1. Angel Investor Performance & Strategy Data from the U.S. and U.K. Robert E Wiltbank, Ph.D. Associate Professor of Strategy Willamette University 503 715 7894 Wiltbank@Willamette.edu

2. Sample Frame: ‘ publicly seeking’ angel groups - Data from 117 different angel groups - 700 angel investors included in the data thus far, experienced 1,542 exits - Individual response rate: 15% Sample Bias? U.S. Sample: No Significant Self Selection Biases –Outcomes are uncorrelated to the response rate of a group. 2.6X for 7 high response rate groups (2/3 response) vs. 2.4 for low rate groups Median multiple was 1.2 for Hi rate groups, 1.4 for low rate groups Business Angel Data

3. Make just more than 1 investment per year Greater variation in UK work experience than US angels –They had founded a median of 2.5 companies (27% founded 0) –Most everyone (95%) had worked for at least a few years in a large firm –24% had operated as public servants for at least a year or two. Median of 10% of their personal wealth in both US & UK About a 2/3 vs. 1/3 split, active vs. passive investors In UK 2007/2008: Reviewed 20 opportunities made 3 investments 24% of the investments likely not made without tax incentives Group Affiliated Angel Investors

4. Distribution of Returns by Venture Investment Green Bars: U.K. % of exits in that Category (prelim) Blue bars: U.S. % of exits in that Category UK: Overall Multiple: 2.2X Holding Period: 3.6 years US: Overall Multiple: 2.6X Holding Period: 3.5 years Approx 22% IRR Approx 27% IRR Hold: 3.0 yrs. Hold: 3.3 yrs. Hold: 4.6 yrs. Hold: 4.9 yrs.Hold: 6.0+ yrs.

5. More entrepreneurial expertise (number of ventures founded) is significantly related to better outcomes. –In the U.S. 85% of angel investors are cashed out entrepreneurs –Somewhat lower in the U.K., a larger variation in the experience of angels U.K. Angels invest in later stage opportunities than U.S. Angels –15% vs. 32% seed stage, 36% vs. 18% early growth Entrepreneurial Expertise

6. Interaction: hi interaction had significantly less failure –Low interaction (quarterly/annually/rarely) failed 61% of the time –Hi interaction (daily/monthly/weekly) failed 44% of the time UK: Board Role: related to better returns (related to entre expertise) –Significantly better returns in regression analyses, the largest effect size Passive vs. Active –Passive was significantly related to smaller investments and worse returns Participation post investment

7. The Impact of Participation in the U.S. High = 1 or 2 times per month Low = 1 or 2 times per year High 3.7X (4.0 years) Low 1.3X (3.6 years)

8. The Impact of Time in Due Diligence Overall Multiple for High Diligence 5.9X (4.1years) Overall Multiple for Low Diligence 1.1X (3.4 years) Median: 20 hours 26% involved over 40 hours

9. Follow-On Investment from Same Angel Investor No 3.6X (3.3 years) Yes 1.4X (3.9 years) 30% of deals had follow on investments.

10. There is practical value in researching angel returns The strategic choices involved in angel investing influence the success and failure of angel investors. Research on the process and outcomes can help improve your next investment. The full reports are available online through the Kauffman Foundation and NESTA Angel Performance Project Robert Wiltbank Wiltbank@Willamette.edu

11. –Deal Flow is critical, and can be very spotty Especially true for individuals, still true for groups in smaller metro areas –Compensation and Capability issues in groups. Active vs. inactive members performing due diligence and oversight. –Capital Waves Strong early activity to max capacity often happens before successful exits –Negotiating leverage in growing deals Angel groups are doing some later stage round, but struggle to control terms –Dispersion of returns: sidecar funds and group cohesion. Spread out the “winnings”? Interfere in the action? Challenges in Angel Investing

12. Non Predictive Control in Angel Investing: –Select ventures that appear most capable of influencing critical market elements. Create and Influence localized markets, rather than compete in large “ideal” ones. –Emphasize the current means and capabilities of the venture rather than on plans for acquiring the “best” means to reach their original goals. Adjusting goals is less expensive than acquiring different means. Commitment is more important than Best. –Encourage the venture to make smaller investments that get to cash flow positive rather than investing in the resources suggested by market research to “hit plan.” Overhead trails growth –Avoid prediction as the basis for investment decisions. Emphasize affordable loss rather than maximizing expected values. Control is related to a reduction in failures, homeruns appear random. At the Core of Entrepreneurial Expertise