Angel groups work in many different ways. In some cases, for example, First Angels Network from Atlantic Canada, the group manager will find, select, complete due diligence and negotiate the deal, then present the deal to the members, who make their own independent yes/no investment decisions. Other groups, for example, the VANTEC Angel Network in Vancouver, are run by volunteers who perform preliminary screening and organize events where the Angels meet prospective investee companies. Any Angels interested in potentially investing then meet separately in private to organize due diligence and negotiate a deal.
Angel Co-Investment
Company
Angel Fund Investment
Some Angel groups, such as Angel One Investor Network and VANTEC, have formalized the role of lead investor as the primary point of contact with the entrepreneur. They follow a lead investor guidebook that clarifies the specific responsibilities of this critically important person who not only leads the negotiations with the entrepreneur, but also is the primary contact for all the Angels co-investing in the deal and any contractors involved (such as legal counsel). Another example is provided by Frank Erschen regarding GTAN: “Since its formation in 2009, several Angels have stepped forward to take the lead role in deals. This evolved naturally. It soon became evident that the lead role was critical for coordinating multiple Angels, performing due diligence, and negotiating and closing the deal. It then became clear that the number of Angels who could, and would, take the lead role was the determining factor in getting deals done. “GTAN continues to be very efficient at qualifying investees through their selection committee, but when investees pitched at GTAN’s monthly Angel meetings, if there wasn’t an Angel who could take the lead role, due diligence was slow or wasn’t initiated. In response, GTAN instituted an education program for Angels and encouraged more Angels to take lead roles. Deal leads also had the ability to call on more- experienced leads for help.” The preferred level of involvement in the company varies tremendously from Angel to Angel and from deal to deal. Some Angels want to fill an operating role in the company or have weekly oversight of the company finances. Others are completely passive. Many want to sit on the board of directors or an advisory board. Yet others want no direct involvement but are available to help as needed. It is important that the expected level of involvement be clearly conveyed to the entrepreneurs early in the process. Angel Fund Company Angel Sidecar Fund Investment Angel Sidecar Fund Company Deal Syndication Angel Side-Car Fund VC
28 A Practical Guide to Angel Investing
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