What is an Angel Investor?
Angel investors are wealthy individuals who invest in high risk, early stage ventures by reserving a portion of their total investment portfolios to provide emerging companies with seed and startup capital through direct, private investments. Their goal is to achieve higher returns than the typical public markets provide. Most angels are active investors - who contribute their time and experience, as well as offer introductions to valuable contacts essential to the company’s success - because they enjoy the thrill of helping entrepreneurs grow their businesses. To maximize the value added, most angels specialize in industries or technologies they understand, and invest only in companies within close geographic proximity.

What is an Angel Group?
Angel investor groups vary in structure, from formal to informal. Formal groups follow strict participation requirements that guide members’ minimum investment activity and event attendance. Some groups pool members’ capital to make investments on the group’s behalf, while others allow individual members to invest in specific deals of interest

A typical angel group’s investment ranges widely from $50,000 to $500,000 per deal, depending on how many group members are interested in the deal. While no two angel groups operate exactly alike, most angel groups maintain a local or regional geographic focus in order to maximize members’ ability to actively engage in the growth of their investments. Angel groups often have web sites that provide directions for business plan submission. After screening business plans for top-quality deals that match the group’s criteria, these groups organize regular monthly breakfast or dinner meetings for members to hear pitches from companies selected to present. If the group (or members of the group) decides to proceed, interested members commonly collaborate on due diligence and deal negotiation. Based on the group’s structure, investments are either made directly by individual members, or by the group as a whole. Most groups apply standard terms to their investments, with some flexibility to negotiate.

Who is sponsoring The Huntsville Angel Network?
Formation of The Huntsville Angel Network was sponsored by a consortium of the area’s leading law firms, CPA firms, investment advisors, and angel investors in cooperation with BizTech, Huntsville’s technology-focused business incubator. The HAN is a member of the Angel Capital Association, a national association of angel investor groups sponsored by the Kauffman Foundation, a non-profit Kansas City based foundation.

What needs does the HAN address?
For angel investors, the Huntsville Angel Network serves as a single point of contact to hear of qualified investment opportunities. HAN members are able to participate in the due diligence process, if they wish, evaluate the results of due diligence, and make their own personal investment decisions. Investors hear of a higher proportion of qualified opportunities, and spend less time listening to unqualified capital seekers.

For businesses seeking capital, the Huntsville Angel Network serves as a single point of contact where they can receive assistance in making their case as attractive and understandable as possible to investors, have their investment opportunity be considered by the area’s most interested investors all at one time, and complete their capital raising in a much shorter time and with less effort than is now possible. This allows companies to get products to market faster, and helps assure that companies are better capitalized and focused on growth and profitability, rather than spending large blocks of management time raising capital in an inefficient process. The HAN helps entrepreneurs organize their business proposal to fit a more standard format so that investors will be able to more easily evaluate the investment proposition.

Who belongs to HAN?
The Huntsville Angel Network’s members are Huntsville area individual angel investors, service providers, and other individuals who have an interest in making the local business capital acquisition process work better. Angel investors and investment firms from the region may also join.

What types of investments will HAN consider?
The Huntsville Angel Network solicits applications from businesses seeking seed and expansion funding of $250,000 to $750,000 in capital, that have a business model and plan that will offer appreciation of at least 5 to 10 times the investor’s money in 4 to 6 years, and that have a clear path to provide a liquidity event for the investors. The HAN seeks opportunities in information technology, biotechnology and life sciences, aerospace, transportation, and energy, but will consider any plan that meets the requirements outlined. While most funding is expected to be in the form of equity, some transactions may involve convertible debt and other hybrid investments. The minimum investment by a HAN member in any company deal is $5,000, with a typical maximum of $50,000.

How does HAN operate?
The HAN is organized as a non-profit entity. The HAN has several committees, including a Board of Directors, a Screening Committee, Due Diligence Committees and other committees that the organization determines from time to time. The Screening Committee receives applications from companies, interviews the company principals, screens for goals and abilities, and vets the company’s 12-minute presentation for suitability. The HAN membership meets monthly to hear 1 or 2 selected business case presentations by company principals. In a discussion after the presentation, members vote on whether or not to proceed beyond this stage with the case. Cases that are approved have a Due Diligence Committee appointed from the membership. This Committee works with the company over the succeeding several months to perform due diligence, mentors the company on its goals and plans, and negotiates the investment deal. When the deal is ready, the HAN membership is invited to a special deal presentation meeting. Individual investors hear the deal, receive the due diligence results, have an opportunity to ask questions of the company and the diligence committee, and have 15 days to make their individual investment decisions. Most deals are for preferred stock with a HAN standard set of terms and conditions, and are made through a new LLC set up for the purpose. Each investee company receives a HAN member or two as Board members, who serve to represent the membership’s interests and mentor the company as it grows. Where appropriate, the company also receives access to the business incubation capabilities of BizTech.

What precedent is there for creating an angel investing organization?
Over 200 angel investor groups have formed around the country since 1990 to bring some order and efficiency to the angel investing process. You may have heard of some of them: Band of Angels in the Silicon Valley, the Tech Coast Angels in the Los Angeles basin, and the Atlanta Technology Angels. These groups have all existed for ten years or more, and have brought many benefits to their members and local entrepreneurs. In 2004, these groups came together to form the Angel Capital Association, where formative groups can get assistance from experienced group leaders, and where groups can share best practices on due diligence and other issues.

What fees are charged to applicant companies seeking investment?
Applicant companies are charged a fee of $100, and companies selected for an investment pay the legal costs of making the actual investment.

How does the HAN relate to other angel investing groups?
The HAN is a member of the Angel Capital Association, a nationwide association of over 75 angel groups. The HAN newsletter contains notices of investment opportunity meetings in nearby cities with which the HAN exchanges deal flow. Where a Huntsville area deal requires more capital than the HAN can handle, the deal can be syndicated with angel groups in the southeastern US.

How is the HAN governed?
A distinguished Board of Directors is setting policy and governing the Huntsville Angel Network.

What membership levels are available?
Long established angel groups tell us that we can expect 3 groups of members: those who attend every meeting, participate in the chores of deal screening and due diligence, and who invest in a few deals each year; those who attend some meetings, do some screening and due diligence work, and who invest frequently; and those who never attend a meeting, don’t do any work, but who invest in almost every deal. In recognition of this, individual and business membership in the Huntsville Angel Network has been structured at several levels, depending on the degree to which the member wishes to participate in the HAN’s activities.

Investor membership for an active angel investor is $1,500 per year. The fee includes the costs of attendance at all meetings and meals that may be served there, email newsletters and correspondence, and the right to receive the results of due diligence on all opportunities the HAN chooses to pursue. Members can earn credits against the annual fee by participating in deal screening, deal due diligence, serving on the board of an investee company, or by volunteering their experience and judgment to investment companies. Members can reduce the cost of their succeeding year’s membership by up to 50% in this way. Investor Members are entitled to vote on all issues that come before the membership. Membership is limited to accredited investors, only.

Affiliate Membership in the HAN is for professional service providers, bankers, investment brokers, venture capitalists and investors from outside the Huntsville area who wish to stay in contact with the HAN membership and its applicant companies. Affiliate membership is non-voting. One representative from an affiliated firm may attend each HAN function. Affiliate membership is $2,000 per year.

Sponsoring Member: this membership allows the member to participate in all aspects of the HAN’s activities, and to receive recognition at all meetings and in all printed materials as a Sponsoring Member of the organization. This membership requires an initial payment of $5000, and renewal payments of $3000 in subsequent years. Two representatives of the firm may attend any HAN function.

How do I join the Huntsville Angel Network?
Call (256) 704-6000 and ask for the HAN membership application package. Applications are considered by the HAN membership committee.

Where can I find out more about angel investing?
See the Angel Capital Association website at www.angelcapitalassociation.org.