Angel investing, from fundamentals to term sheets, explained from the ground up.

A new and authoritative guide for beginners and seasoned investors, as well as founders raising an angel round.

300-page online book
Digital access to this title in the Holloway Reader
Downloadable PDF for personal offline use

Length: 300 pages

Edition: e1.0.0

Last Updated: 2021-02-01

Language: English

ISBN (Holloway.com):

978-1-952120-04-6

ISBN (print):

978-1-952120-20-6

$35

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Angel Investing

Start to Finish

by Joe WallinPete Baltaxe

Angel Investing: Start to Finish is the most comprehensive practical and legal guide written to help investors and entrepreneurs avoid making expensive mistakes.

Angel investing can be fun, financially rewarding, and socially impactful. But it can also be a costly endeavor in terms of money, time, and missed opportunities. Through the successes, failures, and collective experience of the authors you’ll learn how to navigate the angel investment process to maximize your chances of success and manage downside risks as an investor or entrepreneur.

You’ll learn how:

Lead investors evaluate deals
Lawyers think through term sheets
To keep perspective through losses and triumphs

This book will also be of use to founders raising an angel round, who will be wise to learn how decisions are made on the other side of the table. No matter where you’re starting from, this book will give you the context to become a savvier thinker, a better negotiator, and a positive member of the angel investing and startup communities.

Rachel Jepsen — Editor

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Featured Reviews

Angel investing is not easy, nor is it for the faint of heart! Unlike buying shares in a publicly traded company or real estate, angel investments in startups are illiquid and not easy to value. The deal terms matter a great deal; mistakes in terms can make the difference between a successful investment and one where the company might be successful, but your investment is not. The authors not only explore the legal matters in this book, but also give many angel investors a framework to think about both individual deals and a long-term portfolio approach. They provide options for many complex issues that confront angels and help you decide what is important in a deal.

Dan Rosen (Chair of the Alliance of Angels)

When both sides approach fundraising with transparency, empathy and respect, outcomes are better for everyone. Angel Investing, Start to Finish gives you the knowledge and tools to achieve more successful investor-investee relationships. My advice to everyone who is new to investing, fundraising, advising, or a combination of all: take this book and make it your cheat sheet.

Leslie Feinzaig (Founder & CEO, Female Founders Alliance)

Joe and Pete have put together a very comprehensive, modern, relevant work on angel investment. This is the book I wish I'd had 10 years ago. It's all the bits and pieces of angel investment perfectly structured for angel and entrepreneur consumption. The details on terms and term sheets are particularly focused and critical. A must-read for anyone involved in early-stage investment.

Burton Miller (cofounder, Startup206, Bliip Networks, and Roost)

This book is an excellent review of angel investing. It is complete and thorough so that, even after 10 years as an active angel investor, I learned some insights. It is clearly written and the links provide easy references so that it is perfect for a novice angel investor.

Dan Delmar (Chief Mentor and Board Director of the Harvard Business School Alumni Angels of New York)

The deeper I get into this book, the more valuable it is. What a great resource!

David Huether (PCH Group)

About the Authors

Joe Wallin

Joe Wallin is a Seattle-based corporate lawyer who represents startups, investors and lenders in startups, founders, and executives. Joe has been working in the early-stage company space since the late 1990s. He is a member of the Angel Capital Association’s public policy advisory council, where he is actively involved in trying to make the law better for investors and founders. Joe has written for The Wall Street Journal, PandoDaily, GeekWire, and Xconomy, and blogs at The Startup Law Blog.

Pete Baltaxe

Pete Baltaxe has played many roles in the startup ecosystem. As a serial entrepreneur, he raised over $25M in seed financing and venture capital, and had two successful exits, an acquisition for 2Market and an IPO for RedEnvelope. He has advised startups on fundraising and product strategy, both individually and as part of accelerators like Techstars. Pete has also been an angel investor for ten years. As an executive in many startups over his 25-year career, Pete has seen first-hand how startups succeed and fail. He has felt the angst of the shortening cash runway and the thrill of the successful exit!

Part I

Angel Investing Overview

What Angels Do Read Preview

Startup Fundraising and the Road to Liquidity

The Process of an Angel Investment

Fundraising and Securities Law

Part II

Finding and Evaluating Deals

Finding Opportunities Read Preview

Evaluating Opportunities

Business Due Diligence for Angel Investments

Legal Due Diligence for Angel Investments

Retaining a Lawyer

Part III

Financings and Term Sheets

Term Sheets and Definitive Documents Read Preview

Convertible Debt

Preferred Stock

Other Investment Vehicles

General Investment Terms

Part IV

Valuation, Ownership, and Dilution

The Interplay of Valuation, Ownership, and Dilution Read Preview

Company Setup and Initial Ownership

Dilution From Selling Priced Shares to Investors

Dilution and Conversion

Dilution From the Departure of a Founder

Part V

Corporate Structure and Tax Issues

What Angels Need to Know About Business Entities and Taxes Read Preview

Tax Credits and Losses

Part VI

Staying Engaged

Boards and Advisory Roles Read Preview

What To Do When One of Your Startups Is Struggling

Common Wisdoms and Painful Lessons

Final Thoughts

Appendices

Appendix A: Example Documents Read Preview

Appendix B: C Corps, LLCs, and S Corps

Does this sound like you?

As a former entrepreneur, I’ve learned a lot about how companies work and the startup community has given me so much. Now I want to give back as an angel investor. Where do I start?

What’s the difference between a managing director, partner, venture partner, principal, associate, or an analyst in a VC firm? Who should I be talking to?

I know a lot of great founders I’d love to help out, but I’m not sure I know enough about negotiating term sheets or what to look for in a company’s prospects.

I’m providing a company’s first outside investment, and I’ll be joining the board of directors. What protections should I be negotiating, and how can I prepare to help the company as they grow?

I’ve made a few angel investments, and now I’d like to become a lead investor. What do I need to know to help myself prepare?

I’m a founder raising my first round of angel investment. What do angels look for in a company, and how can I pitch them to make my company an appealing candidate?

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