Lecture given to EMBA students at the Haas School of Business, University of California, Berkeley, CA, June 2008

1. Haas School of Business
University of California, Berkeley
The Global Angel Investing Sector
Status and Prospects
Dr. Burton H. Lee PhD MBA
Principal and Co-founder
June 27, 2008

2. Space Angels Network
Overview
 Angel Investing in the Global PE Marketplace
 USA, Europe, India
 What are Angel Investor Groups?
 Space Angels Network
Rationale, Market View and Investment Focus, Strategy

3. Space Angels Network
Goals for this Lecture
 Tutorial on angel investor group business models
 Brief overview of the growing importance and variety of angel
investor groups in the US and internationally
 In-depth look at a new Sector-focused, National angel
investor group:
 Space Angels Network LLC

4. Space Angels Network
Angel Investor Groups
Tutorial

5. Angel Organizations Fill Capital Gap
Stage Pre-Seed Seed/Start- Early Later
Up
Source Founders,
Friends Individual Funding Gap between
and Angels Venture Funds
$300,000 and
Family $2,000,000/$5,000,000
(FFF) (depending on region)
Investment $25,000 to $100,000 to $2,000,000/$5,000,000
$100,000 $300,000 and up
Source: Angel Capital Association
5

6. Space Angels Network
Angel Investor Group Business Models
 For-Profit vs Non-Profit
USA: for-profit models dominate

Europe: non-profit models most frequent, likely to shift to for-profit in future

Russia: non-profit models most frequent

India, China, Brazil and Other Countries: data not available

 Revenue Models
Angel investor membership fees

Entrepreneur application fees

Corporate sponsorships

Event sponsorships and fees

National, regional and/or local government support

Equity participation or Entrepreneur/Investor success fees

 Cost Models – Major expense categories
 Marketing to entrepreneurs and angel investors
 Staff (usually part-time)
 Operating/IT expenses

7. Space Angels Network
Angel Investor Group Models
 Local / Regional Focus
 Silicon Valley/NoCal: ~20 angel groups
 Europe: promoted by EU and local governments for local economic development
 Investors’ need to remain engaged with nearby ventures
 Broad Investment Preferences are the norm
 Most angel groups invest across 3-5 domains: software, IT, semiconductor, cleantech, etc.
 Three sector-focused groups: Life Sciences Angels, Film Angels, Space Angels
 Rapid growth in new angel groups
 Silicon Valley/NoCal: 5-10 new groups this year expected
 Major growth potential
 Vast majority of angel investors do not belong to an angel investor group
 New business opportunity for entrepreneurs: start a new angel group!
 Confluence of social networks and investing
 Groups forming around many different themes: university alumni, sector-specific interests,
women investors, regional economic development, personal networks

8. Investors Per Angel Group
40
35
30
25
20
15
10
5
0
2 to 10 11 to 25 26 to 50 51 to 75 76 to 100 101+
Average = 55
Median = 41
Source: 2008 ACA Confidence Survey 8

9. Space Angels Network
Angel Investing in the USA
2007

10. Total US Angel Population 2007:
258,200
Investment Preferences:
Industrial &
Sector Software Healthcare Biotech Retail Media Energy
Deals 27% 19% 12% 6% 5% 8%
$26.0 Bn in 57,100 Deals
Source: UNH CVR (2007)

11. Angel and VC Markets Are Large, Complementary
Late
Mostly later stage
3,912 deals
$26.0 Bn
Early
$30.5 Bn
57,100 deals
1,400 Seed
Mostly & Early
Seed
seed & early stage Stage Deals
Angel Investment VC Investment
(2007) (2007)
Sources: UNH CVR, NVCA

12. ACA Membership: Networks and Funds
Angel Networks
99
12 Networks w/Sidecar Funds
17 Angel Funds
Full Members 123
Provisional Members 12
Investors in Operating Groups ~6,000
12

13. Profile of A Typical US Angel Investor
• Years investing 9
• Number of investments 10
• Total exits/ closures 2
• Years as entrepreneur 14.5
• Number ventures founded 2.7
• Age 57
• Percent of wealth in angel investing 10%
• Education Masters degree
13

14. Investment Preferences: 2007 - 2008
Biotechnology
Business Products/ Services
Computers & Peripherals
Consumer Products/ Services
~6,000 Angel Investors
Electronics/ Instrumentation
Financial Services
Healthcare Services
Industrial/ Energy
IT Services
Media & Entertainment
Medical Devices & Equipment
Networking & Equipment
Other
Retail/ Distribution
Semiconductors
Software
Telecommunications
0 10 20 30 40 50 60 70 80 90
Percent of Groups
Source: 2008 ACA Angel Group Confidence Survey 14

15. Space Angels Network
Angel Investing in Europe
2007

16. Total European Angel Population 2007:
75,000
€4.0 Bn
Late
Mostly later stage
~23,000 deals
5,920 deals
Early
€12.1 Bn
3,160 Seed
& Early
Mostly
Seed
Stage Deals
seed & early stage
Angel Investment VC Investment
(2007) (2007)
Sources: EBAN, EVCA,
Innovarium Ventures estimates

17. European Business Angel Network (EBAN)
3

18. Space Angels Network
European Business Angels
Network (EBAN)
• Location of members
• July 2007
• ~300 angel networks identified
• June 2008
Sources: EBAN

19. Space Angels Network
Angel Investor Groups in Europe, by Country/Region - 2006
Country/Region # Angel Groups # Angel Investors
France 34 ~2100
Italy 11 260
Portugal 6 200
Catalonia 8 401
Sweden 21 600
Netherlands 4 500+
United Kingdom 35 4620
Germany 38 ~1000
Sources: EBAN

20. EBAN Member Networks
Investment Preferences - 2006
Other sectors: environment, films, games, tourism, food, electronics, culture and security
Sources: EBAN

21. Space Angels Network
Angel Investor Group Trends in Europe - 2008
Major Trends
 Cross border investing is growing
 Sector-specific networks are appearing
 Syndication and co investment
 Collaboration with seed funds and VCs
 International collaboration
 Networks in mature markets receiving less support from regional or
national authorities, and an increased share of budget from private
sector sources
 Support from European funds is growing as new networks are being
created in regions of Europe lagging behind the EU 15, i.e. Southern
and Eastern Europe
Sources: EBAN

22. Space Angels Network
Angel Investor Group Trends in Europe - 2008
 Major Constraints
27 different legal and fiscal environments
Very fragmented and diverse European angel market
Stigma of failure and lower culture of risk than the USA
Up-front fiscal incentives available only in France & the UK
UK enterprise investment scheme is the most
advantageous tax break scheme but only applies to
investments in UK companies
Sources: EBAN

23. Space Angels Network
Angel Investing in India
2007

24. Space Angels Network
Angel Investor Group Trends in India - 2008
 Little data available – highly anecdotal
 “Extremely nascent”- Angel investing is new phenomenon in India
 “Both entrepreneurs and investors are trying to figure it out”
 Initial funding in India comes from four primary sources:
Family

Individual business networks and connections

Two angel groups (see below)

2-3 Seed stage funds

 DFJ-India, Canaan Partners-India and other funds
 Angel Investor Networks
 Mumbai Angels
 India Angels, Delhi (aka “Band of Angels”, founded 2005)
 Members: VC partners, corporate CEOs
 Areas of interest:
 IT products & services, Retail, Specialized BPO, Healthcare, Media and Entertainment
 Focus is on seed stage investments, typically in the Rs. 25 lacs to Rs. 2 crore range
Sources: DFJ India

25. Space Angels Network
a National network of accredited investors
focused on
seed- & early-stage aerospace-related
investment opportunities
www.SpaceAngelsNetwork.com

26. Space Angels Network
US Aerospace Innovation and Finance Pipeline
Chronic Structural Gap
in Seed-stage Funding for Space-related Companies
Angel Investors
And Networks
FFF Seed Early Growth Later Stage
Venture Capital
Angel Investors play a critical and growing role in the
AeroSpace Innovation Ecosystem

27. Space Angels Network
Structure of Angel Finance in US Commercial Space - 2007
258,200
$26.0 Bn
Individual Investors
57,100 deals
$1.9 Bn
ACA Angel Networks
Independent Angels
$24.1 Bn
~1,000 deals
(6,000 Investors)
(252,200 Investors)
~56,100 deals
~100 Active Space Angels
~$10 Mn Order of
~10 deals Magnitude
~ 100 Entrepreneurial Space Companies
Source: UNH CVR/ACA/Innovarium Ventures estimates - 2008

28. Space Angels Network
Virtual Solution – National Network
An online platform and Deal-making EcoSystem
Space
Angel Space
Space Angel
Angel
Space
Space Angel
Angel
Space
Angel Space
Angel
Space
Space Angel
Angel
Space
Space
Venture
Angel
Space
Angel
Space
Angel
 Collaborate on due diligence and deal negotiations.
 Find deal flow which is unavailable thru traditional angel channels.
 Access aerospace industry experts: technology, markets, legal, finance

29. Space Angels Network
Market View
and
Investment Focus

30. Space Angels Network
Major Market Trends
 Space-Information Technology convergence is primary driver
Integrated telecommunications and imaging (Iridium, etc)
Location-based services integrate imaging and telecom with GPS and RFID
Desktop Google Earth, Microsoft Virtual Earth + migration to mobile platforms
Commercial weather observation systems to replace government constellations
Asset tracking and satellite-RFID applications coming to market
Environmental sensing & climate change monitoring (CO2 emissions, C-trading)
 Space-Aviation convergence
Combined aerial/space imagery (e.g. Google Earth, etc)
Growing integration of hybrid technologies: aircraft, UAVs, LEO Sats, GEO Sats
 “Light Aviation” growth expected to be strong
 Asian Aviation boom (China, India)
 Space-Air Traffic Management System modernization - IP networks

31. Space Angels Network
Major Aerospace Investment Opportunities: 2008 - 2020
Qualitative Ranking
(Order of Magnitude)
Perceived Investor Risk
Space
Tourism
Orbital
Services
UAVs Satellite
& UAV
Asian
Air Applications
Aviation
Sensors Taxis/
Small
& Imaging
VLJs
Sats Navigation
Avionics
Telecom
SATMS Asset Tracking
Space Technologies Environment
$100Mn $1Bn $10Bn $100Bn $1Tn
Market Size

32. Space Angels Network
Opportunity: “AeroSpace”
The “AeroSpace Innovation Ecosystem” –
A Broad Spectrum of Investment Opportunities
Space-
“Pure” Space Space-
Based Aerospace
Space Components Related Aviation
SatNav Robotics
Satellites Avionics Retail Air Taxi
Asset Tracking Avionics
Rockets Sensors Web UAV
Telemedicine Sensors
Services Lasers IT VLJ
Tourism Materials
Space-Air Traffic Management System Infrastructure

33. Space Angels Network
Emerging Future Markets – Environmental Monitoring and Carbon Trading
 Emerging federal, state and global carbon emissions monitoring and
trading policies and mechanisms will promote development of major
new markets – and investment opportunities:
 Environmental monitoring
 Aerial-, space- and ground-based systems and sensor networks
 Environmental compliance and certification
 Corporate, government and non-profit facilities
 Residential units
 Regional environmental data collection/fusion, modeling, prediction and measures
 Water, weather, solar irradiance, etc
 Crop yields and famine prevention
 Disaster mitigation and prevention
 Estimated global market size (long-term): > $100 Bn per annum

34. Space Angels Network
Major Space-related Investor Exits and Events: 2007 - 2008
 Scaled Composites (acquisition by Northrop Grumman)
 Aviation and space platform/composites manufacturer
 AeroAstro (merger with Radyne Corporation)
 Small satellites + telecommunications systems
 XCOR Aerospace (investment by Boston Harbor Angels)
 Payload Systems (acquisition by Aurora Flight Sciences)
 Space payloads + UAV manufacturer
 MicroSat Systems Inc. (acquisition by Sierra Nevada Corporation)
 Small satellites + electronics/sensors/IT/systems integration
 TerreStar (strategic investments by EchoStar, others)
 4G integrated mobile satellite and terrestrial communications network

35. Space Angels Network
Venture Capital and AeroSpace Investing
 Astrolabe Ventures, Palo Alto, CA & Paris, France
Formerly known as Red Planet Capital, intended to be NASA-sponsored VC fund similar to
CIA’s In-Q-Tel, shut down by White House
Aerospace is one investment area of interest
Raising two funds at present
Stanford connection thru Peter Banks, General Partner
 Atrium Capital, Palo Alto, CA
Aerospace and Defense interests
 E-Synergy Ltd, London, UK
European Special Applications Fund, backed by ESA ( €5 Mn )
First €15 Mn raised, total fund size of €40 Mn is intended
 “Recent” space-related deals
ProtoStar and New Enterprise Associates, Silicon Valley
iOpener and Triangle Ventures, Germany

36. Space Angels Network
Strategy & Execution

37. Space Angels Network
Strategic Relationships – Aimed at Deal Flow and Successful Exits
Local
Venture Capital
Angel Groups
Firms
Federal
S&T Agencies Corporate M&A
& Venturing Groups
Space Prize
Organizations
Private Equity
State Space
Authorities
Investment
& Equity Funds
Banks
Research Universities
& Non-profit Hedge Funds
R&D Institutions
Deal Flow Funds/Exits

38. Space Angels Network
Deal Flow to Date – May 2008
 Satellite & UAV Applications (DVAS)
 Development stage: seed- and early-
Aprize Satellite
stage—from prototype development to
GeoOptics
early revenue
Space Data Corporation
 Sectors: launch vehicles (space tourism,
 Cleantech
consumer collectibles), satellite
Assured Power
 Aviation and UAV Platforms & Services applications, aircraft components,
EvoLux military/security, enterprise software,
Gotham Studios semiconductors, air taxis, unmanned
JIT Slipstream aerial vehicles (UAVs), cable television,
Linear Air audio/video entertainment, retail, energy,
R3 Scientific
telecommunications
WheelTug
 Business models: dual-use applications
Lumedyne
(terrestrial and space markets); aviation &
 Space Tourism
space-only (consumer, enterprise,
Rocketplane Global
 Retail/consumer government)
 Capital requirements:
Air & Space TV
 $100,000 to $10 million
Microgravity Enterprises
 Domicile: US, Canada, Europe
Starport Café
UP Aerospace

39. Space Angels Network
Key Takeaways

40. Space Angels Network
Outlook for US Angel Investing Climate - 2008
 Space Angels Network first deal in 2008
 Expect to see new angel investors playing a role in space sector
 Continuing momentum in formation of new angel groups
 Angel groups will capture a larger share of investor market
 Mobile social networking will drive continuing integration of
Internet w/ satellite applications
 Tighter coupling of angel investing with prizes programs
 Growing appreciation of importance of angel finance by US govt.
 Growing US-Europe angel investor connections

41. Space Angels Network
Questions and Discussion

42. For more information, please contact:
Dr. Burton H. Lee PhD MBA
blee@spaceangelsnetwork.com
+1 (703) 282-4513