineering, MBA patricia.loftus@scorevolunteer.org, Philanthropic and non-profit focus on entrepreneurship and innovation empowerment Connect with me on LinkedIn 2

3. Agenda What is an angel investor and where do I find them? What kinds of companies do angels invest in and how big is the check? How do I know if my business is right for an angel investment? What are some know before you go tips? What are typical questions an angel investor may ask before investing? What process can I expect if I apply to an angel investor for funding? What resources are available in the entrepreneurial ecosystem? What other funding options are available? 3

4. Defining Angel and Venture Capital Angel Investors Venture Capitalists Invest 3rdparty funds for long-term return greater than 20% Invest in later stage (rapid growth and rapidly gaining market share) Source of Funds High net worth individual(s) invest own funds for long-term return greater than 20% Invest in early stage (last pre- revenue stage of development, proof-of-concept,and early market entry) $25K - $1M+ Stage Typical Check Size Greater than $5M Venture Asset Class early stage company with long-term (5-8+ years) high growth potential. Both issue securities in a private company (debt, equity).Monetize the investment when the company has a liquidity (exit)event. 4

5. Angel Investing Basics Tamiami Angels Website Resource: Glossary of Terms related to Venture Capital & Other Private Equity or Debt Financing Angel Capital Association Resources for Entrepreneurs (including Directory) : https://www.angelcapitalassociation.org/entrepreneurs/ https://www.angelcapitalassociation.org/directory/#AP 5

6. What Are The Characteristics of Your Startup? Source: First-Time Founders How to Select the Best Startup Funding Strategy 6

7. What Is the Best Funding Strategy for Your Startup? Source: First-Time Founders How to Select the Best Startup Funding Strategy 7

8. Know Before You Go Fit Do You Have What It Takes? 4 Entrepreneurship Whys: Company, Business Start,Personal,Mindset Startup Game Board Business Category Experience Capital Difficulty Scalability Freedom Wealth Inventor (w/ entrepreneur commercializing) M M H Y H M Physical Product Company M H H Y M H Virtual Product Company M L H Y H M Software or e-commerce Company M M H Y M H Multiple Location or Multiple Geography Business H H H Y L H One Location or One Geography Business M M M N L L Solopreneur or Freelancer H L L N M L Service Company w/ Employees H M M N L M Capital Intensity Combining amount of capital prior to launch through early years. High - hundreds of thousands of $. Scalability (highly profitable, wealth creation, provides freedom) Incremental lowering of cost through expansion. Service Companies can scale by productizing services, franchising or achieving recurring revenue (automatic payment stream). 8

9. Typical Questions Angel Investors/VCs May Ask Before Investing Know Before You Go Tips Thesis (criteria) fit Capital type, terms, timeline Process Apply (Business Plan, Pitch Deck, Financial Model), Screen, Due Diligence (Data Room), Investment, Post-Investment, Exit Culture and strategic fit 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Is the expected valuation for the company realistic? 11. How will my investment capital be used and what progress will be made with that capital? 12. Does the company have differentiated technology? 13. What is the company s intellectual property? 14. Are the company s financial projections realistic and interesting? 15. Is the legal formation clean and in compliance with applicable laws? Other Questions Outstanding Liabilities?, Lead Investor?, Cap Table?, Terms?, Strategic Investor?, Product-Market Fit? Is there a great management team? Is the market opportunity big? What positive early traction has the company achieved? Are the Founders passionate and determined? Do the Founders understand the financials and key metrics of their business? Has the entrepreneur been referred to me by a trusted colleague? Is the initial investor pitch deck professional and interesting? What are the potential risks to the business? Why is the Company s product great? (key differentiators) Source: 15 Key Questions Venture Capitalists Will Ask Before Investing In Your Startup (4/13/2019) and Why Entrepreneurs Received Early "No Interest" 9

10. The Southeast Capital Landscape is Growing! Number of Firms by Capital Stage Number of Firms by State Southeast Capital Landscape Resource: https://embarc-collective.github.io/southeastcapital/ 10

11. How Can You Tap into the Startup Ecosystem? 11

12. Startup Roadmap Course on Demand Chapter 5 Funding Resources https://www.score.org/event/startup-roadmap-chapter-5-finding-funding 12

13. SCOREs 10,000 Volunteer Business Experts Stand Ready to GuideYou via Free, Confidential Mentoring! https://www.score.org/event/startup-roadmap-chapter-5-finding-funding Content Description Help You Prepare Personal financial picture, amount of financing needed and personal credit score Explore Options & Help Develop the Pitch Funding options table, pitch deck/points and role of business plan or Business Model Canvas (BMC) Mentoring Session Interaction Tips Questions to expect & ask Resources FedEx Grant Content, Blog, E-guides, Articles, Templates, Fundability Quiz Homework Options Fundability Quiz, Complete financial & business plan templates, Loan Estimator Funding Sources Deep Dive Resources Bank loans, Nonprofit Lenders, Credit Cards, Home Equity Loans or HELOCs, Retirement Plan Borrowing, Personal Loans, Equipment Financing, Friends & Family, Crowdfunding, Angel Investors, Grants & Awards 13 11 13

14. SCORE Startup Roadmap Course on Demand https://www.score.org/event/startup-roadmap-chapter-5-finding-funding Financing Source Amount Needed Advantages Disadvantages When to Use $500,000-several million May require collateral or personal guarantee; long approval/funding process; hard to get If they need a lot of capital and have a good credit score Bank Loan Large loan amounts May require collateral or personal guarantee; long approval/funding process; hard to get If they need less than a traditional bank loan and have good credit SBA Loan $50,000-several million Smaller amounts than a typical bank loan Work with inexperienced entrepreneurs, may provide assistance, low-interest rates If they fit the nonprofit s target borrower profile Nonprofit Lenders $2,500-$50,000 Small loan amounts Credit Cards $20,000 or less Easy to get, may offer perks, revolving credit Higher interest rates, risk of hurting credit rating Borrowing small amounts Up to 80% of your home equity HELOC offers revolving credit; lower interest rates than unsecured loans Can lose their home; the time-consuming approval process HEL/ HELOC As a last resort for small amounts 401K Rollover for Biz Start Complex to set up and administer; can lose your nest egg If they don t need their retirement savings soon $50,000+ No approval process; no debt to pay back Often don t require collateral, fund quickly mingling personal and business finances; higher interest rates than secured loans Personal Loan $20,000 or less As a last resort for small amounts May include business advice; more lenient terms than bank loans. Can hurt relationship; lender may lose their money . If they have a strong relationship with someone who can afford to lose money Friends and Family Varies 80-100% of the cost of equipment Conserves cash; using equipment as collateral lowers interest rates If expensive equipment is essential to their business Equipment Financing Money can only be used for equipment Crowded market; need to sell business idea; may not get all the money you seek; may have to give up equity If they have a new product and a passionate market for it Crowdfunding $25,000-$300,000 Fast funding; idea validation $100,000-several million Have to give up equity in business; angel may want too much involvement Their concept has been tested; They can promise a high ROI Angel Investors They get advice along with financing Difficult to find and qualify for; long application process; small amounts If they meet the criteria of a specific grant or award 14 Grants & Awards $50,000 or less Free money 12 14

15. Thank You Q&A Connect with me on LinkedIn Patricia.loftus@scorevolunteer.org 15 Funded in part through a Cooperative Agreement with the U.S. Small Business Administration.

16. SCORE and Entrepreneurial Ecosystem Resource Links Angel Capital Association Member Directory Tamiami Angels Glossary of Terms Inside Secrets to Angel Investing - Karen Rands Plan Your Start - Allen Clary startups.com crunchbase.com Wells Fargo Works for Small Business Business Finance Depot First-Time Founders How to Select the Best Funding Strategy Back Testing Why Entrepreneurs Received Early "No Interest" from New World Angels National Venture Capital Association Website National Venture Capital Association Member Directory National Venture Capital Association Regional Data LeAD Accelerator State College of Florida Incubator/Accelerator MacDonald Ventures Launch Blumberg Capital Move to Miami 15 Questions VCs Will Ask Angel Capital Association Entrepreneur Resources https://www.score.org/recovery/small-business- resilience https://www.score.org/score-for-all https://www.score.org/startup-roadmap https://www.sba.gov/funding-programs https://www.sba.gov/local-assistance https://www.sba.gov/funding-programs/investment- capital 16

17. SCORE and Entrepreneurial Ecosystem Resource Links (Continued) SCORE Webinars by Allen Clary (Recorded): https://www.score.org/event/how-to-get-an-investor-chase-you-understanding-investing-game https://www.score.org/event/solopreneur-wealth-and-freedom-how-avoid-solopreneurs-trap https://www.score.org/event/making-the-leap-to-entrepreneurship SCORE Webinars (Recorded): https://www.score.org/event/angel-investing-101-what-is-angel-investor-does-my-biz-need-one https://www.score.org/event/how-angel-investment-process-really-works SCORE Blogs & Articles https://www.score.org/blog/five-factors-angels-look-investment-opportunity https://www.score.org/blog/does-your-small-business-need-angel https://www.score.org/blog/understanding-differences-between-angel-investors-and-venture-capitalists https://www.score.org/resource/are-angel-investors-right-your-business Funding Options: https://www.score.org/blog/11-funding-options-female-entrepreneurs 17

18. SCORE & Entrepreneurial Ecosystem Resource Links (Continued) Southeast Capital Landscape (comprehensive): https://embarc-collective.github.io/southeastcapital/ Angel Capital Association Members in TN: https://appalachianinvestors.org/ https://launchtn.org/ http://www.theangelroundtable.com/ https://www.thejumpfund.com/ Angel Capital Association Members in FL: https://www.blackangels.miami/ http://www.floridafunders.com/ https://www.keiretsuforum- midatlantic.com/content.aspx?page_id=22&club_id=4152 90&module_id=389442 http://www.newworldangels.com/ http://www.seedfunders.com/ http://www.tamiamiangels.com/ Article: https://www.naplestechnologyventures.com/news/39-best-- most-active-florida-micro-vcs Article: https://investoravailable.com/18-best-most- active-tennessee-micro-vcs/ 18

19. SCORE & Entrepreneurial Ecosystem Resource Links (continued) Crowdfunding https://www.score.org/resource/infographic-crowdfunding-right-your-small-business https://www.thebalancesmb.com/a-guide-what-is-crowdfunding-985100 https://www.business.org/finance/loans/best-crowdfunding-sites-for-startups/ Grants https://www.grants.gov/ https://www.sbir.gov/ https://www.fundera.com/blog/small-business-grants https://www.grantsforwomen.org/ https://www.finimpact.com/small-business-grants/ https://www.fundera.com/blog/minority-owned-business 19