We seek companies that are as passionate about what they are doing as we are.
To determine whether an opportunity may be suitable for investment, AngelVision evaluates both the management and the business. However, before we delve deeper into company presentations, PowerPoint decks, and due diligence, AngelVision members look for a few, key indicators of the nature and fit of potential investment opportunities. These indicators can be separated out into two broad categories: Non-economic and economic.
Investing Our Advice & Connectivity, Not Just Our Money
We are an industry knowledge and relationship resource. Accordingly, we prefer investments where the CEO is interested in regular interaction with AngelVision in ways that we jointly agree will benefit the company. For example, our relationships with customers and vendors can help the company capture new customers, grow revenues, improve relations, identify opportunities, improve quality and service, reduce costs, and enhance productivity. Our knowledge and mentoring can be invaluable to CEOs in identifying management and organizational needs, recruiting, compensation, strategic planning, financial budgeting, and market positioning.
Convertible Preferred Equity & Convertible Notes
We seek to make investments of equity, which is the best form of capital for emerging, fast-growing, entrepreneurial businesses. We typically structure our investments in the form of convertible preferred stock and/or convertible notes. Other forms of investment will also be considered.
Direct Investments in Operating Companies
We only invest in fully independent operating companies, meaning all the proprietary and other significant assets necessary to support management’s strategic plan are owned directly by the company (not an affiliate or third party). No holding company investments.
The CEO and all key personnel are full-time, dedicated employees of the Company, or will be immediately following our investment. The CEO is a substantial shareholder of the company. All key employees will have appropriate financial incentives, whether through stock ownership or other compensation, and all will execute employment agreements with the company at closing that cover the duration of our investment.
AngelVision places at least one of its principals on the company’s board of advisors or board of directors. We require minority investor protections customary for angel investments, including the approval of AngelVision for certain important decisions including: the annual financial budget, raising equity, dividends, loans, employee compensation, acquisitions, joint ventures, asset sales, and significant contractual commitments.
Liquidation Preference & Conversion Rights
We require that our security have a liquidation preference over the company’s existing equity and shareholder loans. Our security has the right to convert into common stock in certain situations, and carries a dividend (in the case of stock) or interest (in the case of a convertible note) which accrues until sufficient cash exists to pay it, or upon our exit from the investment.
Substantial Ownership Stake
We expect our investment will represent at least a significant minority ownership in the company on a fully-diluted basis, typically not less than 25%. Given our target investment size of $100,000 to $2.5 million, companies in which we invest will usually have a post-money enterprise value of $1 million to $10 million. We will also consider majority equity investments. We require customary anti-dilutive protections.
Use of Funds
We invest capital where it can help the company bridge the gap across a critical threshold: one which must be crossed now, and for which the company is ready and capable but for the lack of capital. Examples include: the purchase of equipment or technology (to improve products, expand revenue capacity, reduce production costs); costs of new products (for patents, research and development, launch); hiring key employees (sales, technical, management); and costs to capture or carry out new customer contracts (inventory, distribution, fulfillment). Successfully crossing the threshold will confer to the company: (1) a decisive market position and competitive advantage; (2) profitability, or critical mass to achieve scalability; (3) a dramatic increase in value; and (4) a clear path for AngelVision to exit its investment.
Target Return on Investment
While our purpose is to help the company CEOs and their shareholders dramatically increase the value of their equity, we also seek superior returns for our investors, and our investments are structured with this balance in mind.
In order to achieve our return targets, a three- to six-year investment period is typical.
AngelVision strongly prefers to fully exit each of its investments in a single transaction. Accordingly, we do not structure our deals with the objective or intention of retaining an ongoing ownership interest in the company beyond the term of the original investment. We expect to exit in one of two ways: (1) through a partial or total sale to a strategic investor; or (2) via a recapitalization transaction with a financial investor such as a private equity group. We do not actively seek to invest in companies whose desired or likely exit is an IPO.