2014 has been another banner year for angel investors. Yet, not every outcome leads to a positive return. The presentation provides an overview of the software investments over the past years, and two case studies of what can go wrong, and what can go right.

1. Observations on Angel investing
Brown Bag Discussion
Christian Dahlen
January 2015
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2. Agenda
• State of VC investing
• Start-up trends and observations
• Case examples: Failures and successes

3. Software is eating the world

4. Dow Jones run up

5. VC Investments in SW are high

6. 2013 - 2014 Start-up trends

7. Unicorns
Source: Cowboy Ventures, 2013
•On average, four unicorns were born per year in the
past decade.
•It takes seven-plus years on average before a
“liquidity event” for companies.
Source: Cowboy Ventures, 2013. U.S.-based software companies started since 2003 and valued at over $1 billion by public or private market investors

8. Being contrarian and right
Average good results
Average bad results

9. Failure
Major Risk Categories
• Market
• Technology
• Team
• Financial
• Business Model

10. Case Study #1: Failure – Social media gaming company
Company creates social media games that allow fans to extend their engagement and live their favorite
hit movies, TV series or brands via Facebook, iPad and mobile devices.
Closed Seed financing in: $1.5m seed from 3 angel groups in June 2011
Exit: Sold my shares for $1.00 in December 2012; company closed 10/2013
Deal History:
• First board meeting in September
• December board meeting unearths significant revenue shortfall
• Multiple board meetings in January – CFO duties removed from CEO
• COO resigns for health reasons
• CEO breaches investor rights; pledges company common shares and AP for a loan w/o board approval
• Company lays off all employees in March 2012. Cash survival plan fails; board resigns.
There are many excuses
• The market conditions deteriorated significantly after the Zynga IPO
• None of the investors had a background in games
• CEO unfit to also be CFO and Chairman. COO and the board couldn’t hold him in check
• The first game did not perform as expected
… but the team didn’t execute

11. Company provides micro-location solutions to large format retailers that increase revenue, enhance the
brand experience, and reduce operating expense at a cost that makes business sense.
Closed Seed financing in: July 2011 – $1m convertible note at $3.5m pre from angels and seed fund
Exit Occurred in: Dec 2013 - Merged into Series C start-up at their last respective valuations
Summary of Deal History:
• Convertible debt converted to equity in January 2012; Raised an additional $500k
• $850k follow-up investment from existing shareholders in November 2012
• Acquirer raised $30m in April 2014
A repeat founder team can still struggle, but will also find
unexpected ways to succeed
• When you are too early to market, pivoting is not an option, it is an imperative.
• Difficulties raising money can be turned into an advantage
• A strong team will come out on top
Case Study #2: Success – WiFi location for retailers

12. Christian
00s & 10s
• Investor: 13 angel investments since 2009, Band of
Angels, blogger
• Companies: SAP, Kabel Deutschland, Excite@Home
• Roles: General Manager, Bus Dev, Strategy & Portfolio
80s & 90s
• Strategy Consultant: Hi tech, IT, general management
• Engineer: Aerospace/mechanical engineering and SW