It's kinda odd some of the discussions that I have recently had with early stage entrepreneurs about angel rounds. Folks wanting to raise $800k at a valuation more than $5 million. Seems a little rich to me and I said as much.
Well Silicon Valley Bank is out with their Q2 Halo Report. And sure enough the median angel investment was $590k with median pre money valuations at $2.5 million.
Everybody wants to raise money and talk about it. One of the things that does not get talked about quite so much is the overhead of taking someone else's money. More often than not one of your investors joins your newly created board and you start having board meetings. And every time I have been advising an entrepreneur on such a thing and the first board meeting comes up panic generally sets in. "How do I prep for the meeting?"
It's a fair question for a first time entrepreneur and it goes something like this.
1. Ask the board members what they would like to see at the meeting. They typically will share with you some board meeting materials from their more advanced stage companies that you will find completely overwhelming. "They want to see what?" you and your team will exclaim. The panic will deepen. Don't fret.
2. Ask the CEOs of the investors other portfolio companies what they provide to the board for their meetings. If you were smart and did your investor diligence before you accepted that term sheet you will already have established a relationship with these folks and they will be more than happy to help. What you will find is that what they are providing to their boards is a little bit less than what the board gives to you as examples.
3. Plan ahead. The first time you prep for a board meeting it will consume quite a bit of time. It's well over a two week planning process. This process shrinks over time. I prepare the board materials for nCrowd and I can literally get them together in less then 48 hours after a few years of doing so.
4. Set a schedule. Our board meetings are the third Tuesday of every even numbered month at 2:00pm and last for 90 to 120 minutes.
5. Get the board the materials out early. At least 48 hours before the meeting. With our Tuesday board meetings my aim is to get them the materials on Friday and if I lapse they go out on Saturday morning. While the materials may change in scope and size they generally include the following.
Board meeting minutes
A cap table
KPIs and operational overview
An organzational chart including planned hires (if you have enough folks to warrant one)
Special departmental or strategic presentations
6. No surprises. Each board member should know what is going to be discussed at the meeting and the CEO needs to understand each board member's point of view on important topics of discussion.
My number one rule on board meetings is to get in and get out quick and nobody gets hurt. Proper preparation will ensure this happens for you.
It's a much broader than your typical technology startup funding event. It will explore alternative and traditional lending options, angel investments, crowdfunding, private equity and more.
I have the honor of being on a panel, Startups Start Here, moderated by Daryn Kagan of CNN fame. I will be joined by a great group including Daryl Dollinger, Co-Founder of Raving Brands and President of Big Game Brands; Andrew Linder, Partner at Frontier Capital; Sig Mosley of Flashpoint Ventures/Imlay Investments/Mosely Ventures; David Rudolph, Founder and CEO at PlayOn! Sports; Michael Tavani, Co-Founder & Head of Product at Scoutmob; and Mark Wilson, President & CEO at e-Verifile.
Quite the panel.
you are seeking startup, working, or growth capital this will be a nice event to learn about various local sources of captial and find out which are right for your business. It is a bargin at $30 and friends of FoG can get a $10 discount (the discount code is ATCLW).
Seems like my Twitter stream was full of references to this angel investor infographic from Investor Pitches (they build pitch decks). The most interesting thing to me is that an angel's average net worth was a lot more than $750k.
This Thursday night at 6:00 is Entrepreneurs' Night. It is my ADTC swan song, and it's going to be a good one. In May we shaking things up a bit and having several Atlanta angel groups present what they are looking for in their deals. I call it the Angel Editon.
Each of these folks will be given 5 timed minutes to present followed by 5 timed minutes of Q & A. Kinda turning the tables a bit. This is the first time that Sig will be talking about Flashpoint Ventures in public. Flashpoint just began accepeting applications today.
This event is open to all enterpreneurs. We would love to see you there. If you plan to attend please register.
Last night was the monthly meeting of the Atlanta Technology Angels. It is the first ATA meeting I have had an opportunity to attend since Mike Eckert became chairman and executive director of the group. And oh my gosh what I difference. To give you some flavor the last ATA meeting I attended in Q3 of 2010 had about 20 angels in attendance. Last night close to 50. And they are getting active.
You may have read about ATA investing in HireIQ. In addition to that deal ATA currently has a term sheet signed, is in due diligence with another company, and has some individual investors moving forward with a third deal. Moreover ATA has already completed three follow on rounds in 2011. Of the four new deals mentioned above, two of them are seed stage investments in pre-product companies.
On top of all this activity one of the most interesting things to watch during the meeting was angels championing startups that pitched. Very passionate support for entrepreneurs.
As part of its evolution ATA has constructed three different deal types that they are interested in pursuing.
One are seed deals. To ATA a seed deal is a $100k or less round into a large well supported market, with a clear understanding of competitive advantage, a preliminary business model, and a team. A member of ATA or other early stage entrepreneur support entities such as atdc must champion seed stage deals. Part of my day job at atdc is to refer the best seed stage deal I see to ATA every month (one of them is in due diligence).
Two are core deals. Core deals are your more historically typical angel deals in the $250k to $1 million range. For core deals ATA is looking for early market traction in a sizable market, an experienced management team with domain knowledge, an exit strategy to liquidation within five years, and a valuation no higher than $3 million.
Three are opportunistic deals. Opportunistic deals are exactly that. As an example I recently discussed a company with Mike Eckert that was raising $1 million on a $9 million valuation. The company has significant revenue traction so Mike met with the CEO to determine if it was a potential fit.
ATA has taken the step to put their investing criteria online. They have also put their seed and core applications online. They are below.
The Atlanta Technology Angels are resurrecting themselves. They are becoming a source of capital that any entrepreneur seeking early investment should consider for one simple reason. They are doing deals.
So I was doing some work on the atdc Startup Showcase that resulted in a quick brainstorming session on Atlanta area organizations that fund technology startups. It looked something like this.
The venture capital firms are Arcapita, BLH Ventures, Buckhead Investment Group, Fulcrum, H.I.G., Kinetic, Noro Moseley, Total Technology Ventures, TechOperators, and Value Plus Ventures. The more angel oriented investor groups include Atlanta Technology Angels, CEO Ventures, the Communications Group, Hamilton Ventures, Profounder, Seraph Group, and Shotput Ventures.
Though they are no longer actively investing in new deals there is of course Imlay Investments. You can add the ATDC Seed Fund and the Georgia Tech Edison Fund to the list as well. There is a total of 20 investment entities . Of the 20 at least 13 are active, having done at least one deal in the past year.
While we can use more this is Atlanta in 2011. It would behoove any entrepreneur that thinks external funding is in their future to do their homework and get to know these firms better.
Update: I was reminded that I omitted Paparelli Ventures.
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