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Business Angels, Pre- and Seed Rounds

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European Angel Investor Landscape
Matthias Hilpert
MH2 Capital
Value add
Support
Market view
Pre-Seed
Seed
Series A
Business Angel Profile
Sources
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Questions
Europe
Germany
Berlin

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Business Angels, Pre- and Seed Rounds

  1. 1. Business Angels, Pre- and Seed Rounds Matthias Hilpert Berlin XPRENEURS UnternehmerTUM München April 2020
  2. 2. 2MatthiasHilpert.com want to raise money? have raised love money? have raised angel money? have raised VC money? Show your hand if you …
  3. 3. 3MatthiasHilpert.com 20+ years Operator turned full time Investor  Worked in telecoms globally, running a EUR1bn P&L  Generated EUR800mio enterprise value for Private Equity sponsors  15 years investing in public and private markets & real estate  Angel investing since 2008 - 19 investments and 4 exits  One of the top 30 angels backed by the European Investment Fund (EIF)  Seed stage subscriptions and marketplaces from EUR10K monthly revenue  175cm, 83kg, 47 years, 1 wife, 3 kids, living in Berlin
  4. 4. 4MatthiasHilpert.com “Angel investors are the most critical” Paul Graham Founder Y Combinator The Hacker´s Guide to Investors
  5. 5. 5MatthiasHilpert.com Segmenting angel investors Hobby Angels (90%)  <30% time allocation  <3 portfolio companies  <2 deals in 12 months  Small network in start-up and investor ecosystems (<10)  Average 10-25K tickets  Dealflow 10 pa Professional Angels (10%)  >50% time allocation  >10 portfolio companies  >2 deals in 12 months  large network in start-up and investor ecosystems (>100)  Average 25-100K tickets  Dealflow 50-500 pa BAE 2015: 7.500 angels in Germany Angel.co 2019: 998 angels in Germany BAND Umfrage: 108 answers EIF: 30 angels in Germany European angels: matthiashilpert.com/ressources
  6. 6. 6MatthiasHilpert.com Typical angel profiles… C-Level Corporate Exec  2+ deal  <10% time spent,  60+ years  investment only  focus on industry network value Exited Founder  5+ deals  <20% time spent  30-40 years  strong start-up experience  relevant start-up community & investor network Professional Angel  10+ deals,  >50% time spent  hands-on advice (pull only)  40-60 years  strong seniority  relevant industry/functional experience  relevant start-up community & investor network First timers  First deal  Strong emotional bond (perhaps limited experience)  Big ticket/valuation (perhaps wrong expectations)  High involvement (perhaps too much push)  Last resort money (perhaps with non-standard terms)
  7. 7. 7MatthiasHilpert.com Segmenting institutional investors in Europe Pre-/Seed funds  10-50mio fund size  First time funds  2 partners + 2 investment managers  Minimum ticket 250K-1mio  5-10 investments pa  Dealflow 100-1.000 pa Series A funds  50-150mio fund size  2nd or 3rd fund  2-4 partners + 4 investment managers  Minimum ticket 1mio-1.5mio  5-10 investments pa  Dealflow 100-1.000 pa European funds: matthiashilpert.com/ressources
  8. 8. 8MatthiasHilpert.com Segmenting start-ups (by investor demand) Warm (15%)  Good team  Medium growth (5-10% mom) => Broad investor discussions (25-50 investors) Hot (5%)  Best-in-class team (eg successful serial founder)  Unique technology  High growth (20-40% mom) => Only selected investor discussions (5-10) Cold (80%)  Mediocre team  Low innovation/differentiation  Low growth => Very broad investor discussions (100+ investors) Top tier VCs invest in only 0.01% of all startups Germany: 557.000 new companies 29.000 tech/growth start-ups 141 Series Seed rounds 13 Series A rounds KfW, KPMG, Dealroom
  9. 9. 9MatthiasHilpert.com Warm Pre-Seed Seed 1 Seed 2** Series A** Stage Idea, MVP Early PMF Established PMF Strong PMF Monthly Revenue 0 5-10K 50K 100K Round size* 50-200K 500K-1mio 1-2mio 4-15mio+ Valuations* 1-2mio 2-4mio 4-10mio 20-100mio Investors Grants, F&F Accelerators & Angels Angels & VCs (<25mio) Angels & VCs (<50mio) VCs (>150mio) Tickets* Angels 10K Accelerators 50K Angels 10-50K VCs 200-500K Angels 25-100K VCs 500K-1mio VCs 2-5mio Reason to invest Love & Play 30x potential 20x potential 10x potential Instrument Convertible Notes CN & Equity Equity Equity When do angels and pre-/seed funds play? * Numbers are indications from Berlin, they may be smaller in other European countries and larger in London ** Seed 2 are more common in the last years and Series A rounds have been growing significantly in size
  10. 10. 10MatthiasHilpert.com Hot Pre-Seed Seed Stage Idea, MVP Established PMF Monthly Revenue 0 50K Round size 1-2mio 3-5mio+ Valuations 4-10mio 8-30mio Investors Angels & VCs (<50mio) VCs (>150mio) Tickets Angels 25-100K VCs 500K-1mio VCs 2-5mio Reason to invest 20x potential 10x potential Instrument Equity Equity What happens if a start-up is hot (0.01% or 3 x pa)?
  11. 11. 11MatthiasHilpert.com Potential compositions for pre-/seed rounds 200K  Friend & family + angels  4x50K or 8x25K  Convertible Note  1 lead angel or founders documentation  Potentially several closings  No notary and transaction cost 700K  Seed VC + angels  500K + 4x50K  Equity  VC as lead to set terms  Single closing day  Notary and 5-10K transaction cost 1.5mio  Series A VC + angels  1mio + 1x300K + 4x50K  Equity  VC as lead to set terms  Single closing day  Notary and 5-10K transaction cost
  12. 12. 12MatthiasHilpert.com What can angels offer (vs institutional investors)?  Operating and investment expertise  Investing own money  Capability to tolerate high risk  Personal and emotional bond  Likely to take “entrepreneur´s perspective”
  13. 13. 13MatthiasHilpert.com What to look for in angels vs institutional investors? Angels  personal chemistry  # of deals in the last 12 months  % time spent on angel investing  operator & investor experience  industry, seniority & years of experience (network type & size) Funds  fund size and strategy  key individuals  personal chemistry  lead or follow  portfolio experience  industry experience  follow on investors
  14. 14. 14MatthiasHilpert.com “…in God we trust, all others bring references!”
  15. 15. 15MatthiasHilpert.com Where to find an angel or pre-/seed investor…  Start locally in DACH  Other start-up teams (comes with immediate reference)  Start-up management teams with successful exits are likely to become angels themselves  Local first tier Accelerators, eg Xpreneurs, Techstars  Angel networks, eg EIF, btov etc.  Early stage Angels and VC regularly refer each other  Directories: Angel.co, LinkedIn, Dealroom …  Investor lists: matthiashilpert.com/resources
  16. 16. 16MatthiasHilpert.com …and what questions should they be able to help you answer?  Is my product a pain killer or a nice to have?  How would you segment my customers? Should I focus on 1, 2 or 3 segments?  What is my initial target market, city A or country B or region C?  Can you help me to get a meeting with a decision maker at Customer A?  How would you build the organisation? What´s the best split of work?  Would you hire first a senior role or a junior role?  What do you think of candidate X?  Which marketing channels should I focus on: SEO, PR, SEM, Print, Radio or TV?  How should I structure my sales funnel?  What should my tech stack & architecture look like?  How much money should I raise from whom?  Can you make an intro to investor X?  Do I need more than 1 term sheet?  What are good and bad terms?  I hate my co-founder, what should I do?  Is this ever going to work?  …and more!
  17. 17. 17MatthiasHilpert.com What are your questions?
  18. 18. Come and visit Berlin! matthiashilpert.com

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