Getting Aligned to New World Angel’s Investment Criteria
Save time and increase your potential for funding. Insure that your company is aligned New World Angel’s investment criteria.
By Steve O’Hara, President, New World Angels
Startups everywhere face challenges in obtaining funding. Florida entrepreneurs are no exception. Generally speaking how you align with New World Angels increases your odds of success. This article seeks to explore New World Angel’s focus as well as Florida’s sometimes unique twist to funding.
investment criteria
My inbox receives anywhere from 1 to 5 emails per day from entrepreneurs giving me their best email pitch and asking when we can talk. However, the smartest angel investors have disciplined investment processes and investment is not driven by a single person. While I respect a direct-to-the-top approach, it shows me that the entrepreneur has not bothered to understand that New World Angels, as a leading investment group, operates with an investment process. Our criteria and process are laid out plainly when submitting your company for consideration. New World maintains investment criteria that help the entrepreneur decide if we are the right investor. Here they are:
Industry. We are industry agnostic. We have a diverse membership representing many industries and possessing wide ranging corporate functional knowledge. As such we have invested in everything from medical and healthcare technologies, to video and media technologies. We have found interesting founders in everything from consumer products to enterprise systems. We look for any smart business and founder that we can reasonably evaluate.
Diversity. We are especially interested in companies originating from, and serving, underserved communities. Great founders, innovators, and business ideas come from everywhere. We believe that your entrepreneurship lifts our community and our society in immeasurable ways.
Geography. First looks go to companies with a Florida nexus or if outside Florida with some sustainable relationship to Florida. We will however invest in businesses without a strong Florida presence. Typically such deals are led by an experienced VC or angel group whom we trust or is sponsored by a New World Angels member with visibility in your company and geography.
Stage. New World Angels invests in deals nearing first revenue or some other significant inflection point (e.g. an IND from the FDA for a clinical trial). Almost half of my unsolicited emails are too early for us (I have an idea and all I need is your money to design and build the product) or too late (their size and valuation is more suited for a large VC investing in major expansion rounds).
Deal Size and Lead Investor. We typically seek to make investments at $250K or larger. For larger investments (typically $1+MM raises), New World becomes your lead investor. A lead investor is the investor doing the due diligence and then organizing other investment groups around the State of Florida to participate in supporting your company. In Florida, there are really only a dozen Florida lead investors capable of $1+MM raises and we assume you will be talking to all of us. But alternatively New World can also be your gateway to these other sources. And yes, Florida early stage investing is a small industry and we all know each other and often work together as co-investors in larger deals.
Valuation and Deal Terms. We typically seek valuations well under $10MM. We don’t consider investments with valuations over $20MM. At New World Angels we often get proposed pre-money valuations and deal structures reflective of the big bets made by Silicon Valley VCs. We are unimpressed when you bring these to us as your proposed pre-money and if the first conversation doesn’t demonstrate a willingness to get real, we will wish you well and suggest you try Silicon Valley first. It’s OK to go in with a valuation you expect to be negotiated down somewhat. We accept the entrepreneurs’ original valuation proposal in 25% of our deals and negotiate the other 75%. But if we are too far apart, we won’t waste our time even getting together.
Deal Structure and Terms. We expect that you the entrepreneur are represented by a lawyer skilled in early stage investment. We want you to have competent representation before and especially after we invest in you. If you can’t figure out how to hire a good lawyer, how can we have confidence that you are able to hire a good overall team? Also, this will be our cash you are wasting on a bad lawyer who will be driving up everyone’s legal fees. On terms, you can expect that we ask for the following standard NVCA terms.
An independent board of directors, including a seat for ourselves
Preferred stock with preferences
A rights agreement since we are often in the minority position
Timing. New World Angels is not quick money. We take 90 days on average. We are going to analyze your world. Everyone has heard of the VC who says they can fund you in one week or less. What they don’t tell you is that they have followed the founder for extended periods while most of their cold start deals take 2-4 months from first meeting to funding. Entrepreneurs often come to us with an aggressive timetable that requires funding by next month. Be realistic because this can backfire. When you push that your funding round rapidly, we will decide to pass, not because we didn’t like the idea, but we aren’t going to try to move heaven and earth for your deal.
Completeness. Provide all the information that is requested. This seems obvious to the point of being trivial. But we notice your effort and it specifically figures into our scoring of your company. Also, we like to see business plans for complicated business environments, not because we believe the plan will materialize as presented. We want to see your deeper thinking and the assumptions and metrics associated with those assumptions. An investor presentation is fine. But if in this first introduction to your business we don’t understand your business, then your opportunity for funding is severely diminished.
Conclusion
Bottom line: worry less about getting a warm introduction into our group and worry more about aligning to the New World’s investment focus and process. A warm introduction will not overcome mis-alignment and we are smart enough not to worry about an introduction when we see a good business opportunity. New World Angels funds 3% of all deals we review and only about 5% of the deals we see in person. You can increase your chances by aligning to both our criteria and process. With that said, don’t be discouraged if we say no. We make mistakes and a number of firms we reject wind up getting funded, sometimes by ourselves a year or two later when the entrepreneur comes back addressing the issues we discussed when saying no. Persevere and learn each step of the way. Incorporate the feedback as you think appropriate and keep moving forward. The start-up game is not easy, but that’s what makes it so exciting and potentially lucrative.