Discussion Topics

What Is a Startup Ecosystem? A startup ecosystem is a network of startups, investors, and others who come together to foster startup formation and growth. The network fosters innovation through shared resources such as capital, talent, and mentorship. At the core of the network are startups led by founders who…

University Angel Network vs. Traditional Angel Network The university angel network has similarities and differences to a traditional angel network. They both consist of a group of investors interested in funding startups. They both want to make a return on their investment. They both want to socialize with others. They…

Finding the Champion In launching an angel network at a university, it takes a champion to see it to fruition. In addition to a business school sponsor and five check-writing angels, you’ll need someone who will be the champion for the group. The champion needs to be well connected with…

Retaining Members In running a university angel network, the attrition rate is often lower than for non-university angel networks. The university group has a great answer for “Why invest in startups?”. Many members join to support the university. The group’s primary purpose is to provide the student with an educational…

Offline vs. Online Meetings In running a university angel network, consider both offline and online meetings for the members.  Online meetings allow you to run education sessions, screening meetings, and pitch sessions along with diligence follow-up. Since the members need not travel to campus, these can be short half-hour calls…

Fund Documents In setting up a university angel network, you’ll need fund documents for the prospective members to review. You’ll need to establish a legal entity for the fund, typically an LLC. After that, you’ll need to write the company agreement documents.  This includes the formation of the fund, its…

Why Set Up a Fund? Consider setting up a fund early on for your university angel group. For every one alumni who joins the angel group, there will be three who will join the fund.  Angel investing takes time and many will not be able to participate in pitch meetings…

Student Participation Is Important Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In setting up a university angel group, the student experience is the primary objective. To ensure the success of the group, set up a program for…

Where Does Making a Return Fit In? Many angel investors want to support their university group, local entrepreneur ecosystem, and more. The primary goal is building up their local community or network. In addition to supporting the community, the investor needs to make a return on the investment.  Investors will…

What Is the Mission of the Group? In starting an angel group at a university, the key mission of the group is not to make money. Supporting the university by providing students with a quality academic experience and job placement is the primary goal. Alumni who join the angel group…

Providing Mentorship to Startups Angel groups are often asked to provide mentorship to startups. Here are some best practices for engaging your angel investors into mentorships with startups: Start by matching the investor with the startup based on the business model, sector, and stage of business. Identify a specific challenge…

Who Else Should You Involve? In launching a university angel network there are legal considerations specific to the university to keep in mind.  A university is a non-profit and therefore cannot participate in startup investing. The first step in launching a group is to contact the university legal counsel about…

The Two Keys to Success A university angel network is a group of investors formed around the affinity to a university. The primary goal of it is to provide student experience and job placement. Making money from the investments is secondary. There are two keys to successfully launching an angel…

Why Start a University Angel Network? A university angel network is a group of investors formed around the affinity to a university. It typically consists of alumni and supporters of the university. So why start an angel network at a university? It’s a great way for alumni to connect back…

Why You Should Move Your Angel Group Online As the world moves online, so you should move your angel network online as well. This includes your screening process, presentation meetings, diligence process, and education sessions.  The screening process can be made more efficient by capturing 1-3 minute pitch videos from…

Meeting Considerations In setting up your angel network you’ll need to set up the meetings. Here are some key points to consider: 1. How many deal flow cycles are you planning? 2. Are you online, in person, or both and at the same time? 3. How will you set up…

Working With Other Angel Groups In setting up an angel network, it’s important to build relationships with other angel groups. Here are some key points to consider: 1. Other angel groups can provide additional deal flow to your group. 2. They can provide follow-on investment for your funded deals. 3….

Sponsorship Issues Sponsors bring needed financial support to the angel network. Here are some key points for managing sponsors: 1. Keep the number of sponsors low so it’s easier to manage. 2. Allow a limited number of sponsor representatives to join the meetings so they don’t overwhelm the members. 3….

Consider Service Providers In setting up an angel network, it’s important to have support from services providers such as lawyers, accountants, and financial advisors. Startups will need legal, accounting, and financial support. Review your community for current service providers who are already helping the startups. Assess the skills of the…

Educating the Members In running an angel group, it’s important to educate the new members on how to invest in startups. Most new members will not have experience with startup funding. It’s important to set up an education program for the members. The members will receive education through the process…

Communicating With Members In running an angel group, it’s important to communicate your membership criteria and organizational structure to prospective members. The website and associated documents should make clear not only the membership criteria, but also the process to become a member, and how the group is structured. It also…

Setting Membership Criteria In setting up an angel network, you need to determine the membership criteria. Here are some points to consider:  The Securities and Exchange Commission or SEC sets the investor criteria to allow for investments into startups. Members must meet the SEC criteria for accredited investors. Make clear…

Funding the Angel Network Program In setting up an angel network, you need to fund the program.  Here are some funding sources to consider:  Most angel networks charge a membership fee to cover the expenses for running the program.  For those groups using the fund structure, a management fee or…

Choosing the Investment Structure In setting up an angel network, you need to choose an investment structure. Here are some structures to consider:  Individual investments — the members can each decide if they want to invest and how much to invest in each deal. This allows for maximum flexibility for…

Choosing the Regulatory Environment As angel networks expand across the globe, those groups outside the U.S. should also consider their local regulatory environment before launching an angel network. Here are some points to consider: 1. Is there a legal environment that allows for investment structures for venture funding? 2. Are…

Choosing the Legal Structure There are several legal structures to use when setting up your angel network. Most angel networks form a Limited Liability Company or LLC. This gives the angel network a legal entity with which it can conduct business. The members often pay an annual fee to fund…

Choosing the Organizational Structure There are two ways to organize your angel network: member-led or manager-led. Member-led groups let the members source deals, lead the investments, and recruit the members. They hire staff members to handle the administrative tasks. Manager-led groups hire experienced professionals to perform key functions such as…

Challenges in Angel Investing Angel investing can be fun and financially rewarding to the investor as well as helpful to the startup. It can also be challenging. Here are some challenges to consider: Angel investing requires hands-on work with the startups not only in funding but also in supporting them…

The Benefits of an Angel Network An angel investor will find many benefits in joining an angel network. The angel network can build resources to share with the angel such as due diligence. This is time-intensive work, so it helps to share the load. Angel networks provide more and better…

Should You Start an Angel Network? Before launching an angel network, assess your community as follows: 1. Do you have accredited investors interested in startup investing? 2. Do you have any investors who will take the lead on diligence and investing for each deal? 3. Do you have a champion…

In running an angel group, it’s important to provide regular reports for the investors about the investments as well as the state of the group.  For individual investments, negotiate regular updates from the startups to include the following: – Sales reports tracking leads, pipeline, and closed sales on a monthly…

A key part of angel investing is negotiating terms with the startup. It’s important to take time to negotiate good terms for the investors in your group. Key areas to focus your negotiations include the following: Valuation – this is the most important term as it determines equity ownership and…

In running an angel network, it’s important to drive the funded startups toward an exit. Investors funded the companies with an expectation of a return typically in the 5 to 7-year timeframe. While some startups will fail and shut down completely, most startups continue as ongoing businesses. It’s important to…

After investing in a startup, it’s important for the angel investor to determine their role with the startup. There are several roles to consider: The investor can take an advisory board seat and provide coaching to the startup on an informal basis. The investor can take a board seat and…

There’s risk in startup investing as most investments don’t pay a return to the investor. In running an angel network, one must take steps to mitigate liability. It’s a best practice to have all members sign liability waivers stating they understand the risk of startup investing and take responsibility for…

 In running an angel network, it’s important to set up a due diligence process. Diligence can take a substantial amount of time, so there needs to be a prescribed process for the members to follow. The process needs to be led by those with experience in diligence and startup investing….

In running an angel network, it’s important to set up several sources of startups seeking funding called deal flow. The best source is angel group members. Continually check with your members to see what deals they’ve seen or heard about. Other sources include the following: Incubators and accelerators often have…

The deal screening process is a key program for an angel group. The process needs to capture all available deals in one place for review. For each deal, sufficient information must be provided by the startup including their revenue, sector, product stage, and fundraise sought. The screening process can be…

In running an angel network, consider using online events for the program. Here are some key tools for creating successful online events: A website. This keeps track of scheduled events with information about each one including the name of the event, description, who should attend, and associated documents. Event registration….

Warrants give the holder a number of shares to be exercised over a specified period to buy the company’s stock.  Warrants play a key part in venture debt. Companies offer warrants in exchange for a lower interest rate on the debt. Investors offering venture debt use warrants to gain access…

Litigation funding provides investments to businesses seeking to litigate a lawsuit.  Lawsuits come from businesses suing other businesses, tenants suing landlords, startups defending their intellectual property claims, and more. The one pressing the lawsuit needs funds to carry it through the courts.  Investors receive a return when the business wins…

Revenue-based funding makes a startup investment and pays back the investor at the rate of top-line revenue. This aligns the investor and founder to the same goal – to create a business and grow sales.  The higher the sales, the faster the payback to the investors and the higher the…

Salary-based funding makes a startup investment and pays back the investor at the rate of compensation the founders take. This aligns the investor and founder on the same goal, to create a business that can sustain itself and pay the team. The investors receive an agreed-upon percentage of any salary…

As your company grows and the equity becomes worth more, there comes a time to switch over to debt funding. There are several forms of debt to consider. Each one is used for a different application.  The primary options are as follows: 1. Traditional bank loan – requires a personal…

Growth startups can raise not only funding for equity but also funding for debt called venture debt. Venture debt doesn’t dilute the founders and provides capital to continue the growth. Here are some key terms and conditions to know when looking for venture debt: There are term loans and revolving…

Venture debt is not for every startup or for all fundraises. It is best used in conjunction with an equity raise. The equity funding provides ongoing working capital that doesn’t need to be paid back. It works well between equity raises from institutional investors. The business must be up and…

Venture debt can reduce dilution and give your startup more runway. Here are a few pointers to see if venture debt is a good fit for your fundraise: It’s often used with equity funding for purchasing equipment, making acquisitions, or making up for funding not acquired through the equity raise….

Venture debt is on the rise in the startup world as more startups find it a useful part of their fundraise strategy. It’s a form of debt financing for venture-backed companies that lack the assets for traditional debt funding.   Venture debt has been around for as long as venture capital…

There’s an old saying in the angel world: If you want money, ask for advice. If you want advice, ask for money. In raising funding, most founders spend their time selling the idea to the investor. An alternative approach is to collaborate with the investor. The selling approach uses the…