MAKING ANGEL INVESTING A WIN-WIN EXPERIENCE - Delivered by Steven M. Cohen, Scott MacColl and Brian Morin to Keiretsu Forum on May 5, 2021 ...
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MAKING ANGEL INVESTING A WIN-WIN EXPERIENCE Delivered by Steven M. Cohen, Scott MacColl and Brian Morin to Keiretsu Forum on May 5, 2021 © 2021 Morgan, Lewis & Bockius LLP
Who are these Angels?
Individuals and family offices motivated
to invest in private companies
Friends and Family Wealthy Stranger Strategic Interest Angel Groups (like
Seeking Profitable interest in business Keiretsu Form)
Investments subject matter
$250k-$1 million (too large for most founder groups to
fund and too small for most VCs)
Seed Stage (pre-revenue or pre-product launch) or Early
What Is the Stage (less than $1 mil revenues)
Sweet Spot Something is Done and Something is Missing – (ie product
for an Angel developed, market not yet established or market
compelling, product development completion required)
Financing? Government grants and bank loans not available or not
sufficient
Scalable market size – potential for significant return on
investment
Common Stock/Units
What Is Basic Preferred Stock/Units (participating or
Deal Structures convertible)
For anAngel
Convertible Note
Financing?
SAFE
FINANCIAL
TRANSACTION What Do Angels What Do Founders
Want? Want?
Significant Return on Money to Grow Business
Money Invested
What Do Angels Want
KEYS TO Management to Focus On?
What Do Founders Want To
Focus On?
SUCCESS • Great product or service • Company science or technology
with protectible edge
• The market
• People who can make
company successful • Product or service differentors to
customer
• Substantial market size with
differentiation from • Obtaining sufficient cash to
competitors commercialize
• Capital efficient to reach • Team that has already been built
valuation inflection
milestone
• Ability to manage risk as
company grows
What Do Angels What Do Founders Want?
COMPANY Want?
PRESENTATION
Concise Business Concept Share the dream
TO INVESTORS and Implementation Plan
• The Problem
• The Solution
• The Market
• The Competition
• The Team
• How we get from here
to there
VALUATION What Do Angels What Do Founders
Want? Want?
Reasonable Valuation Highest Fair
to Appropriately Valuation to Minimize
Reflect Risk Potential Founder
Dilution
Next Round at Higher
Price Next Round at Higher
Price
What Do Angels What Do Founders Want?
INVESTOR Want?
PROTECTIONS No single investor veto rights
Reasonable Investor or other special angel
Protections to Manage investor rights beyond NVCA
Risk - customary rights for major
• Preemptive Rights, investors
• Information Rights,
Angel investor rights
• Approval Provisions, shouldn’t impede venture
• Investor Board round
Representation
Be Left Alone – Not have
• Not get screwed in later Angel investor rights impede
VC round management of the company
or a larger VC round
What Do Angels What Do Founders
CORPORATE Want? Want?
GOVERNANCE
Angel board representive Do Want: Value from
to represent investor experience network CEO
interests mentor “reality check”,
Provide oversight to feedback and input. Take
management company to VC level/board
member experience level
Add value, experience then depart for VC/indepdent
and investor relationships director
Don’t Want: Daily phone call
or email, someone who
thinks they are an “expert” in
two hours a month, someone
who needs to tell CEO what
to doPERSONAL What Do Angels What Do Founders
Want? Want?
RELATIONSHIP
Pleasant Experience Pleasant ExperienceTo: OtoNexus Investors
Example of From: Caitlin Cameron, CEO, and the OtoNexus Team
Excellent
Communication We have lots of exciting news to share with you in our first update for 2021.
By Founder CEO There are updates on product development, new partners, new IP, and more.
To Angel Investors
We couldn't have reached this point without great investors like you. Thank you
for your unwavering support of our work. It means the world to us, especially as
the world changed around us this last year. As difficult as it has been, it does
clarify that tools like ours are critical for infection control solutions. Not only will
this device have a tremendous impact on children's treatment, but it will also
help clinicians practice antimicrobial stewardship, which benefits us all. You are
part of a new medical innovation that will affect generations to come, and we
are glad you are on the team.
Please enjoy the update, and as always, please feel free to contact me at any
time. You can reach me at 206-919-2623 and caitlinc@otonexus.com.
Thanks again!
Caitlin & the OtoNexus TeamValue-Adding Industry Knowledge
An Angel Introductions
investment should
not be an
adversarial
experience, but a
win-win Someone to keep
relationship for management accountable
both the Angel
investor and the
Company.
Someone to Talk To A friendly ear to listen
Access to Other
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