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“Ten Commandments of
   Angel Investing”
What commandments might a “higher investing power”
pass on to angel investors, to help in their quest for
success in early stage company investing?

Although not necessarily etched in stone, we’ll take a
stab at what might be considered the “Ten Command-
ments of Angel Investing”: a set of basic rules for early
stage company investing.


                   “Ten Commandments of Angel Investing”
                          ©2012 Tech Coast Angels
I.
“Profit is the ultimate goal.”


          “Ten Commandments of Angel Investing”
                 ©2012 Tech Coast Angels
1. “Profit is the ultimate goal.”

   Angel investing is not charity.
   Invest to create successful companies.
   Invest Create Grow Exit (M&A or IPO).
   The goal is to yield profits for future investments.




                    “Ten Commandments of Angel Investing”
                           ©2012 Tech Coast Angels
II.
“Invest in great teams.”


        “Ten Commandments of Angel Investing”
               ©2012 Tech Coast Angels
2. “Invest in great teams.”

   Avoid single member “mad scientist” investment.
   Great entrepreneurs build great teams.
   Great teams can overcome most challenges.
   Try to find, and fund, great teams (business
    experience, business diversity, attitude).



                  “Ten Commandments of Angel Investing”
                         ©2012 Tech Coast Angels
III.
“Invest in big ideas.”


      “Ten Commandments of Angel Investing”
             ©2012 Tech Coast Angels
3. “Invest in big ideas.”
    “I skate to where the puck is going to be, not where it has been.”
                                -- Former NHL hockey all star Wayne Gretzky



    Look for big idea, where market is heading.
    Avoid the “me too” investment (similar ideas in
     crowded field).
    But: big idea must be backed up with data.



                         “Ten Commandments of Angel Investing”
                                ©2012 Tech Coast Angels
IV.
“Invest in large markets.”


         “Ten Commandments of Angel Investing”
                ©2012 Tech Coast Angels
4. “Invest in large markets.”
   Large markets allow for growing pains; “larger
    field”, more “playing time”.
   Large markets support inevitable competition.
   Even “somewhat successful” result might yield
    “large exit” in a large market.




                   “Ten Commandments of Angel Investing”
                          ©2012 Tech Coast Angels
V.
“Know the valuation range.”


          “Ten Commandments of Angel Investing”
                 ©2012 Tech Coast Angels
5. “Know the valuation range.”

   Angel investing is risky investing, don’t overvalue.
   Companies should be reasonably priced.
   Use “comps” of similar companies but always
    adjust for risk.
   Remember: failure more likely than success, don’t
    be afraid to walk away, there will always be
    another deal.

                   “Ten Commandments of Angel Investing”
                          ©2012 Tech Coast Angels
VI.
“Always do due diligence.”


         “Ten Commandments of Angel Investing”
                ©2012 Tech Coast Angels
6. “Always do due diligence.”
    “There are known knowns; there are things we know we know.
     We also know there are known unknowns; that is to say we know
     there are some things we do not know.
     But there are also unknown unknowns – the ones we don’t know
     we don't know.”
              -- Former United States Secretary of Defense Donald Rumsfeld


     Angel investing is full of “unknown unknowns”.
     Use your due diligence time to uncover them.
     Take nothing for granted, be thorough.


                            “Ten Commandments of Angel Investing”
                                   ©2012 Tech Coast Angels
VII.
“Support your companies.”


        “Ten Commandments of Angel Investing”
               ©2012 Tech Coast Angels
7. “Support your companies.”

   Keep “dry powder” for future investment rounds.
   Listen and advise where you add value.
   Help “keep the faith”: start-ups succeed with
    persistence and patience.




                  “Ten Commandments of Angel Investing”
                         ©2012 Tech Coast Angels
VIII.
“Create an investment portfolio.”


            “Ten Commandments of Angel Investing”
                   ©2012 Tech Coast Angels
8. “Create an investment portfolio.”

   If one or two out of ten or twenty are “homeruns”,
    you need a portfolio of co.’s to increase odds.
   Invest where comfortable but diversify.
   Be patient: a good investment portfolio takes time
    to develop.



                   “Ten Commandments of Angel Investing”
                          ©2012 Tech Coast Angels
IX.
“Know when to fold „em.”


        “Ten Commandments of Angel Investing”
               ©2012 Tech Coast Angels
9. “Know when to fold ‘em.”
“You got to know when to hold 'em, know when to fold 'em.
 Know when to walk away and know when to run.”
                      --“The Gambler” by Kenny Rogers


   Don’t throw good money after bad in deals.
   Don’t just chase the “homeruns” (100X exits).
   Reasonable returns in a reasonable timeframe
    (doubles, triples etc. keep you “in the game”).

                    “Ten Commandments of Angel Investing”
                           ©2012 Tech Coast Angels
X.
“Give more than you receive.”


          “Ten Commandments of Angel Investing”
                 ©2012 Tech Coast Angels
10. “Give more than you receive.”

   Always be teaching, as well as learning.
   Mentor and help entrepreneurs and startups, even
    those you may pass on, for investment.
   Those you help, may later help you one day.




                  “Ten Commandments of Angel Investing”
                         ©2012 Tech Coast Angels
I.                                                                   VI.
 “Profit is the ultimate goal.”                                            “Always do due diligence.”




             II.                                                                     VII.
 “Invest in great teams.”                                                  “Support your companies.”




             III.                                                                       VIII.
    “Invest in big ideas.”                                                 “Create an investment portfolio.”




             IV.                                                                    IX.
 “Invest in large markets.”                                                “Know when to fold „em.”



           V.                                                                          X.
“Know the valuation range.”                                               “Give more than you receive.”

                                  “Ten Commandments of Angel Investing”
                                         ©2012 Tech Coast Angels
Who are the Tech Coast Angels?

Tech Coast Angels, www.techcoastangels.com, the largest angel investor
network in the United States, provides funding and guidance to more
early‐stage, high‐growth companies in Southern California than any other
investment group. Since its inception in 1997, TCA members have focused on
building valuable companies, personally invested more than $100M, and
helped portfolio companies attract more than $1B in additional capital, mostly
from venture capital firms.

TCA members give companies more than just capital; they also provide
counsel, mentoring and access to an extensive network of potential investors,
customers, strategic partners and management talent.

TCA has more than 300 members, including its venture capital affiliates, in five
networks in Los Angeles, Orange County, San Diego, Westlake/Santa Barbara
and the Inland Empire.




                           “Ten Commandments of Angel Investing”
                                  ©2012 Tech Coast Angels

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Ten commandments of Angel Investing

  • 1. “Ten Commandments of Angel Investing” What commandments might a “higher investing power” pass on to angel investors, to help in their quest for success in early stage company investing? Although not necessarily etched in stone, we’ll take a stab at what might be considered the “Ten Command- ments of Angel Investing”: a set of basic rules for early stage company investing. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 2. I. “Profit is the ultimate goal.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 3. 1. “Profit is the ultimate goal.”  Angel investing is not charity.  Invest to create successful companies.  Invest Create Grow Exit (M&A or IPO).  The goal is to yield profits for future investments. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 4. II. “Invest in great teams.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 5. 2. “Invest in great teams.”  Avoid single member “mad scientist” investment.  Great entrepreneurs build great teams.  Great teams can overcome most challenges.  Try to find, and fund, great teams (business experience, business diversity, attitude). “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 6. III. “Invest in big ideas.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 7. 3. “Invest in big ideas.” “I skate to where the puck is going to be, not where it has been.” -- Former NHL hockey all star Wayne Gretzky  Look for big idea, where market is heading.  Avoid the “me too” investment (similar ideas in crowded field).  But: big idea must be backed up with data. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 8. IV. “Invest in large markets.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 9. 4. “Invest in large markets.”  Large markets allow for growing pains; “larger field”, more “playing time”.  Large markets support inevitable competition.  Even “somewhat successful” result might yield “large exit” in a large market. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 10. V. “Know the valuation range.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 11. 5. “Know the valuation range.”  Angel investing is risky investing, don’t overvalue.  Companies should be reasonably priced.  Use “comps” of similar companies but always adjust for risk.  Remember: failure more likely than success, don’t be afraid to walk away, there will always be another deal. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 12. VI. “Always do due diligence.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 13. 6. “Always do due diligence.” “There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don't know.” -- Former United States Secretary of Defense Donald Rumsfeld  Angel investing is full of “unknown unknowns”.  Use your due diligence time to uncover them.  Take nothing for granted, be thorough. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 14. VII. “Support your companies.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 15. 7. “Support your companies.”  Keep “dry powder” for future investment rounds.  Listen and advise where you add value.  Help “keep the faith”: start-ups succeed with persistence and patience. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 16. VIII. “Create an investment portfolio.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 17. 8. “Create an investment portfolio.”  If one or two out of ten or twenty are “homeruns”, you need a portfolio of co.’s to increase odds.  Invest where comfortable but diversify.  Be patient: a good investment portfolio takes time to develop. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 18. IX. “Know when to fold „em.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 19. 9. “Know when to fold ‘em.” “You got to know when to hold 'em, know when to fold 'em. Know when to walk away and know when to run.” --“The Gambler” by Kenny Rogers  Don’t throw good money after bad in deals.  Don’t just chase the “homeruns” (100X exits).  Reasonable returns in a reasonable timeframe (doubles, triples etc. keep you “in the game”). “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 20. X. “Give more than you receive.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 21. 10. “Give more than you receive.”  Always be teaching, as well as learning.  Mentor and help entrepreneurs and startups, even those you may pass on, for investment.  Those you help, may later help you one day. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 22. I. VI. “Profit is the ultimate goal.” “Always do due diligence.” II. VII. “Invest in great teams.” “Support your companies.” III. VIII. “Invest in big ideas.” “Create an investment portfolio.” IV. IX. “Invest in large markets.” “Know when to fold „em.” V. X. “Know the valuation range.” “Give more than you receive.” “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels
  • 23. Who are the Tech Coast Angels? Tech Coast Angels, www.techcoastangels.com, the largest angel investor network in the United States, provides funding and guidance to more early‐stage, high‐growth companies in Southern California than any other investment group. Since its inception in 1997, TCA members have focused on building valuable companies, personally invested more than $100M, and helped portfolio companies attract more than $1B in additional capital, mostly from venture capital firms. TCA members give companies more than just capital; they also provide counsel, mentoring and access to an extensive network of potential investors, customers, strategic partners and management talent. TCA has more than 300 members, including its venture capital affiliates, in five networks in Los Angeles, Orange County, San Diego, Westlake/Santa Barbara and the Inland Empire. “Ten Commandments of Angel Investing” ©2012 Tech Coast Angels