Angel Financing for Entrepreneurs

Subject Index

A

Accelerated Cost Recovery System

accredited investors

SEC definition of

accrued interest

ADR (American Depositary Receipt)

advisers. See also advisory boards

compensating with options

referring angels to opportunities

advisory boards

corporate resolutions

due diligence review of

interview questions about

organizing structure of

participation in

preferred stock holders as members

staggered board

Alternative Minimum Tax (AMT)

American Depositary Receipt (ADR)

AMT (Alternative Minimum Tax)

Anderson, Keith

angel investors. See also finding angels;

post-investment relationships advisory roles of

arriving at due diligence

average investments by

business help offered by

communicating regularly with

companies appealing to

compatibility with

confidant relationships with

deals financed in 2005

draft term sheet for

as financing source

finding other angels through

first impressions on

follow-up calls to

getting referrals to

initial contacts with

international participation by

investing in traunches

investment trends for

knowing personality of

organizations of

participation in company by

personal wealth investment by

post-investment relationship with

product design and

providing references for

questions to ask

Regulation D and

return on investments for

risk of investments

role in early-stage funding

time spent on new investments

understanding investment expectations of

venture capitalists vs.

visiting company’s office

angel organizations. See also finding

collective due diligence by

finding angels via

investment preferences of some

list of EBAN members

weighted average

Articles of Incorporation

assets under management

current and fixed

“At the Individual Level” (Wiltbank)

B

Babcock, Reggie

Chapter 7 and 11

contacting angels via

board of directors. See advisors; advisory boards

bootstrapping business

bridge financing

designating bridge notes

Briggs, Laurence

broad platform technology

broker-dealer consultants

business incubators

business journals

business judgment rule

business plan competitions

company history in

competitive analysis in

customer definition for

executive summary in

exit strategies in

industry discussion in

investors’ assessment of

management team included in

marketing plans within

operations summary in

product and technology descriptions in

requested for due diligence

buy-out agreements

C

CAGR (Compound Annual Growth Rate)

Canadian angel organizations

capital under management

capitalization tables

showing cram down

showing increasing valuation

carried interest

cash flow statements

Center for Venture Research

Chambless, Jr., T. Sidney

Chan, Dominic K.

Churchill, Winston

collar agreement

committed capital

common law rights

C corporation issuance of

avoiding insufficient authorized shares

conversion ratio for

converting preferred stock to

co-sale agreements about

documenting issuance and details of

outstanding stock

sample corporate share structure for

vesting founders

voting vs. nonvoting

business plan and executive summary

investor presentations

maintaining regular angel

community involvement

angels’ interest in

investments and

companies. See also limited liability companies; start-up companies

angel’s participation in

appealing to angel investors

business plan for

contracts prior to investing

defining business growth strategy

developing corporate structure of

financial documents needed for investors

interview questions about operations

investor’s visits to

liquidation payments

policies and procedures for

preparing contracts and documents

preparing for investors

return on investments

stages of development

unrealistic valuation of

venture capital and control of

compatibility with angels

communicating positioning on

interview questions about

competitive analysis in business plans

Compound Annual Growth Rate (CAGR)

Comprehensive Preferred Stock Term Sheet

confidential and proprietary agreements

employee signatures on

entrepreneurs wanting total

equity investments and reduced

shareholder and buy-out agreements

venture capital and company’s

conversion prices

conversion ratio

convertible debentures

converting to preferred stock

corporate control and

convertible preferred stock

convertible promissory notes

sample agreement for

convertible securities

due diligence process for

corporate structure

charters and resolutions

interview questions about

limited liability companies

potential investor questions about

recommendations for

unappealing to investors

corporate venturing

corporations. See also corporate

financing by corporate partners

cram down round

cumulative preferred stock

cumulative voting rights

customer definition

D

equity investments vs.

existence of heavy

financing documents for

investors views on company

debt instrument

demand registration

determining funding needs

creating financial documents

essential documents for

financial models for

directors. See also advisory boards

distribution systems

creating business plans

preparing company-owned contracts and

requested for due diligence

writing executive summaries

dot-com companies

draft term sheet

drag-along rights

angel groups and collective

clarifying investment terms before

documents requested for

financial analysis

intellectual property and

interview questions for

market validation by investor

office visits during

providing draft term sheets before

questions to ask before entering

red flags during

reviewing advisory board in

summary of process

due diligence checklist

“dumb money”

E

rates of return required for investors

venture capital investments in

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

economic development programs

employee option pools. See option pools

Employee Retirement Income Security Act (ERISA)

Employee Stock Ownership Plan

confidentiality agreements signed by

documents relating to

preparing for investor’s office visits

reminders of confidentiality for

sample non-disclosure agreements for

stock options for

angel as confidant for

angel-financed deals in 2005

arriving at due diligence

building financial models

coachability of

determining funding needs

equity investment risks

finding accredited investors

gaining positive cash flow

Internet matching sites for angels and

making match with investors

negotiating valuation

preparing for venture capital proposals

private equity investing for

providing references

questions to ask investors

registering securities with SEC

sharing company control with investors

understanding angel’s investment expectations

wise use of funds by

ERISA (U.S. Employee Retirement Income Security Act)

escrow for preferred stock

executive summary

adding in initial investor contacts

exit strategies

for angel investors

including in business plans

post-investment

showing in investor presentations

expansion stage

rates of return required for investors

venture capital investments in

F

family and friends

common stock options for

developing elevator pitch with

investing in company

final term sheets

financial documents

appending to business plan

developing funding milestones from

due diligence analysis of

essential financial

including in business plan

preparing for investors

sample balance sheet

sample cash flow statement

sample income statement

summary financial statement

financial models. See also financial documents

assumptions in documents

establishing path to profitability in

factoring expenses into

including financial projections in slides

summary financial statements

types of documents needed

financial statements

financing. See also international financing;

venture capitalists

avoiding insufficient authorized shares

corporate partners and investment arms

economic development programs

escrow accounts for preferred stock

incubator-based

investors’ help in funding rounds

protection for prior

regional investing habits

rescission rights for previous

technology licensing and

angel organizations’ role in

characteristics appealing to angels

importance of first impressions

professional advisers’ help

proving product’s market acceptance

return on investment required

first impressions

Flanders-Stec, Lou Anne

follow-up calls

formal financing

founders’ shares

licensing intellectual property rights to company

reverse vesting of

vesting with common stock

Franklin, Robert

fully diluted outstanding shares

G

Gaydos, Valerie S.

general partners (GPs)

Generally Accepted Accounting Principles (GAAP)

George, Stephanie

Geshwiler, James

golden parachute

Goldsmith, Mitchell D.

GPs (general partners)

Great Starts, Inc. sample company

Comprehensive Preferred Stock Term Sheet for

corporate share structure for

sample balance sheet

sample cash flow statement

sample income statement

angel’s interest in potential

defining company’s strategy for

unrealistic projections of

H

Hannan, Robert P.

Harvey, Dean E.

investor’s aid in funding rounds

offered by angel investors

high-net-worth individuals (HNWIs)

holding companies

I

incentive stock options

income statement

incubator-based financing

industry discussions

informal financing

preferred stock holders’ right to

protecting preferred stock

information rights

initial public offerings (IPOs)

exit strategies with

flipping shares in

mezzanine financing for

institutional investors

intellectual property

documents pertaining to

due diligence process for

non-disclosure agreements for

protecting rights to

trademarks and service marks

types of protection for

Internal Rate of Return (IRR)

international financing

investor participation in seed/ start-up stages

intrastate exemption

investable companies

Investment Advisers Act

Investment Company Act

investment forums

investments. See also post-investment relationships; private equity investing

angel’s personal wealth as source of

deals not suited for venture capital

developing final term sheets

disclosing amount sought

draft term sheet in

due diligence process for

expectation of return on

getting investor referrals for

making initial contacts for

negotiating valuation for

opening moves in

presentations in

red flags during due diligence

shareholder and buy-out agreements

vehicles for private equity

investor presentations. See also

disclosing amount sought

dos and don’t of

general rules for

investment process and

slide content in

ten-minute slide shows

investor questionnaire

investors. See also angel investors; preparing for investors; venture capitalists

appreciate wise use of funds

attracting interest of

attributes of professional

companies attractive to

family and friends as

first impressions with

hunting for potential

making match with

non-disclosure agreements for

number of HNWIs

questions about corporate structure

tips on seeking venture capital from

unattractive corporate structures for

IPOs. See initial public offerings

IRR (Internal Rate of Return)

J

James, Christina

K

Karter, Elizabeth

Kirschner, Ronald L.

knowing a “no”

L

Lambert, Brannon

language in investor presentations

rates of return required for investors

venture capital investments in

legal counsel, retaining

leveraged buyout (LBO)

liabilities, current and long-term

intellectual property rights to company

limited liability companies (LLC)

structural advantages of

limited partners (LPs)

preferences for preferred stock

priority of payments on

liquidity events

documents about company

interview questions about

Lovett, II, W. Radford

LPs (limited partners)

M

management team

history of failure by

interview questions about

organization chart of

summarizing in business plan

defining approach to

interview questions about

investor validation of

plans for in business plan

market capitalization

Mattingly, Jerry

meetings with investor

mentoring by angels

Metzger, Sr., Bill

mezzanine financing

developing funding

informing angels of

providing in slide show

Mott, Catherine

N

NASD (National Association of Securities Dealers)

NDA. See non-disclosure agreements

net present value

angel’s help with

getting referrals to investors

locating angels by

No Shop, No Solicitation clauses

nonaccredited investors

disadvantages of

limit on number of

non-disclosure agreements (NDA)

asking investors to sign

nonqualified stock options

nonvoting preferred stock

notes, subordinated

NYSE (New York Stock Exchange)

O

O’Donnell, John

offering documents

Okrepkie, Kenneth G.

opening moves in investment

due diligence interview questions about

summarized in business plans

establishing employee

inappropriately sized

qualified vs. nonqualified options

options. See also option pools

compensating directors/advisers with

outstanding stock

oversubscription

Over-the-Counter (OTC)

avoiding messy share

losing with venture capital funding

protecting for intellectual property rights

P

participating preferred

participating preferred stock

required for entrepreneurs

showing in presentations

due diligence process for

intellectual property

path to profitability

angel investors and

recovering investments and

persistence vs. annoyance

piggyback registration

PIV (Pooled Investment Vehicle)

placement agent

Pooled Investment Vehicle (PIV)

portfolio companies

post-investment relationships

angel’s level of involvement

communicating regularly to angels

exit strategies

post-money valuation

PPMs (private placement memorandums)

preemptive rights

preferred dividends

preferred stock

C corporation issuance of

anti-dilution provisions for

avoiding insufficient authorized shares

conversion options for

conversion ratio for

documenting issuance and details of

down rounds for

establishing employee option pools

holders as members of board

information rights for holders

issuing series of

liquidation preferences for

outstanding stock

protecting information about

protective rights for

redemption and voting rights for

registration rights for

right of first refusal

sample corporate share structure for

sample offering of

setting up escrow account for

voting vs. nonvoting

pre-money valuation

preparing for investors

contracts needed when

developing corporate structure

employee compensation plans

organizing advisory board

preparing for due diligence

protecting intellectual property

presentations. See investor

PricewaterhouseCoopers MoneyTree

private equity investing. See also

preferred stock

broker-dealer consultants for

equity investments vs. debt

investment vehicles for

preferred stock

private placement memorandums

rates of return for

Regulation D and

private placement

private placement memorandums (PPMs)

private securities

describing for business plans

distribution of

market acceptance and funding of

pitching plan not

promissory notes. See also debentures

proof of market

proofreading documents and slides

protective rights for preferred stocks

public companies

published source references

Q

qualified professional asset manager (QPAM)

to ask angel investors

potential questions about corporate structure

R

rate of return, internal

recapitalization

redeemable preferred stock

redemption rights

providing for investors

published source

regional investing habits

registered offering

registration obligation

registration rights

preferred stock

registration rights agreement

registration statements

Regulation D. See also Securities

accredited investors

definitions and terms in

general conditions under

intrastate exemptions

nonaccredited investor limit exclusions

number of qualified accredited investors

preliminary notes to

reporting company

resale registration

rescission rights

restricted securities

restricted shares

retained earnings

return on investments

exit strategies for angels

expectation and types of

start-up companies’

reverse vesting

right of first refusal

preferred stocks’

rights offering

entrepreneurs and equity investing

start-up/seed stage investments and

Robinson, Robert

Robinson, Stephen G.

rules of Securities Act of 1933. See Securities Act of 1933

S

Sadowski, Mary Ann

sample company. See Great Starts, Inc. sample company

sample documents

cash flow statements

convertible promissory notes

income statement

non-disclosure agreements

preferred stock offering

Sanchious, Gloria

Sarbanes-Oxley Act

SBA (Small Business Administration)

SBIR (Small Business Innovation Research)

Schwartz, Lawrence

SEC. See Securities and Exchange Commission

Securities Act of 1933. See also

Securities and Exchange Commission (SEC). See also Regulation D

accredited investor definitions

registration statements

text of Regulation D

Securities Exchange Act of 1934

accredited investor as defined by

security regulations

seed/start-up stage. See also determining

funding needs; start-up companies

angels’ role in funding

bank funding during

characteristics attractive to investors

finding distribution systems

investment risk during

rates of return for investors

setting up option pools

venture capital investments in

selective investments

senior securities

Series A preferred stock

avoiding insufficient authorized

fully diluted outstanding

oversubscription

shell corporations

Shoemaker, Michael A.

Sierralta, Ivan

single-application technology

defining growth strategy in

financial projections in

funding amounts and exit strategies

management overview in

market approach defined in

outlining positioning on competition

preparing and presenting

presenting technology in

providing milestones in

Small Business Administration (SBA)

Small Business Innovation Development Act of 1982

Small Business Innovation Research (SBIR)

Small Business Reauthorization Act of 2000

Small Business Technology Transfer (STTR)

social responsibility

angels’ sense of

investments and

software company startups

Sonny Bono Copyright Term Extension Act

Specified Purpose Acquisition Companies (SPACs)

stages of development. See early stage; expansion stage; later stage; seed/start-up stage

staggered board

Stampede Brewing Co.

start-up companies. See also seed/start-up

angel funding of

angel’s participation in

average angel investments in

board of directors for

early stages of development

participating in business plan competitions

return on investments for angels

setting up option pools

trying for venture capital

statutory voting

stock. See also common stock; preferred

due diligence documents for

founders’ shares

stock investment

stock option plans

stock purchase agreements

strategic investors

STTR (Small Business Technology Transfer)

subordinated note/debt

subscription agreement

Sullivan, Joseph

T

tag-along rights

broad platform for

describing for business plans

interview questions about

investor validation of

protecting intellectual property of

requiring multiple licensing

single-application

thank-you notes

third-party financing

Thompson, Randy

time value of money

due diligence process for

2006 World Wealth Report (WWR) (Capgemini and Merrill Lynch)

U

underwritten offerings

unfair advantage

U.S. angel organizations

U.S. Library of Congress

U.S. Patent and Trademark Office

utility patents

V

cap tables with increasing

pre- and post-money

venture capital

average investments for

deals inappropriate for

first impressions when raising

investment trends in

losing ownership with funding

tips on gaining

venture capitalists

angel investors vs.

board participation by

fiduciary obligation of

finding angels through

seed/start-up financing and

vesting founders’ common stock

von Maydell, Catarina

voting agreements

common and preferred stock

designating special

W

Wainwright, Fred

exercise price of

unattractive to investors

Weaver, David P.

angel-entrepreneur matching

identifying potential investors from

weighted average anti-dilution

Wetzel, William

Wiltbank, Robert

works made for hire