NewYork Angels

INVESTORS

Welcome
Why Join
Membership Criteria
Accredited Investors
Investment Criteria
Investment Process
Investor Resources
Frequently Asked Questions

WELCOME

The New York Angels is a member run organization of active investors. Consequently, we are looking for prospective members who will be active investors and participants in selecting and mentoring high quality growth companies. It is highly recommended that prospective members meet a current New York Angel member and get an endorsement for membership. A list of current members can be found under the About Us tab. Prospective members must submit an application, which will be reviewed by the membership committee. We are actively seeking members who share our vision and will contribute to our process. If you are interested in being considered for membership, please send an email with a biography to info@newyorkangels.com. If you seem to be a good fit, you will be contacted by our professional staff to discuss next steps, which will include meeting some members and attending at least one breakfast or screening meeting. There is no business solicitation allowed among members of the New York Angels.

WHY JOIN THE NEW YORK ANGELS?

Membership in the New York Angels offers investors many advantages. Some of them include:

Association with a premier angel group in New York City.
Increased deal flow to top emerging companies across a broad range of industries.
Improved deal terms as a result of investing collectively..
Introductions and access to the New York Angels network of over 75 successful New York City entrepreneurs and business leaders.
Opportunity to work as a team to evaluate and learn from each other during Due Diligence.
High quality monthly meetings with top notch company and educational presentations

New York Angels is a Non Stock Corporation and is managed by a Board of Directors elected by the membership who supervises a small professional staff. New York Angels is not a fund and does not invest as a group. Our members collaborate on due diligence and pool their investment funds to create critical mass; but each member makes individual investment decisions and understands that investments in early-stage, privately-held ventures are risky and can be highly illiquid. Typical angel investments can take years before capital is returned, and, in some cases, the company goes out of business and no money is returned. Serving on corporate boards can also expose an individual to substantial personal liability.

Membership Criteria

Our members:

Are all accredited investors (according to SEC rules– see below).
Have track records managing and building successful companies either as entrepreneurs or operating executives.
Are experienced in angel investing, leading Due Diligence, structuring investments, and coaching entrepreneurs.
Form an extensive peer network of domain expertise and contacts for subsequent funding, talent and technology.
Dedicate significant time and effort to NYA activities, including attending breakfast meetings and screening sessions, identifying and analyzing investment opportunities, and serving on NYA committees.
Agree to invest at least $50,000 and participate in at least one NYA investment per year.
Understand the risk associated with angel investing.

Securities and Exchange Commission

For more information on being an accredited investor or regulations regarding private stock offerings, please consult your attorney and visit www.sec.gov.

Accredited Investors

Under the Securities Act of 1933, a company that offers or sells its securities must register the securities with the SEC or find an exemption from the registration requirements. The Act provides companies with a number of exemptions. For some of the exemptions, such as rules 505 and 506 of Regulation D, a company may sell its securities to what are known as "accredited investors."

The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:

A bank, insurance company, registered investment company, business development company, or small business investment company;
An employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
A charitable organization, corporation, or partnership with assets exceeding $5 million;
A director, executive officer, or general partner of the company selling the securities;
A business in which all the equity owners are accredited investors;
A natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase;
A natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
A trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

INVESTMENT CRITERIA

Before joining the New York Angels, you should make sure that our investment criteria and process are in alignment with your expectations. The New York Angels invest between $100,000 and $1,000,000 in early stage companies. We are looking for companies that have an established proof of concept and are poised for growth. We have invested across multiple industries but have a core strength in business products & services, media, internet/web services, mobile, and financial services. We tend to avoid investments that require significant capital and regulatory approval in order to get their product to market, such as life sciences. Finally, almost all New York Angel valuations are below $5 million pre-money.

While the merits of each investment will vary, we evaluate ventures according to the following criteria:

Management team. We look for teams of high-quality entrepreneurs with a track record of leadership and performance - either in the company's specific industry or in prior entrepreneurial ventures. We also look at the team's passion for and commitment to the new business idea, and its ability to inspire confidence among future stakeholders, including employees, potential customers, and investors. As we will be working together as partners, the team's credibility is essential. In addition, the team must be open to and comfortable with receiving input provided by angel investors.
Market opportunity. We invest in solutions that address major problems for significantly large addressable target markets (i.e. a $500+ million market). The company must demonstrate a strategy to claim a reasonable share of this market.
Financials. We are looking for well thought out and reasonable revenue plans. Most financial plans do not achieve their revenue projections, so we will evaluate plans under the assumption of a revenue shortfall. Consequently, gross margin and cash positions are critical variables to manage.
Valuation. Most New York Angels deals have pre-money valuations that are below $5 million. The majority of our deal valuations are in the $2.0 million to $3.5 million range. A key reason for this is that it gives the investor the potential for a nice return at a modest exit valuation. It also allows for some protection against future round dilution. It is in the entrepreneur’s best interest to have the valuations of subsequent rounds increasing and avoiding bad will and anti-dilution ratchets.
Use of proceeds. Funds must be used to accelerate the company's achievement of key milestones that increase the company's value. We often fund activities that include research and product development, building a sales and marketing infrastructure and hiring key executives.
Growth potential. We look for companies that can grow quickly and manage the scale necessary to succeed. The company must demonstrate a plan to generate significant profits beyond the initial product idea. Is there a strategy to achieve multiple sources of revenue?
Competitive advantage. The company must have some proprietary features that distinguish it from potential competitors or provide barriers to entry that prevent other companies from capturing customers with a similar offering. Attributes that convey competitive advantage include intellectual property protection, exclusive licenses, exclusive marketing and distribution relationships, strong brands, scarce human resources (i.e. knowledge and skills), and access to scarce raw materials.
Fit. Our group members - all accredited individual investors - have significant executive experience in a variety of fields. One of the benefits of working with angel investors is the active coaching and contact network that such investors can provide. As such, there must be a fit between members of our group and the company.
Technology. We prefer to invest in first-of-a-kind new ideas, rather than incremental enhancements to common products and services. Is this a nice-to-have, or a need-to-have product or service? However, we approach highly complex, esoteric technologies with caution. The concept behind the technology must be proven and verifiable. Further, we avoid science projects that don't demonstrate a clear path to commercialization. Any breakthrough innovation must be accompanied by a strong business plan.
Exit strategy. Our members typically seek returns of at least five times their initial investment, within five years. This level of return on investment is essential due to the high risk and likelihood of failure among early stage ventures. Thus, a clearly articulated exit strategy - how angel investors will extract such returns - is essential. For example, do you plan to sell the company to an established corporation in your industry? Or will the exit be through subsequent rounds of financing - venture capital or the public markets? Angel investors are not just interested in the strategy, but more importantly in the how - the operational strategy that shows specific steps that will be taken to achieve the exit.

INVESTMENT PROCESS

The following is a brief summary of the New York Angels investment process:

Apply online via Gust.com The company will complete a one page executive summary outlining the key characteristics of the company. We will review the application and determine if it is a good fit for our group. If it is deemed a good fit, then the company will be invited for an initial screening presentation. It is always preferable to have a member of the New York Angels sponsor the company to attend screening.
Screening meeting. Screening is held once a month and will consist of a 15 minute presentation to approximately 10 members. The top three or four companies from screening will be asked to present to the full membership at breakfast in two weeks.
Breakfast Presentation to membership. A final 20 minute presentation will be made to the entire membership. If there is sufficient interest from the membership, then the company will be invited back for a Discovery session.
Discovery. Discovery is a one hour meeting where a more in depth discussion will occur on the key issues affecting the future success of the business. No additional preparation is necessary for Discovery. If there is sufficient interest following Discovery, then Due Diligence will commence.
Due Diligence. During Due Diligence, interested investors will verify the statements made in the business plan, presentation, and financial projections. They will thoroughly research the team's background and track record. An initial discussion of valuation and terms will happen early in Due Diligence to make sure the two parties are within working distance of each other and that Due Diligence can proceed.
Term sheet negotiation. After successful completion of the due diligence process, interested angel group members will present a term sheet that defines the structure of the investment deal - including type of equity and board of directors representation, using industry standard terms and provisions.
Funding & Beyond. When all parties are satisfied with the terms and language contained in the term sheet, the deal can be executed. Closing the deal is only the beginning of the angel funding process. It is expected that investors will provide the company with access to their network of value-added contacts and offer their guidance for the growth and success of the venture.

Investor Resources

Before becoming an angel investor, we recommend that you do research to maximize your potential for success. There is a wealth of information available that can help get you started and understand the risks and rewards of angel investing.

The New York Angels sponsors an educational series that is open to investors and entrepreneurs. In order to learn more about the next presentation go to: www.meetup.com/NY-Angels

The following is a list of books and links, compiled by the New York Angels members.
Winning Angels: The 7 Fundamentals of Early Stage Investing by David Amis and Howard Stevenson
Angel Investing: Matching Startup Funds with Startup Companies by Mark Van Osnabrugge and Robert Robinson
Early Exits: Exit Strategies for Entrepreneurs and Angel Investors (But Maybe Not Venture Capitalists) by Basil Peters
Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Feld
Angel Capital Association: www.angelcapitalassociation.org
Kauffman Foundation: www.kauffman.org
www.angelblog.net
The Frank Peters Show: www.thefrankpetersshow.com

New York City Start-up Information

Tech Meetup: www.meetup.com/ny-tech/
Startup Digest: www.startupdigest.com
Gary's Guide: www.newyork.garysguide.com/events

Early Investing Blogs

FREQUENTLY ASKED QUESTIONS

How long does it take to join the New York Angels? Prior to becoming a member, it is recommended that prospective members meet current members of the New York Angels. A list of current members can be found under the About Us tab. A prospective member will also be asked to attend at least one screening and one breakfast meeting in order to see if the New York Angels is right for them. The entire process should take a month.

What is angel investing? Angel investing is early stage investing in private companies. It generally is the capital financing after friends and family and before venture capital. Because of the early stage of investing, angel investing is very risky and illiquid.

Who are angel investors? Angel investors are wealthy individuals who invest in high risk, early stage ventures by reserving a portion of their total investment portfolio to provide emerging companies with seed and startup capital through direct, private investments. Their goal is to achieve higher returns than the typical public markets provide. Most angels are active investors - who contribute their time and experience, as well as offer introductions to valuable contacts essential to the company's success - because they enjoy the thrill of helping entrepreneurs grow their businesses.

What if I do not make an investment during the year through the New York Angels? The New York Angels are looking for active members. If you are not making investments or contributing to the growth of the group, then the New York Angels is not the right group for you.

In what dollar increments are angel investments made? Angel investing is an extremely risky asset class and should not be made if the investor is unable to absorb a complete loss of their investment. Each individual makes their own investment decision on where and how much to invest. In general, angel investments are made in increments of $25,000. The New York Angels expects all members to invest $50,000 a year in NYA deals.

How do I reduce the risk of angel investing? Angel investing by nature is a risky proposition. Like other investment classes, it has been shown that risk can be reduced by diversifying across a broad portfolio of angel investments.

Entrepreneurial Resources

Before submitting your business plan, we recommend that you do research to maximize your potential for success. It is highly recommended that you do research to determine what capital options are available and how best to prepare to have success raising money.
The New York Angels sponsors an educational series that is open to investors and entrepreneurs. In order to learn more about the next presentation go to: www.meetup.com/NY-Angels

The following is a list of books, links and articles compiled by the New York Angels members.
4 Steps to the Epiphany by Steven Blank
Reality Check by Guy Kawasaki
Attracting Capital from Angels by Brian Hill and Dee Power
Term Sheets & Valuations - A Line by Line Look by Alex Wilmerding
Definitive Guide to Raising Money from Angels by Bill Payne The Seven Deadly Sins of Powerpoint Presentations
Angel Capital Association: www.angelcapitalassociation.org
Kauffman Foundation: www.kauffman.org
Entrepreneur Magazine: www.entrepreneur.com
Wilson and Sonsini www.wsgr.com Go to entrepreneurial services
New York Angels Chairman David Rose video on pitching VC's: http://www.ted.com/talks/lang/eng/david_s_rose_on_pitching_to_vcs.html
Term Sheets & Valuations - A Line by Line Look by Alex Wilmerding
Definitive Guide to Raising Money from Angels by Bill Payne