A Practical Guide to Angel Investing (2nd Edition)

Most screening committees and individual Angels use some form of checklist and various technology platforms (see NACO Online Sample Documents on the website for a couple of different screening checklists). Screening technology platforms include Dropbox, Box and Google Docs for document sharing; Survey Monkey or Doodle for polling members and scheduling meetings; Skype, Facetime or Google Hangout for videoconferencing; Salesforce.com for customer relations management; and when all else fails, Excel.

Common Angel Deal Flow Process

E N T E R

Screening Team Review

General Meeting Presentations

Diligence & Team Sheet Negotiations (Coordinated by Managing Director & Deal Lead)

E X I T

Submissions (~30 plans per month)

Manage Investment

(1–3 plans per month)

(5–10 plans per month)

Managing Director pre-screens emailed submissions.

Screening team votes on which companies to invite to general meeting.

Managing Director polls members for level of investment interest in deals, recruits diligence team, and facilitates selection of deal lead to begin term sheet negotiation.

Deal lead closes transaction and the sidecar fund invests in companies that attract at least $250K in investment from at least 5 members.

Board member represents member interests and seeks an attractive exit.

Source: Angel Resource Institute

The next phase of the screening process usually involves a formal 20–30-minute investor pitch presentation by the potential investee company, including Q&A (Angel Resource Institute’s Due Diligence of Early-Stage Firms Workshop). Angel group managers send all members a standardized investment opportunity summary sheet they can use to decide whether or not to attend the presentation (see NACO Online Sample Documents for a couple of different investment opportunity summary sheets). Most groups host from two to four presentations at monthly meetings. As shown earlier, of the 695 presentations made to Angel groups in 2014, 271 (almost 40%) generated interest from investors and moved forward to due diligence. Angel Group or Lone Wolf? Angel groups have been found to statistically perform better in their investments, partially due to the level of due diligence conducted. This can often be seen at Angel groups when opportunities are discussed. In one particular meeting I attended, three companies were presented: a microfluidic diagnostic chip, transgenic goats that produce spider silk milk, and swarm-theory-based HVAC control systems. Seemingly impossibly, for each, there was an Angel in the room who had direct, personal experience with their technology. It is virtually impossible for a Lone Wolf Angel to have the knowledge and network necessary to invest in such a variety of companies. — Bryan Watson , Partner, Flow Ventures

40 A Practical Guide to Angel Investing

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