1. Sourcing
We use our extensive network to find investment opportunities in the technology sector. Many of these are early stage.
2. Screening and Evaluation
We filter the many opportunities against our investment criteria, carefully selecting those with the most potential. We are seeking businesses with significant potential i.e.:
meet an unmet customer need
dramatically reduce the cost of meeting a customer need
have potential to open new or gain significant market share in an existing market
appropriate timing (not too early or too late, hit the market when customers are ready to buy) resulting in a profitable business with the potential to generate an above average ROI for its investors.
Approximately 10% of opportunities that approach us make it to stage 3. Part of the screening out includes entrepreneurs with unrealistic expectations. The screening process also could consider pre-defined conditions such as BEE compliance, geographical preference, minimum turnover, etc. We also manage the rejection process for those that do not make it, attempting to encourage the entrepreneurs to feel motivated to try again having remedied the reasons for their rejection and hopefully wanting to deal with us in the future.
3. Grooming
We work with the entrepreneur for a period of time, overcoming early obstacles, and getting the business to a fundable state (investment readiness). We ensure the opportunity is real, quantify the risk and ensure a realistic expectation of returns for the investors. We also ensure adequate financial management and management accounting.
4. Valuation
We would apply a variety of valuation methods, and propose a valuation range. We also set exit strategy objectives, including exit valuation and timescale to exit to be attractive to VCs.
5. Matching and structuring of deal
We match the opportunity with appropriate investors, arranging syndication if required. We propose deal structure, ensuring investors have protection. For example, we would consider:-
most appropriate stock selection:
common or preferred
which rights are attached, e.g. tag-along, pre-emptive, board seats, information, liquidation, redemption, first refusal, anti- dilution, royalty, dividend, warranties),
convertibility (from one type to another, compensating investors with equity for under performance and entrepreneurs for exceeding targets)
level of involvement of investor (hands on or sleeping)
matching funds
setting of goals and growth targets
A typical Angel investment would be
6. Nurturing
We mentor and coach the entrepreneur and management team, occasionally taking interim management roles, with a view to ensuring goals and growth targets are achieved. As co-shareholders, we seek to protect and maximise the value of our investment. During this phase we would supply regular progress feedback to investors (monthly progress report).
7. Exit (harvesting)
Lining up appropriate second round funding sources. We target returns of at least 50% per annum. At each stage we seek to identify, quantify, manage and reduce risk, adding value to all stakeholders involved in the process
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