WEBVTT 00:00:08.000 --> 00:00:15.640 Kia ora koutou, hello, and welcome to episode 5 nzangels.com, a guide to raising angel 00:00:15.640 --> 00:00:18.560 investment in Aotearoa, New Zealand. 00:00:18.560 --> 00:00:23.560 I'm Dave Moskowitz, one of New Zealand's most experienced angel investors. 00:00:23.560 --> 00:00:28.000 In this episode, we'll talk about the series of steps you need to take to get from deciding 00:00:28.000 --> 00:00:32.960 that you'd like to raise an angel investment round to completing that round. 00:00:32.960 --> 00:00:37.680 This series of steps varies a bit from deal to deal, but overall, the sequence is more 00:00:37.680 --> 00:00:39.280 or less the same. 00:00:39.280 --> 00:00:43.980 The whole process can take three to six months due to the number of people involved. 00:00:43.980 --> 00:00:47.800 They say it takes a village to raise a startup, and it's very true in the case of securing 00:00:47.800 --> 00:00:52.720 angel investment, where you might have scores of investors involved in several clubs right 00:00:52.720 --> 00:00:55.120 across the motu. 00:00:55.120 --> 00:00:58.879 So the sequence goes something like this. 00:00:58.879 --> 00:01:03.440 One day you decide, I'm ready for investment into my startup. 00:01:03.440 --> 00:01:08.120 So you do some internet research, look around, and ideally you talk to some people who've 00:01:08.120 --> 00:01:10.320 done this before. 00:01:10.320 --> 00:01:18.920 You put together a pitch, and you find a friendly investor and get more advice and upgrade your 00:01:18.920 --> 00:01:19.920 pitch. 00:01:19.920 --> 00:01:24.640 And this is really a pro step, because if you can get an investor interested in what 00:01:24.640 --> 00:01:30.040 you're doing early, that will make all of your interactions with the angel world much 00:01:30.040 --> 00:01:34.560 easier, because you have social proof that another investor is actually interested in 00:01:34.560 --> 00:01:37.640 what you're doing, and that's really important. 00:01:37.640 --> 00:01:43.280 So you approach an angel club, you go through screening, where they'll ask you a bunch of 00:01:43.280 --> 00:01:47.040 questions, they'll make you fill in an application, figure out whether or not you're actually 00:01:47.040 --> 00:01:52.400 ready for an angel investment, and then you'll get selected. 00:01:52.400 --> 00:01:55.920 During the time of selection, the time you do your pitch event, your pitch is going to 00:01:55.920 --> 00:01:58.200 go through a thousand iterations. 00:01:58.200 --> 00:02:02.440 And this is going to be stuff that you decide to add, your team decides to help you with, 00:02:02.440 --> 00:02:06.240 your business is going to be changing because you're so young, and you'll probably be getting 00:02:06.240 --> 00:02:10.440 advice from the club itself about how to improve your pitch. 00:02:10.440 --> 00:02:13.080 They want you to succeed, and they're on your side. 00:02:13.080 --> 00:02:17.760 They really want your pitch to be as good as it can possibly be. 00:02:17.760 --> 00:02:22.160 So the big night comes, and you pitch at a pitch event. 00:02:22.160 --> 00:02:26.760 And there are 50 angel investors in the room, and they're all watching you with 00:02:26.760 --> 00:02:29.720 bated breath and really interested in what you're doing. 00:02:29.720 --> 00:02:37.320 You mingle with people and interact with them during the event, and try to get as many email 00:02:37.320 --> 00:02:43.200 addresses and what's up as you possibly can during that event. 00:02:43.200 --> 00:02:46.160 You should network like hell because this is really, really important for your future 00:02:46.160 --> 00:02:47.160 success. 00:02:47.160 --> 00:02:53.560 After the event, the club will hold a meeting with people who are interested in your investment 00:02:53.560 --> 00:02:54.560 opportunity. 00:02:54.560 --> 00:02:57.519 And hopefully you get a good group of those along. 00:02:57.519 --> 00:03:02.280 And if you can bring that first person along, your first believer who you got involved really, 00:03:02.280 --> 00:03:07.280 really early on, that'll really help grease things along. 00:03:07.280 --> 00:03:12.220 So the angels will start due diligence, and they're going to ask you way, way too many 00:03:12.220 --> 00:03:13.660 questions that you're comfortable with. 00:03:13.660 --> 00:03:16.500 But they'll ask you about all the various aspects of your business. 00:03:16.500 --> 00:03:21.140 You'll probably have several DD meetings, and you might actually iterate your plans 00:03:21.140 --> 00:03:25.180 based on that DD. 00:03:25.180 --> 00:03:28.900 Hopefully you will land a lead investor at this stage, and it's really critical that 00:03:28.900 --> 00:03:33.260 you do, that you find someone who might not be that first person you interacted with, 00:03:33.260 --> 00:03:36.940 but hopefully you'll find someone who really likes what you're doing and wants to help 00:03:36.940 --> 00:03:40.180 steward you through the rest of the process. 00:03:40.180 --> 00:03:44.220 Because that lead investor is going to be the person who's going to have the most influence 00:03:44.220 --> 00:03:45.860 in setting terms, 00:03:45.860 --> 00:03:50.540 what your valuation is, what other things need to go into the investment agreement 00:03:50.540 --> 00:03:56.220 and investment documentation like the Constitution and shareholder agreement. 00:03:56.220 --> 00:03:59.460 So you consolidate interest amongst those angels. 00:03:59.460 --> 00:04:00.940 You collect commitments from them. 00:04:00.940 --> 00:04:03.980 You get them to say how much money they want to put in. 00:04:03.980 --> 00:04:08.180 And ideally you negotiate a term sheet with lawyers at that stage, so everything's written 00:04:08.180 --> 00:04:09.180 down. 00:04:09.180 --> 00:04:11.220 You're literally on the same page. 00:04:11.220 --> 00:04:15.620 So then that angel club, if you haven't reached your investment goal, that angel club will 00:04:15.620 --> 00:04:20.620 syndicate your deal to a bunch of other clubs, and that's when you take the show on the road, 00:04:20.620 --> 00:04:25.700 go around the country to other angel clubs, and do the same thing over again. 00:04:25.700 --> 00:04:29.940 You pitch to these clubs, you get interest, you wrangle investors that are on the fence, 00:04:29.940 --> 00:04:33.420 you collect commitments from people in the syndicated clubs. 00:04:33.420 --> 00:04:37.720 There may be more due diligence, and those clubs might decide to share due diligence 00:04:37.720 --> 00:04:43.200 for the club that you originally presented at. 00:04:43.200 --> 00:04:45.120 Due diligence completes. 00:04:45.120 --> 00:04:49.520 You reach your investment target, and then you negotiate the investment documentation 00:04:49.520 --> 00:04:50.520 again with lawyers. 00:04:50.520 --> 00:04:57.840 So this is the investment agreement, your Constitution and shareholder agreement. 00:04:57.840 --> 00:04:59.600 Everyone signs the documents. 00:04:59.600 --> 00:05:03.760 The angel networks collect the cash from various places for you. 00:05:03.760 --> 00:05:06.440 They then deposit the money in your bank account. 00:05:06.440 --> 00:05:11.160 You update the share register and the companies office, and there you go. 00:05:11.160 --> 00:05:16.280 You can start executing, and on that very day, you're going to start planning your next 00:05:16.280 --> 00:05:20.240 round, rinse and repeat. 00:05:20.240 --> 00:05:25.040 So we'll go through all of these steps in more detail later on in the series. 00:05:25.040 --> 00:05:30.360 But your homework for now is to find some founders who have done an angel round already. 00:05:30.360 --> 00:05:32.320 You might know some of them directly. 00:05:32.320 --> 00:05:36.220 You might be able to find them at a meetup or through your local support organization 00:05:36.300 --> 00:05:41.580 like Creative HQ or Ministry of Awesome or GridAKL, your local EDA, or you might 00:05:41.580 --> 00:05:44.940 want to reach out to some on LinkedIn. 00:05:44.940 --> 00:05:48.340 The closer they are to your industry and the more they look like your company, the better 00:05:48.340 --> 00:05:51.580 because the experience will be similar. 00:05:51.580 --> 00:05:59.860 So the pithy quote for today's episode is, it takes a village to raise a startup. 00:05:59.860 --> 00:06:04.540 This wraps up the introductory section of the series, and in our next episode, we'll 00:06:04.540 --> 00:06:10.020 get into the next section, which is all about foundercraft, the art and science of being 00:06:10.020 --> 00:06:11.500 a founder. 00:06:11.500 --> 00:06:13.500 Until then, ka kite.