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Welcome to the Equity Entrepreneur Library
Introduction
The wiki is intended to help you to invest successfully – how to recognise, understand, assess and manage the risks associated with Business Angel Investing. It is a stand alone source of reference; a practical guide, the accumulation of dozens of individuals’ knowledge and experience.
success = skill & intelligence + knowledge + experience
The wiki provides information only; even with the greatest skill and intelligence, it will not provide experience. Equity Entrepreneur© workshops are specifically designed to fast-track that experience, without anyone having to lose money in the process.
If as a result of browsing through the wiki you decide to have a go yourself, it really is worth first booking a place on a Workshop: the experience of those attending is evidence enough. The sole purpose of Equity Entrepreneur© and these Workshops is to encourage MORE investors to invest MORE money in Business Angel activity, MORE wisely - and MORE successfully.
The Equity Entrepreneur© Workshops break successful investing down into three stages:
Starting Out
Getting In
and
Getting Out
because the reason for being involved in this area of activity is, fundamentally, to make money. Each Workshop focuses on a different aspect of the process, hopefully facilitating all those with any interest at all to make a success of it no matter what their absolute wealth or background
Introduction to wiki knowledge
A wiki is computer software that allows users to easily create, edit and link web pages. One of the best-known wikis is Wikipedia
We’ve created this wiki in order to harness the collective wisdom and knowledge of all the Business Angels who care to make entries. In this way, we hope to rapidly expand the general body of knowledge available to all actual and potential Business Angel investors.
It is hoped to help those that are contemplating making a Business Angel investment to make fewer mistakes, to make better use of his or her available funds and to have more fun.
We’ve started off the wiki with some suggested pages, but it is entirely up to you the users to determine the ultimate shape and content of the wiki. Read what others have written, make your own contributions, and keep whatever you like updated. The only rules concern legalities, Financial Services regulations, and improper use, language, morality and so forth – see Terms of Use.
Consult the User's Guide for information on using the wiki software.
Background
Why on Earth do it? Equity Gap Innovation How do Business Angels help? Tax Enterprise Investment Scheme Capital Gains Tax Inheritance Tax Income Tax Regulation Expectation
Risk Management Recognise what is Risk Acting on risk Avoid Transfer Reduce Accept Risk Homeostasis
Applying the Understanding of Risk Equity Entrepreneur© Valuation Toolkit
Personal Risk Factors and Considerations
Time Exposure Family Involvement Distance Reputation
Sourcing and Portfolio Building
Networks Clubs Syndicates Portfolio building How much to invest? What do the Professionals do? Why Invest in smaller businesses? Calculating Reward Net Present Anticipated Value Portfolio theory Factors which encourage investment Sharing Experiences Portfolio spread Quantity
Business Plans
Model Finances Operations Resources Marketing & Sales Vision Stage Scale Scope Evolution - revolution
People
Leadership - team building Character Experience Knowledge Capability Profiling Motivation Attitude - lifestyle Financial commitment
Due diligence
Valuation methods
What factors influence business value? Formal Valuation Discounted Cash Flow Comparables – Main Market Comparables – Small Cap Private company discount Minority shareholding discount Small size discount Net Assets Sweat equity IPR David Berkus - Business Stage Compensated Adviser / Virtual CEO Multiple of disposable profits Back-of-envelope Rule of thirds Rule-of-thumb Put it off ‘til later Top-down Bottom-up Greed Ratio Risk-Reward Internal Rate of Return (IRR) Modified IRR equivalent annuity capital efficiency Price/Earnings Basis Uncertainty in Financial Projections
Negotiations
Motivation Debt - equity Structure - share class - ratchets Board position Minority rights
Legals
Heads of agreement Lock out/Exclusivity Agreement Confidentiality Disclosure Letter Directors’ Duties Shareholder Agreement Indemnities Control & Definition of Shareholder Rights Other protections for the Investor Key Employees & Service Contracts Dilution
Growing a Business
time vs money mentoring vs involving vs meddling relationships Management Issues
Exits
timing type Initial Public Offering (IPO) Trade Sales Company Buy-back
