Angel Investor's Handbook How to Profit from Early-Stage Investing

ISBN-10: 1576600769

ISBN-13: 9781576600764

Edition: 2001

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Many of today's high-net-worth investors are turning their attention to early-stage investing in emerging companies. They know just how successful and lucrative funding a start-up venture can be. Savvy angel investors can foresee distant but potentially huge returns from pre-IPO companies. There are scores of hungry entrepreneurs in search of capital and lots of money to be invested. But, matching the right entrepreneurs with wise investors, so that both can profit, is the challenge in new enterprises. Gerald Benjamin and Joel Margulis demonstrate that the real pitfall for potential investors is an incomplete understanding of the complexities of early-stage investing. At the same time, the angel capital market offers few mechanisms for bringing investors and entrepreneurs together, while securities regulations restrict communication between sophisticated investors and promising new businesses. So, where do the uninitiated start, and how do they separate the wheat from the chaff? In this ground breaking work, Benjamin and Margulis offer angel investors a hands-on manual for profiting from early-stage, private equity deals. They show how to develop investment criteria and overall game plans, locate viable investment opportunities, assess and manage risks, negotiate the most favorable deal terms, conduct thorough due diligence, and plan the all-important exit strategy.
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Book details

List price: $71.95
Copyright year: 2001
Publisher: John Wiley & Sons, Incorporated
Publication date: 7/1/2001
Binding: Hardcover
Pages: 351
Size: 6.25" wide x 9.50" long x 1.25" tall
Weight: 1.738
Language: English

An Overview of the Angel Capital Market
Defining Angel Capital and Pre-IPO Investments
Trends Increasing Private Equity Investment
How Angel Capital Has Provided an Infrastructure for Today's Economy
Inefficiencies in the Market for Early-Stage Company Equity
Government Attempts to Facilitate Pre-IPO Investments
The Roles of Traditional Venture Capital and Angel Investors in the Early-Stage Capital Market
The Pre-IPO Investment Opportunity Defined
How Angel Investors Add Value Beyond Capital
Introduction to the Pre-IPO Investment Process
Key Factors in Successful Angel Investing
Why Angel Investing Is Attractive
Specifics on Private Equity Classes
Demographics of Angel Investors
Required Skills for Successful Angel Investing
Developing Angel Investment Criteria
Structuring an Angel Investment Plan
Harmonizing Financial and Psychological Returns
Commonsense Guidelines for Successful Asset Allocation Decisions
Guiding Principles for Prospective Angel Investors
Understanding and Managing Risk
Disadvantages of Angel Investing
Assessing Risk in a Potential Investment
Differentiating between Indirect and Direct Venture Investment
Assessing Your Own Risk Tolerance Level
Managing Risk with Proven Hedging Strategies
Types of Angel Investment Strategies
Defining Angel Investment Strategy
How Demographics Affect the Choice of Active or Passive Angel Investment Strategies
Variations in Angel Investment Strategies
Active Angel Investment Strategies
Passive, Indirect Angel Investment Strategies
Deal-Flow Development: Surfacing Angel Investment Opportunities
How Angels Historically Have Located Deals
Satisfaction with Traditional Deal-Flow Development Techniques
Developing Your Angel Investment Goals and Objectives
Shifting from Informal to More Formal Deal-Flow Development
The Essential Elements in a Formal Deal-Flow Development Strategy
Targeting, Positioning, and Defining Investment Size
Organizing Investor Identity Materials and Deal-Flow Tracking Systems
Criteria for Selecting the Most Appropriate Communication Channels to Attract Deal Flow
Public Relations
Referral-Based Networking
Caveats: Deal-Flow Development Approaches to Avoid
Managing the Due Diligence Process
Why Due Diligence Is So Important in Today's Angel Market
Beware of Dead Ends on the Road to Riches: Case Studies from the Dark Side of Early-Stage Investing
Greed and the Entrepreneur's Loss of Ethics
Government Regulation and Legislation
Screening Opportunities with the Investor-Oriented Executive Summary
Why You Should Require a Business Plan
Investigating the Entrepreneur and Management Team
Separating Fact from Fiction in Venture Documentation
Knowing When to Say "No"
Who Pays Due Diligence Expenses?
The Preinvestment Audit
The Analytical Research Approach to the Preinvestment Audit
The Preinvestment Audit Questionnaire
Analysis of Financial Projections
Can Management Reach the Forecast Objectives?
Interrelationships of Financial Projections
What Are the Company's Expected Financial Needs?
How Much Funding Is Sought?
Evaluating the Company's Stated Capital Needs
Analyzing the Forecast Balance Sheet
Description of the Balance Sheet
Shareholders' Equity and Net Worth
The Income Statement or Statement of Operations
The Income Statement
Cash Flow Forecast
The Forecasted Cash Flow Statement
Use of Proceeds
Financial Assumptions
Company Investors, Directors, Advisers, and Resources: Lists for Reference Checks
Miscellaneous Documents Required for Analysis
Negotiating and Structuring the Deal
Definition of Negotiation
Market Inefficiencies Make Negotiation a Must
Negotiating the Transaction
Negotiation Mistakes Made by Angel Investors
Simple Guidelines for Professional Angel Investment Negotiations
The Private Placement
Choice of Securities for Angel Investors
The Role of Legal Documentation in Private Equity Transactions
Misuse of Business Plans as Investment Documentation
Overview of Legal Documents Used in Venture Investment Transactions
Using a Term Sheet to Structure the Angel Investment
Model Term Sheet Checklist
Valuation of the Early-Stage Company
Pricing as Good Judgment, Not Formulae
Factors in Valuing Potential Investments
Macroeconomic Forces in Valuation
Subjective Determinants of Valuation
Fundamentals of Valuing Start-Up Ventures
Sweat Equity: The Investor's Perspective
Overseeing and Advising Postinvestment
Definition of Monitoring the Investment
Passive Monitoring and Evaluation Techniques
Active Monitoring and Evaluation Techniques
Harvesting Returns: Exit Routes to Liquidity
Planning for the Angel Investor's Financial Reward
A Contrarian Perspective on Liquidity in Public versus Private Markets
The Importance of Identifying Exit Strategy before Investing
Reasonable Expectations for Investment Return and Hold Time
Evaluating Your Returns
Realistic Exit Routes
The Living Dead: Coping with the Marginally Performing Investment
Restricted versus Free-Trading Stock
Transforming Investment Losses into Tax Gains
Internet Directory
Angel Investing Conference/Forum Directory
A Model Term Sheet
Valuation Case Study
Hypothetical Valuation Example
Frequently Asked Questions
Suggested Reading List
Supplementary Reading
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