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The Benefits of a Family Office

The Benefits of a Family Office

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    The Cost of Angel Investing—Where are the Fees?

    July 5, 2022

    3 min read I recently read a discussion forum in which the author of the post had bought a financial instrument and later discovered that the investment advisor who sold it to him actually made a commission on the sale. The author was incensed that someone actually made a commission off selling him something and to top it off the investment advisor didn’t disclose his commission. As I read the post I began to wonder where has this guy been for the last 50 years. Of course, people make money selling things and financial instruments are no different. When I sit in pitches from investment advisors promoting their fund, or whatever their financial instrument may be the first question that nearly always comes up from the audience is how much are the fees and commissions. Of course, this number ranges from a fraction of a percent for mutual funds to double-digit percentages in private equity. What are the fees? After reading the post I began to wonder about the cost of angel investing. Where are the fees? In a member-managed group such as the Central Texas Angel Network, there is a membership fee to belong to the group but the members review the deals, perform the due diligence and ultimately decide what to invest in. The main cost comes in three areas and while those costs aren’t paid directly by the angel investor, the business pays the costs and ultimately the angel investor takes a reduced return based on those costs. An experienced angel should ask about the costs. Management Salaries  The first cost is the management salaries. Management salaries are kept low in the early days of a company to give the business every chance of succeeding. I was recently in a deal in which the members asked about the CEO’s salary. He replied it was $300K/year. You could feel the air leaking out of the room after he said that. While he was a strong manager there was no way the business was going to survive paying salaries like that. Consultant Costs The second cost is that of consultants whether they are on the board or as advisors. It’s fair to ask who is getting paid and how much for the work they are providing. There are good consultants out there but I’m often amazed by how vague their duties are. Often times I hear things such as “they are going to help us.” There’s no job description, no metrics, no deadlines and it’s all very nebulous. Angel Investor’s Time The third cost and what I consider the most important is the angel investor’s time. If the deal will require a day a month or worse a day each week, then the deal must be spectacular to make it worthwhile. The angel investor should figure out upfront what value he can add and if the business runs into trouble who is going to help them. The angel investor’s time becomes the key factor in calculating the cost of angel investing. Read more TEN Capital Blogs Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Tips For Starting an Angel Investment Group

    December 4, 2021

    2 min read There are many things to consider when starting an angel investment group. What kind of deals you will pursue, how much you will invest, and who will be on your team are all things you will need to consider during the planning process. Below are some tips and best practices for recruiting members, branding, and allocating funds for your angel investment group. Recruiting Members It’s important to recruit members to join your angel investment group. The first step of recruitment is showcasing the deals you have to prospective investors to gauge interest. Send them recently funded deals as an example of the type of deals your group offers. You can also give them access to all of your deals for a period of time and then see if they want to join. Network through your current investors to find potential new members. Have the current members bring friends and colleagues to the presentation meetings and invite them to invest in deals the members are funding. Provide the returns for the group to show the track record. It helps to have a fund that investors can join for those who don’t have the time to review specific deals. For every four investors who want to participate, three will join the fund and one will join the group. Setup a syndicate that takes care of the diligence and makes it easy for investors to join the deals. Make the goal and mission of the group clear to prospective investors as the why is stronger than the return in gaining new members. Branding Your Group In running an angel network it’s important to establish a brand for the group and to then promote it. Branding can make your group appear larger and shows it is an established and well-thought organization. A brand consists of a unique name, logo, mission statement, and mantra. Your brand helps your group stand out from the crowd. It helps build trust and is a promise to the investors and startups you serve. It helps people remember your group by giving them a name to associate it with. A brand also helps attract investors as investors want to belong to a group that stands for something. Finally, a brand helps attract startups. Startups need to recognize your group as a viable source of funding for their company.  Allocating Funds In preparing for Startup investing, determine upfront how much you are willing to invest. In general, it’s best to keep your startup investing to 3-5% of your discretionary investment funds- funds you can lose and not impact your lifestyle or other investments. When determining how much you plan to invest, use a five-year window. Separate these funds from the rest of your investments to make it easier to manage the process. The amount you invest per deal will determine what platforms you will use. You invest $5K you will most likely be on an online funding platform. If you invest $25K you can join a group and invest with angel investors. If you invest $50K you can join a syndicate. And if you invest $100K or more you can invest through investment banks.  Feel free to try out our calculators and contact us if you would like to discuss your fundraise: https://staging.startupfundingespresso.com/calculators/ Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group.

    Building Your Investment Thesis

    September 1, 2020

    2 min read For investing in a startup, consider the future and what will be needed then; don’t just look at the world as it is today. Map the trends and extrapolate out and consider what will be needed five years from now based on the direction of technology, the markets, and other factors. From this, you can build a view of the future and inform your investment thesis and begin your preparation for investing in startups. Creating Your Investment Thesis There are too many deals to look at all of them. You’ll want to narrow the field by building out your investment thesis. There are a few crucial steps to take if you haven’t done so already. Step One: View 50 deals, then write down what you like and what you don’t. TEN Capital is a great resource to help you field deals regularly, show you how to review them, and what to look for. Step Two:  Follow up one to three months later to see how each deal is working out. Checking-in regularly will inform your investment thesis as you will see some deals progressing forward, some stall out, and others pivoting to something else. Step Three: Write out your investment thesis in full, including: Your observation about a macro trend in an area you care about The position of the company in the trend Characterization of the company that gives it a competitive advantage Conditions for investing based on price and other factors Example investment thesis statements include: “Healthcare is moving to the home.” “Companies providing technology-enabled services will succeed.” “Companies with recurring revenue and a CAC:LTV ratio of 1:8 are preferred.” “Companies with revenue above $500K and pre-money valuation below $5M are preferred.” It’s essential to write out your investment thesis ahead of time, as you’ll often return to it. Allocating Funds In general, it’s best to keep your angel investing to 3-5% of your discretionary investment funds. These are funds you can lose and not impact your lifestyle or other investments. Determine in advance how much you plan to invest. Use a five-year window. Once you have that number, know how you’ll access those funds for when you need them. Keeping these funds separated from the rest of your investments will make managing the process easier. Read more: https://staging.startupfundingespresso.com/education Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Have a Little Fun, Make a Little Money, Do a Little Good

    September 1, 2020

    1 min read There’s an old saying about angel investing: “Angels like to have a little fun, do a little good, and make a little money.” Angel investing is more than just about money. I’ve found the successful investments covered all three of the elements of the old angel saying.  It was fun. The people were great to work with.  It had an element of making the world a better place albeit on a small scale. Finally, it provided a positive return on investment so I could continue funding startups. Have a little fun Pursue deals you like. If you don’t like the deal, then why spend the time? Ask yourself, do I want to work with these people? Do I value the work they are doing? If you can answer yes to these questions, you are well on the path to finding a deal that lets you ‘have a little fun.’  Do a little good Once you have a deal you like, then ask, “does the company align with my interests?” Invest in startups that further that in which you believe. You may want to support your local entrepreneur ecosystem, or further a technology that can solve problems that benefit the general public.  Make a little money Get agreement on the terms of the investment with a defined exit. Use the 3X in 3 redemption to define the exit. If you can help the company then consider setting up an advisory position with them.  One of the biggest sources of burnout is uncompensated work. There’s an almost unlimited amount of work that needs to be done and the startup will load you up.  Set boundaries on what you are going to do and how you will be compensated. Consider including these negotiations in the term sheet, even if you don’t intend to provide advisory work as you may later be drawn into it. Having your time negotiated in the terms upfront makes it much easier to navigate the process. Remember, successful investments let you make some money, have some fun, and do some good. Read more: https://staging.startupfundingespresso.com/education Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Top 5 Blogs for Angel Investors

    July 17, 2017

    Whether you’re an angel investor or a startup, there is nothing more valuable than knowing firsthand the fundamentals of the business. Knowledge is power, so here are a few blogs to keep your eye on! Venture Hacks: This blog is run by AngelList and offers advice from various angel investors, on topics ranging from their own processes and tips for startups on how to approach and pitch an investor. AngelList Blog: The AngelList Blog itself is a reliable place to find “how we made it” stories about startups. It’s low-key, yet informative. The Gust Blog: Gust is an online platform that connects investors and startups. Their blog provides a ton of useful advice from both investors and startups. They have blog categories set up for all stages in the process making it easier to get the insight you need.   A2A: Analyst to Angel: The founder/CEO of Lucas Point Ventures, Adam Quinlan, shares his thoughts on topics ranging from startups and early stage investing. And finally, from our favorite shark in the tank, Mark Cuban’s blog: Blog Maverick: In his blog, Cuban gives advice and his personal thoughts on investing, as well as tips on how to be successful as an entrepreneur. TEN Capital Network Investor Program provides angel investors, vc funds, family offices, and more, with an easy way to invest in Texas-based startups and early-stage companies. Through our online funding portals, one-on-one funding events, and data analytics services we help take the guess-work out of finding investment opportunities to diversify and expand your investment portfolio. Signing up as an investor with TEN is easy and free. Visit our Investor Page and sign up now! If you have any questions, please contact us at info@tencapital.group.

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