Angel Investing

By: Elizabeth Usovicz, General Manager of Transaction Commons, as part of a series she writes for ACA aimed at entrepreneurs, "Your Pitch is Just the Beginning."

Call it high optimism.  Every entrepreneur puts a positive spin on his or her situation occasionally. Maybe you’ve done it yourself: your deal with a big customer is only days away from closing; the next version of your product will be released in less than a month. Marketing is, after all, presenting a product, service or brand in the best possible light, and there’s nothing wrong with that. It’s crossing the line from positive spin into wishful thinking that leads to trouble.

When startups cross the line, it’s often in an effort to get to “yes” prematurely with an investor or business partner. Unfortunately, the results can be far-reaching.

By: Doug Doan, founder of ACA member Hivers and Strivers, an angel investment group that invests exclusively in companies started by military veterans. ACA is supporting the celebration of National Veterans Small Business Week with a Veterans Syndication Event on November 12 in Boston.

An important fact about American veterans is also the least reported and understood.  Our Army, Navy, Air Force and Coast Guard veterans are turning into superb entrepreneurs and are unusually successful starting and running new business enterprises.  Surprised?  You shouldn’t be. Many military vets use the very skills, leadership, and drive learned the hard way from service in wartime to build and run great companies.  Let’s call it Post Traumatic Growth or PTG. 

Companies such as Ridescout, founded by two West Point grads and combat leaders, brought the drive, determination, and fierce execution skill skills learned in the Army. They have been so successful in opening up a new market, their company was recently gobbled up by Daimler Benz, with a nice return for the angels involved.

By: George Bittlingmayer, professor of finance at the University of Kansas and member of Mid-America Angels

This blog post originally appeared as a column in RealClearMarkets 

The startup scene in Kansas City has grown by leaps and bounds in recent years, mirroring the upswing in cities nationwide. In fact, the big, welcome news of the last decade is that tech innovation hubs have expanded beyond Silicon Valley to cities from Austin to Pittsburgh and Boulder to Nashville. Unfortunately, those new, thriving ecosystems of entrepreneurs, incubators and early-stage investors may soon hit a headwind blowing in from Washington, D.C.

Angel investors, the first and often crucial providers of funding for high-growth startups, provided $24.8 billion in growth capital last year, not too far behind the $29.6 billion that came from venture capital. While the overall amounts are similar, angel investors play a distinct role, typically funding businesses earlier and with smaller amounts per company.

By: Marianne Hudson, ACA Executive Director

We have good news. Several ACA members have asked about the "1202" exemption that expired December 31, 2013. The Senate Finance Committee approved the 100% exemption of gains in investments in qualified small businesses earlier this month as part of its "tax extenders" bill. We have even better news - the extension is for two years and would be retroactive to January 1, 2014.

We’re looking out for you. The Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act still needs to be approved by the Senate and House, but it appears to have bi-partisan support. More details on the bill are in the Senate Finance Committee website.

For those of you who are not awar of this tax exemption, its formal name is Qualified Small Business Stock, and full IRS information is here.  If you don't know about it, at least make sure that your accountant does!  It can be a great tool to catalyze investment in job-creating startups and help our economy.

By: Marianne Hudson, ACA Executive Director

We had a great gathering of angel investors last week at the ACA Summit. The event in Washington, DC attracted more than 600 people, from 30 countries and 44 American states. Thank you to the Summit planning committee for putting together a terrific agenda and speakers, and also to our partners and sponsors, which added value and expertise to the event.  Everyone will have different highlights for the Summit, but here are mine:

  • Great networking events. Thursday evening’s ACA reception was at 1776 DC accelerator, with great food (from an entrepreneurial food incubator!) and opportunities to meet some of 1776’s entrepreneurs. I loved the reception for women investors at Foley Hoag law firm, as we saw a huge increase in the proportion of women at the Summit! The Canadian Embassy also hosted a great dinner for international guests, which also included a tour of Washington monuments.
  • Keynote presentation by Michael Chasen, co-founder of Blackboard, Inc and now CEO of SocialRadar. How many people can talk about leading a company from two people in a brownstone to 3,000 employees in a publicly traded company? His “5 Pieces of Unconventional Wisdom I Learned Building a $2B Company” had great insights and was hilarious.  

Want to find the best deals? The best exits?  Curious about syndicating on accredited platforms? How about getting answers to your questions about the new SEC rules on general solicitation and what you really need to do (from the SEC and from leading attorneys)?  Want to rub shoulders with some of the best and most successful angels in the world?

The world of angel investing is changing dramatically. To stay current with today's proposed rules and trends - and to hear from the best in the business, plan to be in Washington, DC March 26-28 for the 2014 ACA Summit - Angel Impacts:  Entrepreneurial and Economic Success.  (You can register here.)

We're inviting the media with lots of great stories about how angels support startup companies with passion, experience and funding. In 2012 angels invested nearly $23 billion in about 67,000 ventures. Read more about what reporters will be writing about here.

We hope to see you at the Summit, where hundreds of angels will gather to help determine the future of angel investing!  You will definitely bring home ideas you can implement immediately.

By: David Verrill, Hub Angel Investment Group, LLC & Chairman – Angel Capital Association

ACA is eager for more accredited individual investors to join our organization to benefit from the professional development events, deal flow tools, and resources for portfolio success that we offer, along with the ability to influence public policy that has a huge impact on angel investors.

Now until late-March we're offering savings of a blended membership and fees to the 2014 ACA Summit in Washington, DC, the world’s largest gathering of sophisticated angel investors, and the preeminent forum for interaction and knowledge‐sharing among accredited investors. This is a savings of $300! Individual investors who belong to accredited platforms that belong to ACA receive even larger savings ($500) for the membership/ Summit package.

We encourage all accredited individual investors who are angels or want to become angels to join. For more information, see our news release here.

I will be at the ACA Summit and look forward to seeing you there!

2013 was a great year for angel investors, including many ACA member angel groups. Several had successful exits, others made more investments than they ever have in a year, and new groups made investments for the first time.

It is important to celebrate these successes, which happened to members in all parts of North America. Here are some great examples:

IPOs:

ACA today provided guidance on the significance of angel group membership in connection with new standards for accredited investor verification. Under Securities and Exchange Commission (SEC) Rule 506(c), which becomes effective September 23, 2013, startups and emerging companies that generally solicit for investors will have heightened duties to verify that all purchasers are accredited.*

Rule 506(c) represents a significant change in securities law, and uncertainty about the verification process is of concern to members of the Angel Capital Association and the active angel community at large. ACA has been vocal in our objections to the rule’s safe harbors that would require sharing wealth or income data, but it is important to recognize that they are not the full rule. The SEC provided a significant and flexible approach for complying with this rule using a principles-based methodology. ACA is providing its guidance on how membership in an Established Angel Group may meet the requirements for a startup that uses general solicitation to verify that all investors are accredited under the principles-based methodology specified in Rule 506(c).

Earlier this month, Laura Baverman wrote an article in USA Today entitled "Time is Right to Consider Angel Investing".  I was tickled with the article because not only did it get the message to many potential angels that angel investing could be a great activity for them, but that it quoted a number of ACA members and friends - such as Dan Mindus of NextGen Angels, John May of New Dominion Angels, the managing team of Golden Seeds (great photo, by the way!), and Rob Wiltbank of Willamette University and the Angel Resource Institute, among others.

If you are new to angel investing or just starting to think about making these investments in innovative startups, I recommend that you talk with people you know who are angel investors, attend an angel group meeting near you to get an idea of how they work, and read up on how angel investing works with articles, posts, and books from experienced angels.  ACA and our members are here to help you as you learn about the fun, adventurous and fulfilling world of investing in and mentoring some really great entrepreneurs.

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