Angels

Angels.

The role of angel investments in the sector is very important. The sum of all angel investments ( 22 billion dollars in 2007 ) has traditionally been comparable to the sum of all venture capital investments (24 billion in 2007 ). In fact, it's a little crafty. Angels invested not only in technology projects, but also real estate, industry, small business.

The term ' angel ' appeared on the. Broadway. Then the angels called the people who finance theater. It was in the early 20th century. Later, the term caught on in the investment business, long before the emergence of Silicon Valley.

In Silicon Valley there is a belief about the fact that two young entrepreneurs who went to ride on a rented yacht on San Francisco Bay discussed the possibility of creating a new business, for which the calculations made ​​on the cover taken from a magazine. When they are moored to the shore, they met at the pier of the two men who had a huge yacht mooring. After a short meet and discuss the project, the entrepreneurs were to check for a small fee, which was enough to run the company. And 10 years later they are on the same spot to berth its huge yacht, cost $ 50 million and by chance met two young entrepreneurs, who discussed a first draft.

Since then, every young entrepreneur discusses his project with a partner on the boat and looks at the horizon, there is a great looking boat.

The last sentence of a joke, but given his experience in Silicon Valley, I can say that the legend is very much the key parameters.

a. young Entrepreneurs. Existing businesses, in most cases, already have enough money to not to attract angel investment.

2. Successful entrepreneurs do very often invest small sums in new. startups.

3. In Silicon Valley is really easy to find someone who can make angel investments.

4. Entrepreneurs and investors, and everything in Silicon Valley really spend a lot of time on active hobby, like boats, planes, golf, tennis. And there really is possible to meet anyone.

I want to just stipulate some things. Institute of angel investing is very well developed throughout the world. In the U.S., according to various estimates operate from 100 to 400 thousand angels who invest from 10 thousand to several million dollars in each project. In Europe, investors are between 80 to 200 000. The British economy, especially after the economic reforms. Margaret. Thatcher. rests on the angelic investment. That's why I want to just stipulate that all the statistics, which is found in the literature, it operates on the whole mass of the angels, who invest not only in the area of ​​technology business. Moreover, if we assume that investors are also consumers of innovative products (by -product, we understand. start-up. In which they invest ), then invert the angels in the field of high technologies belong to the category. innovators. , The total amount of not more than 5%. The vast majority of studies and reports that explore the angel investment gives the temperature ' of the average house ' and it can only make general conclusions.

All that we see in this part of the book takes into account my experience and comments of many entrepreneurs, venture capitalists and angels themselves, with whom I've encountered.

We use the definition of an angel:.

'. An. Angel. Investor. is. a. high. net. worth. individual. who. invests. a. portion. of. his. /. her. assets. in. new. or. expanding. small. businesses. started. and. operated. by. someone. else. '.

Who are the angels? . I would venture to propose the following classification of angels, which operate in the U.S., mostly in Silicon Valley. This classification differs from the conventional. And I suggest to her that they imply different approaches to the angels:.

a. Successful entrepreneurs who have successfully built and sold his company.

2. Former investment bankers and people whose work was related investments c.

3. Top managers of large corporations.

4. Unskilled investors who are retirees who have sufficient savings, doctors, lawyers or consultants.

What is the difference between the angels of the venture capital funds?.

The first and most important difference - the angels invest. their. money. Unlike the funds to other investors have entrusted their money, angels invest the money earned themselves for their lives. Hence the second difference - Funds make rational decisions and emotional Angels. What is meant by emotional decision? . This does not mean that Angel does not conduct verification of such a transaction, but as parvo had limited opportunities to make a qualitative Due Diligence and Angel often uses intuition.

What drives the angels? .

a. earn.

2. Repay their debts to society.

3. be needed.

4. adrenaline.

5. fashion.

In one form or another of these motives work, not only in the U.S. and Europe but also in Ukraine and Russia.

Understanding these reasons allows to build a line of conduct in the negotiations with the angel. Remember that the angel, like any investor should go for advice.

Each angel has its own investment strategy, even if it is not formalized and announced, it is often easy to understand or learn. Parameters of the strategy, we will describe later, and now look at the main types of strategies. There are two main types of angels active and passive strategies.

Let us consider in detail the active angel strategies ( and their advantages and disadvantages, one advantage we will not discuss in detail, it is true for all policies - this is what h. start-up. Early gets the money, and often, this fact allows us to put up with some flaws ). Active strategies involve angelic angel actively involved in the company. The extent of this activity is regulated by agreements between the angel and the entrepreneur, who better to issue in the investment agreement.

a. Lead. Investor. - Usually a strategy implemented by experienced angels who have the experience behind him a few transactions and business experience. These angels are actively trying to participate in the life of the company.

2. Manager. - Usually a former employee of a large corporation, which, together with investment looks for a place of employment.

3. The right of first night.

By Angelic passive investment strategies include the following:.

a. Co -investment.

2. barter. These angels do not provide capital, and providing services or products.

3. Angel funds.

4. charity.

An understanding of such a strategy may increase the chances of success and reduce the time, knocking the wrong door.

Factors that includes the strategy:.

a. branch.

2. Network.

3. The size of the transaction.

4. portfolio.

5. Criteria.

6. geography.

7. participation.

8. exit.

9. Form of investment.

10. Readiness of the company.

If angels are active, they can bring to the company much more than money (usually this is especially true of angels in technology projects, a grandmother from Miami, is unlikely to help much. startup. ). In the case where the entrepreneur has found a correct (' a ') angels, it may help ( remember that for the entrepreneur to work one will do ) in the following areas:.

- Search and. strukturirvanie. first deals.

- Recommendations for staff.

- Look at the activity. start-up. by.

- Search for an investor to the next round.

These angels are most often had meetings in the technology business is, and it is a lucky lottery ticket for the Entrepreneur.

Usually, their rights and obligations of the angel sells through its seat on the board of directors. start-up. But close human and business relations with angels can bring us much more than formal.

The biggest mistake you can make an entrepreneur - is to forget about Angel. At least he should receive a monthly, or better yet, a weekly report on the activities of. start-up. The monthly report should be submitted in a formal or informal board of directors. In the process of. Due. Diligence. investor in the next rounds will be first to try to structure the deal to previous investors, and a good attitude and satisfaction of an angel can help greatly.

In the U.S. and Europe, most angels are in the process of 10-20 % of the shares. But once again napiomnim that many transactions - so many options. I know of cases where the angels invested and a 5 % stake in the company, but prescribed in the investment agreement that, regardless of their share of future rounds can not be changed. This could complicate negotiations with investors following rounds. Also, angels can make money as a debt to the founder or the company, the debt may be convertible.

In Ukraine, angel investing is developed only in the small business and made ​​the first steps in the formation of the industry. There was the first association of investors. Angela is still very little understanding of what the technology business, and especially investment in this area, but there is interest in such investments.

In Russia, angel investing in technology projects since the late 90s. National feature, you can specify an angel desire to dominate and control the business. Thus, it is very common structure of the transaction in which an angel gets 50 % or more in a company. Such a structure of the transaction has the right to life only if the entrepreneur has no plans to raise the next rounds of investment. Venture capital funds are always watching and if the motivation of the entrepreneur 's share did not provide him with sufficient income to output, in such a fund company probably will not invest.

The only situation that allows for a significantly larger share of an angel than. minority. - This is when an angel round and will be the only. This is usually acceptable when built a small local project money and angelic head should be sufficient for its construction.

The very structure of the Angelic Community in Ukraine and Russia differs from that of other countries. A very active role in these communities are government officials, large holdings and financial-industrial groups. Another feature of the local markets is the unavailability of the angels. If the U.S. and Europe, the angels are a way of life, not much different from the average citizens living and access to them can be obtained without difficulty, in our social circle of wealthy people is very limited and is associated with communication with the secretaries, assistants and protection. Thus, the. Network. Through which you can gain access to these groups of people is very limited, which makes it possible to make a variety of intermediaries and brokers.

important factor in the wide spread of angel investments in the U.S. and Europe is the stock market. most. households. do not keep their savings in deposits and invest them in shares quoted on the stock market. Because of the cyclicality of the economy,. fondvy. Sometimes the market is in decline, during which some of these savings is lost. Thus, the average citizen has a culture of investment on the one hand, and ready to risk the other side. This allows us to consider angel investments, as another way to invest savings, and not as an alternative to deposits. In Ukraine and Russia citizens are still in the vast majority are trying to invest in precious metals deposits, foreign currency and real estate ( including abroad). That is why alternative investments are considered with great caution.