You are previewing Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups.
O'Reilly logo
Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups

Book Description


"The world of entrepreneurial startups is where the most exciting and creative action is happening in today's business world, which is why I was a strong supporter of the JOBS Act of 2012. No wonder millions of people are wondering how they can get involved as investors. There's no better place to start than by reading David S. Rose's Angel Investing."

—U.S. SENATOR CHARLES E. SCHUMER, Senate Finance Committee

"From the best methods for finding and picking tomorrow's big winners to proven techniques for adding value to any business you invest in, Angel Investing provides readers with everything they need to know to get started in this fascinating, fun—and lucrative—business arena."

—DAVID BACH, #1 New York Times bestselling author of The Automatic Millionaire and Start Late Finish Rich, Angel Investor

"As an angel investor and a long-time fan of David S. Rose, I was delighted to hear he finally captured his wit and wisdom in the pages of a book. David's witty stories and angel investing principles — as well as his unsurpassed knowledge of his field — are teaching me so much more about investing than I've learned over the years doing it!"

—BARBARA CORCORAN, Real Estate Mogul, Shark Tank star, Angel Investor

"This is the most comprehensive and readable guide to angel investing ever written. The chapter on valuation and expectations lays out a clear framework for understanding one of the least well-known pitfalls in the angel world. And its emphasis on creating a win-win relationship with the entrepreneur is at the heart of being a long-term successful angel—and continuing to see the best deal flow. I recommend this book to anyone even thinking about making or receiving angel investments."

—HOWARD L. MORGAN, Founding Partner, First Round Capital

"Angel Investing is an engaging, easy read, full of real stories and hard numbers, actual cases and a whole lot of good advice. David S. Rose brings tons of real-world knowledge to the subject that makes this required reading for every new angel."

—TIM BERRY, Author of Business Plan Pro, Entrepreneur, Angel Investor

"Anyone with a checkbook can be an angel investor, but it takes insight to do it well. David S. Rose has written a terrific new book that will help would-be angels make money, rather than lose it. From explaining the value of diversification, to tips on evaluating deals, to offering up plans to attract good deals, Angel Investing will help you move from a money-losing amateur to a money-making professional angel. And if you're an entrepreneur looking for angel money, you should read this book too. It will help you understand what knowledgeable angels are seeking and how they will evaluate you."

—SCOTT SHANE, author of Fool's Gold? The Truth Behind Angel Investing in America

Table of Contents

  1. Cover Page
  2. Title Page
  3. Copyright
  4. Dedication
  5. Contents
  6. Foreword
  7. Introduction
    1. Why Angel Investing Is About to Take Off
  8. PART I: The Basics of Angel Investing
    1. 1: The 25 Percent Annual Return
      1. What Exactly Is Angel Investing?
      2. Can You Really Make 25 Percent a Year?
      3. Who Can Be an Angel?
      4. . . . And Who Should Be an Angel?
      5. Getting Started in Angel Investing
      6. Risks in Angel Investing
      7. Types of Angel Investors
    2. 2: Plus, It's Really Fun!
      1. Keeping Up with the World
      2. Entrepreneurship without the Responsibility
      3. The Joy of Giving Back
      4. The Social Side of Angel Investing
    3. 3: The Portfolio Theory of Angel Investing
      1. Truth 1: Most Startups Fail
      2. Truth 2: No One Knows Which Startups Are Not Going to Fail
      3. Truth 3: Investing in Startups Is a Numbers Game
      4. Truth 4: What Ends Up, Usually Went Down First
      5. Truth 5: All Companies Always Need More Money
      6. Truth 6: If You Understand and Follow Truths 1 to 5, Angel Investing Can Be Very Lucrative
    4. 4: The Financial Life of a Startup
      1. Financial Stages of a Startup
  9. PART II: The Nuts and Bolts
    1. 5: Develop Your Deal Flow
      1. Personal Connections
      2. Angel Groups
      3. Meetups
      4. Business Plan Competitions
      5. Startup Conferences and Launch Events
      6. Accelerator Demo Days
      7. Online Deal Sources
      8. Deal Brokers
      9. What to Expect When You Meet a Founder
    2. 6: Bet the Jockey, Not the Horse
      1. What Makes a Great Entrepreneur?
      2. Are Startups a Young Person's Game? How Young?
      3. Serial Entrepreneurs versus First Timers
      4. What About Tech Savvy?
      5. What About Education?
      6. Warning Signs of a Weak Founder
    3. 7: Here Comes the Pitch
      1. Strength of the Management Team
      2. Size of the Opportunity
      3. Product or Service
      4. Other Issues
      5. Where Is My Money Going?
      6. Materials You Should Expect to See During the Pitch Process
      7. Summary Financials
    4. 8: Look Under the Hood and Lead a Deal
      1. Leading a Deal
    5. 9: Valuations and Expectations
      1. The Four Simple Numbers: Basics of Investment Math
      2. How Much Should You Invest?
      3. What Target Rate of Return Should You Aim For?
      4. What Is the Company Worth When You Invest?
      5. How Do Initial Valuations Affect an Angel's Ultimate IRR?
      6. Changing Valuations During a Round
    6. 10: Investment Rounds and Their Forms
      1. How Equity Investments Work
      2. The Discounted Convertible Note
      3. Fine Points of Investing in Discounted Convertible Notes
    7. 11: The Art of the Angel Deal
      1. Integrity and Knowledge
      2. Relative Power Position and Personal Style
      3. The Question of Control
      4. Red Flags in Deal Negotiation
    8. 12: Term Sheets and Closing
      1. Term Sheet for Convertible Notes
      2. Term Sheet for Convertible Preferred Stock
    9. 13: After the Investment
      1. Monitoring Your Company
      2. Thinking About Your Portfolio as a Whole
      3. Making Follow-On Investments
      4. Adding Value to Your Investment
      5. Serving on a Company Board
    10. 14: Exits and Other Unicorns
      1. When a Company Fails
      2. When a Company Is Acquired
  10. PART III: Your Place in the World of Angels
    1. 15: The Entrepreneurship Financing Ecosystem
      1. Government Grants
      2. Economic Development Agencies
      3. Business Plan Competitions
      4. Accelerators
      5. Funding Platforms
      6. Intermediaries
      7. Super Angel Investors
      8. Angel Groups
      9. Venture Funds
      10. Venture Debt Lenders
      11. Private Equity
      12. Corporate Venture Groups
    2. 16: Building Your Angelic Reputation
      1. Create Your Profile
      2. Write a Blog
      3. Answer Questions Online
      4. Attend Events in Your Local Startup Community
      5. Participate as a Judge, Mentor, or Panelist
      6. Pay It Forward by Advising Startups
    3. 17: Joining an Angel Group
      1. How Angel Groups Operate
      2. How Smart Entrepreneurs Work with Angel Groups
      3. Angel Group Money Matters
      4. The Future of Angel Groups
    4. 18: Impact Investing
    5. 19: Sit Back and Let Someone Else Do the Work
    6. 20: Crowdfunding and the Global Revolution
      1. But Wait! Here Comes Equity Crowdfunding!
      2. What Can We Expect to See with Equity Crowdfunding?
  11. A: Angel Screening and Valuation Worksheet
  12. B: Angel Investment Due Diligence Checklist
  13. C: Gust Convertible Note Term Sheet
  14. D: Gust Series Seed Term Sheet
  15. E: Gust Revenue-Backed Note Term Sheet
  16. F: International Angel Investor Federations
  17. G: Major Regional Angel Groups
  18. H: Angel Investing Blogs and Resources
  19. Glossary
  20. Acknowledgments
  21. Index