Valuing Your Company

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Valuing Your Company

• Mass. Software Council Meeting
• Dec.13, 1999
• Alain J. Hanover
• CommonAngels

2
Valuing Your CompanyOutline

• Who Angels are
• Why get Angel Funding
• What were looking for
• Valuing your Company

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Who Angels are

• Angels are individuals or groups of private
  Accredited Investors who help Early Stage
  Companies
• There are over 12 Angel Investor Groups in the
  Boston area
• Plus several incubators (Such as TEC - Im
  Advisor)
• CommonAngels - Group of 50 Boston-Area Hi-Tech
  CEOs (started by MSC veterans) who meet monthly
  for breakfast by the Boston Common to evaluate
  investments
• Angel investors provide more than money -
  Expertise, Help w/ Business Plan, Contacts, Board
  Participation, Fund-raising

4
Who Angels are (contd)

• CommonAngels evaluates investments and invests
  350K-1M, itself, with 0-2M from other
  investors, sometimes including VCs
• Each of our investors invests 50K-100K in a
  group deal, if its less than 350K, we go
  off-line
• We have a formal process
• Contact a CommonAngels member OR
• Submit a questionnaire and Exec. Summ. to our
  website
• Then get invited to our meetings
• If its too late or too small, or really early,
  do it off-line

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Why get Angel Funding

• First round AND you need less than 2M for your
  company - VCs only write big checks
• You arent ready to get VC funding
• Team Incomplete or Unproven
• Business Plan incomplete
• Need help with Business Development
• VCs tell you to get Angel Funding

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Mix of Team and Product/Market for Investment
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What were looking for

• Great business idea market opportunity
• Compelling business plan to capitalize on it
• Great people
• Well-presented and articulated pitch
• Working Product demo or Prototype
• Co. Needs , help, advisors, market development
• Our money will help launch product, pre-VC

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What were looking for (contd)

• CommonAngels is biased towards software
  internet deals, and have Comm. and Biotech -
  experienced members
• Other groups look at all types of businesses -
  Comm., bio-tech, medical, manufacturing
• Long-term high return opportunity
• Make millions and billions
• We treat it just as you would treat your own
  investments

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Valuing your Company

• Due to early stage, valuation range is 2-10M
  pre-money but most likely 2-5M
• If you have good reasons for more than 5M,
  youre probably ready for VCs
• As first investors with most risk, we want
  highest returns
• With 350K to 500K, we want 10 -25 of your
  company and board seat to help out

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Valuing your company (contd)

• Deal Structure
• Like VC Series A preferred terms
• Board Seat
• Fast close within 2 months
• Expect reasonable pre-money valuation lt5M
• Roughly 2x-3x amount you are seeking
• CA invested over 4M in over 15M of financings
  of 1st round. deals

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Valuing your company (contd)

• Typical Deals Ive done (All _at_ Pre-Money val.)
• ParallelSoft - Prod. in dev. _at_5M (5.5 post) -
  co. now bankrupt
• TTtech - Cust., 2M sales, B/E _at_ 9M (10M post)
  , sold for 1M
• FinWeb.com - Prod. in dev. _at_5M (5.5post), sold
  for 2.5M
• WebSoft. - R1.0 done - in _at_ 7M with VCs, going
  out _at_ 200M
• AdPost.com - Prod. Done, maj. partner, name CEO,
  _at_ 5M - TEC
• Store.com web site in devt - _at_ 14M, new round
  _at_ 70M - CA
• Shopbot.com - web site up, customers growing - _at_
  3M pre.- CA
• e-money - proto site, exc CEO, unique - invested
  _at_ 3M pre.- CA
• ABCsoft - 2M sales, IBM ptnr., B/E - _at_ 5.5M- CA
  Walnut
• B-to-B.com - first sales, site up - done at 4.5M
  pre.- CA VCs

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Summary

• Angels fill big funding gap between personal
  funds and multi-million VCs
• Angels bring more than money
• Angels do it with Panache
• Angels have more fun
• Look up CommonAngels.com
• Send mail to alain_at_hanover.org