For Entrepreneurs
Funding process and investment criteria
Please review our Funding
Process and Investment Criteria
and if you believe your venture meets these criteria we would like to
hear from you. We would consider companies from any industry or US
location.
There is a one-time fee of $400 if invited to
present to the full membership meeting.
Funding Process
Self Assessment
Before submitting your business plan for our consideration, you must
determine if angel capital - and specifically capital from our group -
is right is for your company. Please review our investment criteria to
evaluate that fit.
Online Application
Our business plan application is designed to extract the most important
details about your business, so our internal review committee can decide
if your company should: a) be invited for an initial screening
presentation; b) be referred to one of our partners for help in evolving
your business plan; or, c) be turned down as unlikely to receive funding
from our members. The information is uploaded through our
password-protected web-site . You do not need to do that in one sitting
since you can save your work and resume it any time later on. The
information will remain invisible to us until you decide to publish it.
You can also make changes there any time later on. Each month we review
30 or more business plans and select 6-8 prospective candidates to
invite to our monthly deal-screening meeting.
Screening Meeting
After reviewing your business plan, our internal committee will
determine if your idea could be of interest to our members. If you
succeed, you will be invited to present to the full membership. Be
prepared to deliver a ten minute investor presentation and answer
questions posed by this group for an additional ten minutes. We usually
look at 6-8 presentations during that meeting and devote close to 1 hr
on discussing the positive sides and the concerns on each business
opportunity. After the meeting each presenter is notified on the results
from the investors' discussion and receives feedback. 3-4 of the
candidates receive an invitation to present their business opportunity
to our full membership.
Presentation To Membership
Following the screening meeting, you will be invited to present to our
full membership. Prepare to deliver a 10 minute presentation and address
questions for an additional 10 minutes. The objective is to make the
people excited just enough to want to learn more about your business -
in a subsequent Due Diligence meeting (should there be any interest) you
will have the chance to go into the details of your business with no
time limit. After all the presentations we excuse the entrepreneurs and
have an extensive discussion on each business opportunity. The investors
express their interest by filling their contact information on interest
sheets, which information is provided to the entrepreneurs for their
following up.
Due Diligence
The investors who expressed interest during the meeting may form a Due
Diligence team and assign a leader to facilitate the process. The
entrepreneur is expected to perform an active role in this process,
especially if a volunteer to coordinate the Due Diligence has not
emerged. During due diligence, interested investors will verify the
statements made in your business plan, presentation, and financial
projections. They will thoroughly research your team's background and
track record. The persistence and timeliness in following up with the
investors will also be an important part of the evaluation process.
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. But remember, closing the deal
is only the beginning of the angel funding process. Now you have access
to a network of value-added contacts and experienced professionals who
can provide essential guidance for the growth and success of your
venture. Adhering to the responsibilities at this stage will enable you
to get the most from your angel relationship.
Investment Criteria
While the merits of each investment will vary, we evaluate your
venture according to the following criteria:
Management team:
Business track record and balanced functional skills
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 your team's
passion for and commitment to the new business idea, and your ability to
inspire confidence among future stakeholders, including employees,
potential customers, and investors. As we will be working together as
partners, your team's credibility is essential. In addition, your team
must be open to and comfortable with receiving input provided by angel
investors.
Market opportunity:
$200M+
We invest in solutions that address major problems for significantly
large target markets (i.e. a $200+ million market). Your company must
demonstrate a strategy to claim significant share of this market (i.e.
20%+). Clear understanding of the user and the customer is required.
There are plenty of great business ideas - but not all businesses will
generate returns that justify angel investor and venture capital
financing. Therefore, providing a solution to a significant problem with
a large potential market is essential.
Problem solved:
Demonstrated customer pain
It is important to clearly demonstrate that there is a "burning" need in
the market that asks for solution. The more urgent is the need the
better since most customers are preoccupied with work or have limited
budgets, they will be able to satisfy their most pressing needs first.
Very often companies raising money have developed a product but have not
identified clearly the problem in the marketplace that they are trying
to solve. Especially with technology, where one and the same product can
have many different applications, it is critical to narrow down the
focus to the most urgent market need.
Solution: Breakthrough
product, not product enhancements
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.
Use of proceeds:
Actionable plan to reach milestones
Funds must be used to accelerate your 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: $50M+
revenue in Y4
We look for companies that can grow quickly and manage the scale
necessary to succeed. Your company must demonstrate a plan to generate
significant profits beyond the initial product idea. We also require
well-conceived financial projections, based on sound assumptions,
demonstrating consistent profits and cash flow growth. We look for
companies with the potential to generate $50M and more in four years.
Exception to that could be the biotech/pharma companies, which are not
expected to generate commercial revenue.
Competitive Advantage: Patents, Exclusive Licenses or Channels
Your company must have some proprietary features that distinguish you
from potential competitors or provide barriers to entry that prevent
other companies from capturing your 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 with expertise
within the group
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 your idea.
Stage: Generating
Commercial Revenues or beta version with customers
Round: $0.5-1.5M
Total Equity Financing Needs <$5M
Our members are looking to invest in companies with total equity
financing needs (including follow-on rounds) <$5M to positive cash flow
or acquisition.
Pre-money Valuation <$3M
For wider discussion on the topic, please review the article
"Considering Valuation".
Exit strategy: 10X+ in
4 years
Our members typically seek returns of at least ten times their initial
investment, within four-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 your exit be through subsequent rounds of financing - venture
capital or the public markets? Angel investors are not just interested
in the strategy you select, but more importantly in the how - the
operational strategy that shows specific steps you will take to achieve
the exit.
Small Business Development Center
The Massachusetts Small Business Development Center (MSBDC) Network is a free statewide business assistance program representing a three-way partnership between the federal government (SBA), state government (MA Office of Housing and Economic Development) and the academic sector (University of Massachusetts) all working together to support business and entrepreneurship throughout the Commonwealth. Established in 1980, this program pools the resources of government, academia, and the private sector in providing entrepreneurs and business owners with free business advisory services, educational programs, and financing assistance. Virtually all MSBDC counselors have been entrepreneurs or business owners themselves, and most have first-hand experience in seeking funding.
The Boston
Harbor Angels Network and the UMass Boston MSBDC have forged a unique
partnership in offering this valuable free counseling resource to
entrepreneurs seeking capital from our network of angel investors. We
encourage entrepreneurs to utilize this resource as a means for refining
value propositions, further developing business strategy, and sharpening
presentation skills. For more info on the MSBDC, visit website at
www.sbdc.umb.edu , or call
617-287-7750.