Step 1 – Business Plan Acceptance
Member Angels will be the primary source of deals. Deals typically will come based upon word of mouth, contacts of members, and marketing of the organization, web site and other internet marketing tools such as Twitter and Facebook.
Step 2 – Secretariat Screening
If, after reviewing the business plan, Secretariat believes that the idea could be an attractive investment opportunity for some of our Members, entrepreneur will be invited to deliver a 10-minute “informal pitch” to a sub-group of our membership here in Hyderabad. No presentation aids (e.g. PowerPoint slides) are allowed at these informal pitching sessions.
Please note that we will only invite entrepreneur to one of these sessions if we believe entrepreneur have a realistic chance of securing funding from our Members, therefore a significant proportion of applications will be turned down without the Hyderabad Angels ever meeting entrepreneur in person.
Step 3 – Formal Dinner Presentation
Usually four companies are selected to present at each Dinner Meeting, with each company being allocated a 30 minute slot, which should be split equally between the pitch and a Q+A session. At the end of the fourth company’s slot, we bid farewell to the four companies, at which point our Members then retire to a private room. A thorough discussion of each investment opportunity (i.e. presenting company) takes place over dinner. In order to proceed to the next stage in our process, the company will need to secure a Lead Investor that is already a Member of the Hyderabad Angels.
If the company is successful in gaining a Lead Investor from within our current membership, during dinner the Lead Investor will ‘defend’ the pitch on the behalf the entrepreneur. By doing so, they are effectively guaranteeing that they will invest in the company alongside any other Members that choose to participate.
Step 4 – Due Diligence
Like most Angel groups, the amount of time that we invest in due diligence is directly correlated to the amount being invested. . However, each member will look at the deal individually and holistically to see if the deal is appropriate based upon host of criteria such as risk appetite.
This is because Angels invest their own money, and therefore choose to rely on their instinct, experience and the opinions of other Members, rather than relying on an expensive and time-consuming due diligence process designed to verify the statements made in the business plan, presentation, and financial projections.
However, as many of Angels primarily invest in people, they are likely to want to hear more about the team’s background and track record. If entrepreneur play an active role in facilitating this process, it will help to expedite a final investment decision from our Members.
Step 5 – Term Sheet Negotiation
After successful completion of the due diligence process, interested Members will present entrepreneur with a Term Sheet that defines the structure of the investment deal – including the amount / type of equity, as well as rights relating to our representation on the board of directors, amongst other things.
Step 6 – Execution
When all parties are satisfied with the terms and language contained in the Term Sheet, the deal can be executed. Both sides may wish to instruct legal counsel to assist in the final negotiation and drafting of Shareholder Agreements, etc, and if for any reason the deal does not close then our Members’ legal costs will be borne by the Interested Angels. However, please note that it is much more common for the deal to close relatively smoothly at which point our Members’ legal costs will be passed on to entrepreneur (subject to the cap in fees agreed during Step 5).
Note: Members will invest directly into the company not through Hyderabad Angels. Hyderabad Angels will only facilitate the deal.
Step 7 – Beyond Funding
Closing the deal is only the beginning of the involvement of Hyderabad Angel’s in the company. The main reason Angels groups have been so successful to date is because of the active involvement of the Lead Angel (i.e. the Lead Investor) in mentoring the business in the long-term. They are able to proactively leverage not only their own network of contacts, but also the contacts of every other Member of our group – as well as helping to arrange discussions with other investors for “follow-on funding” should the business plan require this.