BBAA Annual Conference

1
BBAA Annual Conference

• John O. Huston
• Chairman, Angel Capital Association
• Founder/Manager, Ohio TechAngel Funds

2
ACA Perspective

• April Atlanta Summit Strongest content lower
  attendance
• Membership renewals Now underway flat?
• Strong interest in public policy, but costly
• Syndication interest growing
• Research reporting DowJones VentureSource/ SVB
• Denver BOD meeting Review our revenue streams

3
Member Groups Perspective

• Now is the time to invest in private equities
• Smaller checks, but often more investors
• Some member attrition
• Launching more angel funds
• Corporate America refugees more deal flow
• Hot deals still get over-subscribed

4
Recession Opportunities

• The real source of all growth is human
  creativity and entrepreneurship. G. Gilder
• With cash and courage a crisis is priceless.
  W. Buffett

5
1930s Innovations

• SPAM luncheon meat (George Hormel)
• Supermarket (King Kullen)
• Washing machine (Bendix Westinghouse)
• Electric razor (Schick)
• Monopoly game (Parker Bros.)
• Helicopter (Igor Sikorsky)
• Television (1939 Worlds Fair)

6
Recession Recalibration

• Longer Sales Cycle Compelling recession need
• Higher Financing Risk
• High capital efficiency deals (cash flow break
  even w/ 2 million)
• Identify portfolio orphans
• Capital Access Plans (liquidity event lt 6
  million)
• Syndication power warrants lower valuations

7
Ohio TechAngel Funds

• After 4th fund 8.2 5.7 13.9 MM 250
  members 25,000 units
• 23 Ohio-based tech. ventures (5 ½ years)
• 1 MM rounds Fund _at_200K members _at_300K
  syndicate 500K
• For each Fund 1.00
• Members invested 1.57
• Other angels VCs invested 20.21

8
Ohio TechAngels Lessons Learned

• We strive to be experts An expert is someone
  who has made all the possible mistakes in a very
  narrow field. Niels Bohr
• Worst practices Constantly seeking new ways to
  lose our money!
• Ten exits 100 loss? 5 worse outcomes!
• Relationship letter at first funding

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The Perfect Loss

• I just lose 100 of my investment, take the tax
  deduction, suffer no on-going tail of litigation,
  no wind-down expenses, no media coverage, no
  damage to my reputation or my relationships with
  co-investors..and it is a productive failure
  because the entrepreneur/ management
  team/investors all learned lessons which will
  increase their likelihood of success in their
  next venture. We call this failing upward.

10
Lessons Learned

• Valuation 3.282 MM Pre-rev of 2.586 MM
  Why should all investors get the same deal?
• Business Plan presents what probably wont work
  Can this team design and execute Plan B?
• DD Expectations 10 hours per team member
  In return you receive priority allocation.
• Assign a Designated Skeptic on each DD team
  Your goal is to cover the exogenous variables.

11
Recession Opportunities

• Aging population
• Decrease costs/time Increase speed/accuracy
• NOT Health care reform driven
• Leverage the recession
• High ambiguity for consumer products
• For B2B If saving money sales cycle can be
  short
• Reaching Standability is revered today
• Additional funding becomes optional
• Fewer competitors at exit time

12
Recession Opportunities

• Have cash? Use FUD factor to attract best talent
  cull average employees
• Acquire IP from gasping ventures
• Focus efforts against weakest competitor
• Result Battle-hardened team facing fewer
  competitors in the future

13
Further Collaboration

• Identify commonalities (eg. Rob Wiltbanks work)
• Share data
• Efficacy of governmental programs
• Group best practices
• Imagine the day when
• Coordinated Subject Matter Experts
• Routine cross-border syndications

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A look at our usual Ohio TechAngel deal.
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Our platform technology is built on rock solid
IP
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Weve set our course to dominate the market
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Were more nimble than our large competitors
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Theres a clear path to our liquidity event
19
Were too busy to worry about what the
competition is doing
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I want to update you on a recent development
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Weve hit some turbulence in our market roll-out
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Achieving our sales projections is taking more
heavy lifting than we thought
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Its far too early for a course correction
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Weve slowed down pursuing a swift exit so we
can fully optimize our idea
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Were fine tuning our business model
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Comments Questions?

• John O. Huston
• jh_at_OhioTechAngels.com