Deal Sourcing: Investment opportunities come from various places. As a manager-led fund, Jersey Angels staff will actively source deals as part of its managerial activities. Some of the specific avenues through which opportunities may arise include:
- Service providers, such as lawyers, investment bankers, and accountants: These individuals come across entrepreneurs fairly regularly, and members’ connections with these individuals often result in application submission.
- Venture capital funds: Venture capitalists only invest in large deals, often totaling $5M or more. If a promising opportunity arises that is too small in magnitude for the venture capitalist, it may be referred to an angel fund.
- Investment or technology forums: These events often showcase pre-screened companies, and sometimes present interesting opportunities for investors.
- Universities: Entrepreneurship is being increasingly promoted at colleges. Many students wish to embark on entrepreneurial endeavors right out of school, especially during times of economic recession when the job market is poor. Technologies also come out of university research, which often present commercialization opportunities.
- Fund website: Entrepreneurs may submit their applications via the fund’s website, which must then undergo a screening process by JA managers.
- Organization membership: Jersey Angels is a member of the Angel Capital Association (ACA) and Angelsoft network, which aids entrepreneurs in finding us.
Initial Screening: Jersey Angels managers screen the plethora of submitted applications for those that meet the criteria of the group. Screening is a uniform process, and all applications will be judged against the same criteria. As much as 98% of applications received will not make it through the screening process. For a sample screening criteria, see Appendix 7 of the attached guide from the ACA. Screening is necessary because angel funds receive far too many applications for the group to analyze and discuss each one. Therefore, it is the managers’ responsibility to effectively eliminate applications that members will not want to invest in. All applications will be available for members to review, including those that did not pass the screening process. Members may also wish to participate in the screening process if they see fit to do so.
Member Screening: After an application passes the initial screening, fund managers may speak to the company to elucidate parts of the plan or uncover additional information. During this phase, fund members will have the opportunity to evaluate the application. The prospective company’s business plan, along with managers’ notes and thoughts from the screening and phone call, will be available for download in the members section of the group’s website. Members may then evaluate the opportunity individually to decide whether it is a business they would consider investing in. The members area of the site allows for forum-style discussions about applications among members, as well as a voting system. If an application is perceived favorably by several members of the fund, the company will be invited to present to the members at the next investor meeting. Those applications that do not receive the requisite number of votes will not have the opportunity to present, but any interested angels may contact the company directly if they wish.
Coaching: Investors’ time is valuable, and meetings are hold only 2-3 times each quarter. For this reason, it is necessary for the fund’s staff to coach companies prior to their presentations. This ensures that they present the right information, format their presentation effectively, and answer questions investors are interested in.
Presentations: On a typical meeting day, several companies will be invited to present. The presentations will be short, between 15 and 20 minutes. There will be time left at the end for members in attendance to ask questions. Afterward, members can discuss the company, share their knowledge about the market, and discuss the viability of the opportunity. Those club members still interested may proceed to the next step.
Due Diligence: JA managers will organize the diligence process for interested members. The activities include in-depth market research, scrutinizing financial statements, background checks, and financial calculations & analyses. Managers may wish to enlist the aid of professionals or outside resources in order to allow members to feel confident in their decision to proceed.
Negotiation: Companies that pass due diligence to interested members’ satisfaction will then be negotiated with. With the help of the group’s managers, members will structure a term sheet— a non-binding preliminary document which outlines the specific structure of the deal. If terms are agreed upon, a final agreement can be drafted by the group’s legal counsel.
Post-deal Management: Depending upon the terms of the deal, group members may have considerable say regarding the company’s operations and decisions. Members may, if they choose, help guide the company they’ve invested in to improve their investment’s chance at success. Invested members not interested in this “hands-on” approach will still be updated frequently regarding the latest activities of companies they’ve invested in.