ANGEL INVESTING

Defining Angel Investors

✓ The American Angel is the name of a report conducted on angels
and the companies they invest in. The report shows that angels in
the United States invest approximately $25 billion in 71,000 startups
each year.

✓ The average angel will invest between $10,000 and $50,000, and
62% are between 51 and 70 years of age.

✓ It seems that female angels are 10 times more concerned about the
gender of the company founder than male angels, and twice as like-
ly to consider the social impact of the company they are choosing to
invest in.

✓ The average angel investment returns little to no money.

✓ Wise investors like to see their money appreciate, but they are also
smart about when to exit an investment so that they can realize a
profit that is not just on paper.

✓ Many angels have 3 to 5-year windows where they are comfortable

with tying up money in an investment.

✓ There are more angel investment groups in the United States now
than ever before.

✓ It is recommended that every potential angel investor join a local

angel group as a necessary first step in the education process. Here
are a few of the reasons why.

o You Borrow Knowledge

o You Get Instant Access to Better Deals, and More of Them as

Well
 o You Enjoy Better Returns

o Your Investing Knowledge Grows

o You Have Fun and Socialize

How (and Why) to Become Accredited

✓ You don't need any accreditation to become an angel investor. All
you need is some spare money and a small business that needs your
money.

✓ Unless you obtain accredited status, however, many companies

won't deal with you.

✓ Accredited investors, sometimes also called sophisticated investors,

earn this label by different requirements in different countries.

✓ In the United States and Canada, you must show an annual income
of at least $200,000 per year over the last two or more years.

✓ Residents of the European Union have to show that they have trad-
ed at least €50,000 on a relevant market, and they must additional-
ly show a financial portfolio of at least €500,000.

✓ Aside from showing companies that you have financial stability, one
benefit of receiving accreditation is that you probably won't be ap-
proached by shady, fly-by-night investment offers.

✓ Even if you are new to investing, accreditation gives others the per-
ception that you are a savvy investor.

How to Find Companies Who Need Money

✓ Sometimes it is as easy as reaching out to business contacts you
have made over the years to find companies that are looking for in-
vestment capital.
 ✓ Join an angel group or an angel network.

✓ One of the many services these groups offer (usually for free) is to
provide a list of investment opportunities to their members.

✓ Additionally, there are experienced angels on these networks and in

these groups.

✓ They can help you select a company that minimizes your risk while
potentially offering a significant return on your investment.

Top 10 Tips on Angel Investing

✓ Never sink more than 10% of your entire investable assets or capital
into one opportunity. If you are new to angel investing, start out by
spending no more than 3% to 5% of your overall investment capital
in a single company.

✓ The 12 business rule works well for successful angels. Focus on en-
tering 12 investments as an angel, with 12 different companies. This
limits your risk, while still giving you exposure to one or more op-
portunities that could deliver impressive returns.

✓ Angel investing means realizing you could lose everything you in-
vest. Most angel investments only return some of the capital invest-
ed, and some return no money at all.

✓ Join an angel group to speed up your education and for access to

high-quality offers.

✓ Writing a personal investing thesis and referring to it often can keep

you true to your important investing principles.

✓ Money is not the only reward of angel investing. Some angels do

what they do to help small business owners that can't find the mon-
ey they need elsewhere.

✓ Stick to what you know and invest in markets you understand.

✓ What is your investment timeline, and how much money will you in-
vest? You need to know these parameters, as well as whether you
will or will not enter subsequent funding opportunities after your
initial investment in a company.

✓ Develop an exit plan before you invest in any company.

✓ Have fun, and never invest money you can't afford to lose.