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TABLE OF CONTENTS Preface Acknowledgments Introduction PART 1 THE CHALLENGE AND THE SOLUTIONS Chapter 1 The Challenge Introduction The Challenge The Angel Investor Structure of the Private Investor Market Making Sense of the High-Net-Worth Market Investor Activity in Early-Stage Deals Angels, A Golden Capital Source Investors Worth Accessing Chapter 2 The Solution: The Private Placement The Private Placement Selecting the Right Capital Source Is Your Deal Financeable? Are You Financeable? Is Your Risk Financeable? The Benefits and Disadvantages of Equity Making Your Search for Investors More Efficient The Problems with Conventional Wisdom Chapter 3 The Solution: A Strategy That Works An "Inefficient Market Defined A Strategy That Works Build a Capitalization Strategy Focus on Management, Not Documents Budget for the Financing Program Anticipate Due Diligence Build Relationships with Prospective Investors Line Up Pre-Commitment Aggressively Manage Database Development Go Directly to Qualified Investors Sell Manage the Close Dreamers and Dream-Makers PART 2 UNDERSTANDING THE ANGEL INVESTOR Chapter 4 Alternative Sources of Capital The Impact of Economic Trends on the Accessibility of Capital Alternative Sources of Capital and How They Effect Early-Stage Investment Business Angels as the Best Source of Capital, Especially for Early-Stage Investment The Appropriateness of Your Venture for a Direct, Private Placement Stages of Development Defined Professional Venture Capital as a Funding Resource for Early-Stage Companies Comparison of Angel Investors with Professional Venture Capitalists Professional Venture Capital: Help or Hindrance to Your Funding Success Chapter 5 Angel Capital in America: A Study Introduction Methodology Results of the Study Concluding Remarks Chapter 6 What Do Private Investors Look for in a Deal? The High-Net-Worth Investor Market The Informal, High-Risk Investor Profile Advantages and Disadvantages of Direct Venture Investing The Private Investor's Criteria Common Reasons Why Angels Reject an Investment Variations in Preferred Level of Involvement after Investment How Angel Investors Can Help Beyond Capital Private Investor Motivation The Allocation Decision Chapter 7 Types of Private Investors Introduction The Value-Added Investor The Deep-Pocket Investor The Consortium of Individual Investors The Partner Investor The Family of Investors The Barter Investor The Socially Responsible Private Investor The Unaccredited Investor The Manager Investor PART 3 RESOURCES FOR ENTREPRENEURS RAISING CAPITAL Chapter 8 Alternative Funding Resources in Accessing Angel Capital History of the Development of Alternative Funding Resources Overview of Alternative Funding Resources Chapter 9 Directory of Alternative Funding Resources Introduction Directories, Printed and Software-Based Incubators Entrepreneurial Finance Conferences Investor Education Meetings and Conferences Venture Forums Venture Capital Clubs Off-Line Investor Networks On-Line Matching and Search Services Financial Intermediaries Chapter 10 Building Your Own Database of Angel Investors Introduction Hurdles Data Entry Backup Cost PART 4 UNDERSTANDING THE ANGEL INVESTMENT PROCESS Chapter 11 The Venture Investing Process Introduction Generating Deal Flow Due Diligence Business Valuation Negotiating and Structuring the Deal Risk as a Driving Force behind Deal Structure Definition of Negotiation Elements in Structuring the Private Placement Overview of Deal Terms and Provisions Overseeing and Advising Post-Investment Harvesting Returns: Realistic Exit Strategies Chapter 12 Preparing for Due Diligence Introduction Pre-Screening Management Business Opportunity Intangibles Legal Due Diligence Financial Due Diligence Lists for Reference Checks Chapter 13 Valuation of the Early-Stage Company Introduction Pricing as Good Judgment, Not Formulae Risk Negotiating Valuation "Sweat Equity" The "Living Dead" Strategies for Circumventing Negotiation Roadblocks Fundamentals of Valuing Start-Up Ventures Macroeconomic Forces in Valuation Risk Profile of the Investor Company-Specific Risk Investor Involvement Correlating Rate of Return with Time to Liquidity Multiples Discounting Projections Valuation Methodology Used in Early-Stage, Private-Equity Transactions Dilution Truisms in the Valuation Process Caveats for the Entrepreneur Appendix A How to Write and Present an Investor-Oriented Business Plan The Target Audience Introduction to the Business Plan What Does Your Business Plan Need to Contain? Executive Summary Mission or Charter Description of the Business Ownership Structure and Equity Description of the Product/Service The Market Description of Industry and Trends Marketing Strategy Marketing Plan Sales Plan Operations, Research and Development Strategies, and Plans Management, Organization, Personnel, and Information Systems Objectives and Milestones Financial Projections Supporting Documents Financial Worksheets 1-6 Preparation and Delivery of Your Presentation Appendix B Legal Primer on Securities Law Issues for Non-Lawyers Overview Private Offerings-The First Step Public Offerings Disclosure Documents Integration Rules: Timing Restricted Securities and Trading The Internet Federal/State The '40 Act The Usual Sales-"Agents" (California) Appendix C Suggested Reading List Glossary About the Authors Index
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