Thursday 12 September 2013

Angel Fund Key Investment Criteria





Welcome to the first Symfonie Angel Investing blog! The purpose of this blog is to share our investment philosophy, highlight some of our experiences as an angel investor and draw attention to news we consider to be relevant and important to not only to angel investors but also to entrepreneurs building and financing businesses. 

Before I launch into the first topic for this blog, I want to take a moment to express my deep gratitude to Bruce Pales, CEO of 360Cities  (www.360cities.net), for his inspiration and encouragement.  Bruce has been a big supporter the Symfonie Angel Ventures project (http://www.slideshare.net/msonenshine/symfonie-pragueangels-final-20120709). During one of our many conversations over the past few months, Bruce encouraged me to start a blog.  "Welcome to the internet and the world of social media networks," Bruce said with a smile, explaining to me the virtues of web-based marketing.

 Bruce embodies much of what I respect in an entrepreneur.  He is innovative and incredibly passionate about his product and the business he and his colleagues are building. The internet made Bruce's business possible, so it comes as no surprise he genuinely understands the seemingly endless possibilities the internet offers.

The genesis for Symfonie Angel Ventures is a conversation I had with my colleagues Pavel Kohout, Michal Pajr and Jitka Rombova.  Pavel, Michal and Jitka made a series of angel investments over the past few years and noticed a growing population of investors in Central Europe who derived personal satisfaction as well as financial rewards from making angel investments.  In their view, what is distinctly missing, and what would benefit investors, is a vehicle that enables them access to the professional structure and discipline associated with a well run investment process, along with benefits of risk reduction through diversification.  Hence, Pavel Michael, Jitka and I conceptualised Symfonie Angel Ventures.

We've recently begun the task of codifying our investment criteria and our investment process.  I offer the first output of this exercise.  In the coming weeks, I will expand on these principles and how we go about mapping our investment decisions to our investment criteria.  I've posted the criteria on slide share.net http://www.slideshare.net/msonenshine/angel-fund-investment-criteria-201309-v11.  I welcome feedback and comments.




Angel Fund Key Investment Criteria

  • The entrepreneur has a demonstrated understanding of the product and the industry in which he/she operates.

  • The Angel Fund investment committee understands the product and the industry in which the company operates.

  • The proposed product or service is readily marketable in the near term.

  • There is an identifiable, proven demand for the product or service.

  • The product or service has unique features and benefits that provide competitive advantage versus similar products and services.

  • The product or service can be produced cost efficiently in small quantities.

  • Changes in technology are likely to positively impact the product, the service and the company – either by fostering new demand or by improving the ease and cost of production and delivery.

  • The project is not highly capital intensive.  Capital investment by the Angel Fund is sufficient to fund the company’s next stage of growth and development.

  • The project’s success is not contingent on a series of continual capital raising.

  • The company can be financially self sustaining in the near term.

  • The Angel Fund can add value to the project by taking an active role in the management and development of the company.

  • The business plan includes putting in place the processes and company organisation that will attract additional capital or facilitate an exit strategy.

  • The business is scaleable – it can be developed, and grown over time.

  • The business can be saleable – either via a trade sale or management buyout, sale via the private equity markets or sale via IPO.  
  • Possibilities to exit within 5 years must be identifiable.

  • The business must be  capable of generating profits that would be the catalyst for fundamental, cash-flow based valuation.

  • Corporate governance, fiscal transparency and legal protections for the Angel Fund must be in place.

  • The company’s founders and key managers successfully pass due diligence and background checks.

  • The company has no significant potential legal challenges to its property and intellectual capital.

  • The company faces no significant legal or regulatory barriers to its business plan in the near term.

  • Minimum return threshold is 35% per annum for the Angel Fund.

There is no assurance that Symfonie Capital will achieve its objectives or that its investment process or risk management will be successful.  Investors may lose money.  No representation is made that any of the Funds will or are likely to achieve their respective objectives or that any investor will or is likely to achieve results comparable to any that may be shown or will make any profit at all or will be able to avoid incurring substantial losses.  Past performance is no guarantee of future results.