The document discusses angel investing and provides statistics on angel and venture capital investments. It notes that in 2005, angels invested $23.1 billion in 49,500 deals, a small increase from 2004. Angels typically invest in seed/start-up stages and provide guidance in addition to funding. The document also outlines various terms that may be included in angel investment agreements, such as preferred stock rights, interest rates for convertible debt, and liquidation preferences.

1. Tacoma Angel Network Angel Investing Essentials October 10, 2006 Susan Preston Entrepreneur-in-Residence Ewing Marion Kauffman Foundation AND Director of Attorney Training and Professional Development Davis Wright Tremaine

2. Financing Life Cycle Financing Idea Pre-seed Funding Seed Funding Expansion/Mezzanine Operating Cap. Friends and Family Angels Seed Funds Venture Funds Founder Institutional Equity Loans / Bonds Product Dev Angel Groups Start-up Funding Government Grants/Loans Discovery Proof-of Concept Product Design Product Development Manufacturing/ Delivery

4. Venture Capital Investments by Stage of Development ($s in Millions) Source: MoneyTree

5. Venture Capital Investment: Historical and 2006 Projected Source: MoneyTree

6. Average VC Deal Size Per Financing Round ($ Million) Source: NVCA

11. Member Locations Full Member Provisional Member

12. August 2005 Does not include 18 Provisional Members Angel Networks Networks w/Sidecar Funds Angel Funds ACA Membership (81): Networks and Funds 60 9 12

13. Years in Operation 68 groups reporting Groups Average = 4.23 Median = 3

14. Average Group Investment Per Deal 45 groups reporting (Caution: source data is incomplete & unverified) Groups Average = $351,050 Median = $300,000 In $1,000s

15. 39 groups reporting (Caution: source data is incomplete & unverified)

16. Investment Preference 39 groups reporting

21. Expected Rates of Return 3X 25%/year Near exit 4X 30% 2 nd stage 5X 40% Early stage 8X 50% Start-up 10X+ 60%+/year Seed Five Year ROI ROI

22. Valuations Of Venture Capital Seed/Startup Rounds ($Millions) $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006* *2006 Estimated Value Startup/Seed