For further details on the conference see the following link. Energy Investment Forum

Michael was among a group of Angel Investors and CEOs/Founders who spoke about Angel  Investing in Chicago. For more details on the event and future Efactor events please follow the link. Efactor Presents : Angel Investing

EFactor, the world’s largest entrepreneurial community, provides resources that every small business owner needs: funding, knowledge, gain revenue and save cost. At EFactor, entrepreneurs exchange ideas with experts, receive exclusive discounts on business tools, interact with potential partners or clients, and discover funding for their startups.

The Founder Institute is a global network of startups and mentors that helps entrepreneurs launch meaningful and enduring technology companies. Through their four month pre-seed incubator program, entrepreneurs can launch their company with expert training, feedback, and support from experienced startup CEOs, while not being required to quit their day jobs. Their unique Bonus Pool also shares equity upside with all participants, creating local, teamwork-based ecosystems where great startups can flourish. More information on the program is available here.

The Founder Institute carefully recruits approximately 25 Mentors per Semester, who are normally the CEO or founder of a successful startup. The Mentors are selected based on their ability to convey lessons learned on a topic in the curriculum and help participating Founders by sharing their relevant experiences. Mentors are accessible to Founders in the program during the sessions and through email. The shared equity upside of each Semester encourages supportive and collaborative relationships with the Mentors.

We hope that you can join us in a celebration by and for company leaders where five amazing founders will share how they started and grew companies to $100 million+ success.

Date: Thursday, November 17, 2011

Location: UIC Forum

Time: 4:30pm Registration

5:00-7:00pm Panel & Reception

Registration: www.entrepbash.com

$55. Cornerstone Angels Members get a discount on the ticket, so please contact us for the discount code.

Speakers: Mike Domek, Founder, TicketsNow

Tony Faras, Founder, MGI Pharma

Ron Galowich, Founder, Initiate Systems & First Health Group Corp.

Jim Gray, Founder, optionsXpress

Dane Miller, Founder, Biomet

Moderator: Robert Jordan, Author, How They Did It: Billion Dollar Insights from the Heart of America

Register at www.entrepbash.com and if you are a Cornerstone Angels Member please contact us for the discount code.

Hope to see you there!

You can access the interview by going to the following link. Click here for interview

ADT develops products that are enabled by thin smooth diamond. ADT is a World Economic Forum 2007 Technology Pioneer, recipient of a 2008 EuroAsia IC Award in the Materials Enabling category from EuroAsia Semiconductor, 2008 R&D 100 Award winner for UNCD Seals™ (mechanical seals for pumps), 2009 R&D 100 Award winner for NaDiaProbes® (AFM probes made entirely of diamond), and 2011 R&D 100 Award winner for its Integrated RF MEMS Switch/CMOS Device

S-Group is a private equity and venture capital company based in Moscow, Russia which focuses on growth opportunities in high-tech and consumer-oriented businesses.

For the press release please follow the link here: Press Release

Force10 Networks is the global technology leader that data center, service provider and enterprise customers rely on when the network is their business. The company’s high-performance solutions are designed to deliver new economics by virtualizing and automating Ethernet networks.

The press release announcing the acquisition can be found at the following link: Full Press Release

Learnings From An Angel (Part 1)
Note: This article was originally written and published for DailyDAC as the fifth installment in a series of articles.

Having gotten active in angel investing over 15 years ago, I felt compelled to provide to share in some of my own personal learnings as well as those that I have learned through my fellow colleagues. As the saying goes, it you want to make a small fortune in a new venture, start with a large fortune! Early stage investing is a high-risk activity, and investors need to be prepared for the potential that an investment can be a total loss. In addition, the likelihood of any particular company being a homerun has a low probability. But that being said, angel investing is not always about making money. It is certainly a large component, but one of the reasons that many of us continue to be involved in such early ventures is not so much the ultimate pay-off, but it is that many of us are intoxicated with the smell and adventure of the creation of something new. The rollercoaster of a start-up is exciting for many, and the very notion of being able to be involved in such effort, and having opportunity to either work alongside, or even pass on experience or knowledge is incredibly rewarding. For those in their later part of their lives, angel investing can become a rich man’s fountain of youth, especially as they will be interacting with 20-something entrepreneurs from multiple companies.

While angel investing can be sexy, and the tenure of people’s activity may be short, I am hoping to quickly provide a few high level concepts to qualified investors in making their investment experience, hopefully more rewarding and successful, and as such, I hope this allows each of you investors t be active in this activity for a long time. Some of these concepts may not be applicable to you, may not be appropriate for certain investee companies, or only a few might work well together, but I believe they provide a good framework for a decision and can drive a healthy combative discussions on the merits and cons for each.

Key Angel Investing Concepts to Remember:
Contact Sport
Do Research
Know Your Leaders
Interact with Investors
Play the Numbers
Extra Firepower
Take Your Time
Surround with Smarts
Valuation
Open & Frequent Communication
Close to Home is Best
Be Supportive & Giving

Contact Sport: Although much of angel investing is done as a passive activity, your active involvement with a company will typically increase the odds of a success. Getting your hands dirty is helpful. Many times this will be done within an angel investor’s area of expertise, but it doesn’t need to be. The key is that when there are more investors who are willing to go the extra mile to help the companies think through strategic issues, and to leverage their networks, this can help lead to strong potential outcomes. See whether you have a passion for the vision or mission of the funding company.

Do Research: You owe it to yourself and your family to have spent some time researching the company and its market before investing. This does not guarantee that you will make the right decision, but it helps. By even the most simple review, your questions to management, and their responses to those questions will give you a good insight into their knowledge as well as more importantly their reasoning capability. Also, as the investor base for a company is more knowledgeable (and supportive, and smart, and reasonable, etc.), their will hopefully be value-add to the company without an obscene amount of administrative burden in managing those relationships.

Know Your Leaders: Spend time with the founders and key management team, both in business and within social environments, including potentially with their significant other. It is amazing how different people act in different environments, and the information that will be revealed in this situations in mind blowing. Validation of past successes, better understanding of failures, as well as greater insights to external pressures are illuminating to help decide on whether you have confidence in the team within the complicated lives that we all weave for ourselves.

Interact with Investors: In a similar fashion to learning about the leaders, it is helpful to know about the expectations, goals, and ambitions of the other investors with respect to the investee company. In essence, you want to know with whom you’ll be getting in bed, as the decisions of these people will affect you through multiple year life of your investment. Although the prominence of many smaller investors may not make this as critical given your relative inability to effect change, however you will be in a much better position if the investors have similar time horizons as well as liquidity expectations. As shareholder votes on critical matters arise, and as investors utilize their ability to provide support to the company with introductions, this “synchronicity of vision” can become very important.

Play the Numbers: In short, it is better to have a diversified portfolio. Spread your bets across multiple companies, and try to manage the concentration of investments in particular companies. Too often I see times where people have made extremely large investments in a particular company because they thought it had a high likelihood of being hugely successful. These investors either cite their own personal experience in the sector, how hot the sector is, or the promises of near term and large returns by the company. Unfortunately, investors are not able to always pick the winners, and often the ones that we invest the most $ into are not likely to even be those winners.

Extra Firepower: Be ready for future follow-on investments. A company often needs more money than it claims, and as such, as a good investor, you should be prepared to potentially invest in the future, either to provide a bridge during difficult times, or for future offerings. You should do the research, and decide whether a future investment is a proper decision, but you should have the capability if it was needed. As I and many others saw during this past Great Recession, many of our portfolio companies needed to raise capital, and in many situations, the valuations of these companies were dramatically reduced (50% in one case). In the right situations, the ability to make these investments can dramatically increase your IRR. Extra Firepower is closely correlated to Play the Numbers and should encourage you to reduce the first investment in a company, and to then potentially increase your stake over time.

Next installment: Learnings From An Angel (Part 2)

What is Angel Investing?

Note:  This article was originally written and published for DailyDAC as the fourth installment in a series of articles.

Outside of the founders, and friends & family, angels are the most typical next step in the private equity continuum as shown below in Illustration 1. Whereas 79% of a first round capital came from the entrepreneur’s personal savings or family and friends, this made up only 11% of the second round, whereas angels provided 34% of the capital in the second round#.  Angels provide the critical capital needed by an entrepreneur to grow the business and with venture capital funds to provide the next stage in capital.   Angels are individual investors, sometimes organized within informal clubs or formalized angel groups, who invest their personal money into a company.   Angels are distinct from venture capital or private equity funds, who have created investment partnerships that manage a pool of capital, typically with a significant portion from larger institutions such as insurance companies, pensions, and endowments.

Illustration 1

Source: VentureLab

Angels come in all shapes, sizes, as well as quality.  Their experience, their financial ability to fund, and their ability to add value to a company is quite varied.  One of the key aspects of an angel is whether such an individual is qualified as an accredited investor.   In short, as defined by various securities laws, there are criteria by which individuals are measured against to see about the appropriateness for them to be investing in high risk opportunities, with small private companies being a key sector.   When a company is raising capital from outside individuals, it will require the investor to complete an Investor Questionnaire that will qualify them as an accredited investor.   Being an accredited investor does not necessarily make that person a better investor, but it is important for complying to securities regulations, for managing the communication with investors, and in working with future investors, notably venture capital investors.

From a company point of view, restricting investors to accredited investors or limiting non-accredited investors allows the company to comply with securities regulations and helps to reduce the additional burdens that would be required with respect to disclosure and the amount and frequency of information that would need to be shared.  In addition, each additional investor brings with it administrative and other ongoing support, and by limiting the number of investors, especially ones where the loss of their investment may be particularly impactful on their life (typically non-accredited investors) or those that are just plain needy, the time commitment and difficulty servicing the investors will hopefully be reduced.  Lastly, venture capital investors prefer “clean” cap tables (the schedule of ownership in company), and as such, entrepreneurs are encouraged to limit the number of angels, especially as this helps to reduce the complexity and difficulty in reaching and get investors to respond to any required shareholder approvals.

Investments from angel investors are significant, and have historically been at relatively comparable levels invested by venture capital firms.  According to Angel Capital Association, there are approximately 330 angel groups in the United States and Canada.  According to both the UNH Center for Venture Research and PWC Money Tree, angels invested $26 billion into 57,000 companies in 2007, most of which were early-stage.  By comparison, institutional venture capital firms invested $30 Billion in 3,918 deals, most of which were at a later-stage.  It is estimated that there were 258,000 active angel investors in the U.S. in 2007.  The Angel Capital Association is a convenient way to search for angel groups, by both geography as well as sector areas of interest.

The typical angel according to a 2007 survey from the University of Washington is male (86%), middle-aged (57 years old), college educated (99% with degree), with an advanced degrees, and has a significant amount of entrepreneurial experience (14.5 years), with the founding of several companies (2.7 companies founded).  As always, as an activity gets more mature, the standard changes, and as such, there is a much greater influx of female angels, and given the great success of recent companies with select examples of Google, Paypal, and EBay, there are a great number of younger angels to balance their more experienced and more gray brethren.

One of the largest trends in angel investing has been the growth in angel groups.  There were approximately 100 in 1999 and with this number reaching 300 by 2009.#  Groups typically invest $100K-$500K in a deal, and with recent surveys showcasing that the average investment is in the mid-$200K, and that there are multiple groups syndicating investment.  Groups for the most part invest locally, but with some groups have chapters either across a state or even across the country, the ability to invest nationally or internationally has become more comfortable.  There is a membership fee typically associated with participating in an angel group.  A brief summary of benefits to angels of belonging to a group include:

• Strong deal flow
• Established procedures for screening and due diligence
• Experienced set of individuals involved in early stage investments
• Diverse set of experiences and domain knowledge
• Ability to have multiple people conduct due diligence
• Greater financial capability allows for better investment terms

Next Installment: Learnings from an Angel