Q. How AIM is run?
A: AIM is a registered not for profit, non-government organisation. As with any organisation, it has an executive board that typically meets once a month. It has a Manager who receives proposals from Entrepreneurs and startups seeking funding for their ideas or businesses. After a preliminary review, interesting proposals are put to a technical committee for a thorough review, after which proposers of fundable projects or businesses are requested to make a presentation to interested angel investors.
Q. If the governance structure is “non-profit”, how does AIM operate?
A: The basic structure of AIM is an association of paid membership and shared expenses. However, the objective of AIM is to gain a return on investment it supports. Each deal that investors participate in will be set up as a separate for-profit entity, allowing the angels to turn a profit on their investment, but also paying a small fee for successful partnerships.
Q. How often will the members meet?
A: AIM Executive Board meets once a month, but AIM members typically meet every three months or sooner, depending on the deal flow. The technical committee that screens the investment opportunities will meet monthly.
Q. Can I bring guests to the screening session?
A: Once an entrepreneur applies for funding, the technical committee will review merit and worth of the deal. The technical committee is a closed door meeting. During the screening session when the entrepreneur presents to the AIM membership and representatives from local economic development organizations, guests may be invited only if they are qualified investors intending to join AIM in the future.
Q. As an angel investor, what are the typical type of ownership options or stake in the business we are investing in?
A: The angel investors’ stake in the company will vary by each individual deal. A popular compensation is a participation in the equity of the company and gives the angels a board position in the company. All investment decisions and level of involvement are subject to negotiations between the company and the angel investor.
Q. I am already busy. How much time will this take up? Will I be inundated with emails and meetings?
A: Each individual investor can decide how much or how little he or she wants to be involved. Through the AIM Web site, investors can set email and communication preference. You can choose to simply receive an email when a deal is available to review and indicate whether or not you want to be included in that deal.
Q. How quickly will I see a return on my investment?
A: Angel investing is risky, which is why the rate of return is high. Investments by angels are long-term, typically taking 3 to 5 years on average to realize a return on investment.
Q. Who are angel investors?
A: Angel investors are high net worth individuals who invest in early stage companies. Angel investors provide cash to young companies in exchange for equity. AIM allows the angels to increase their access to investment opportunities and diversify their investment portfolio.
Q. What are AIM’s investment criteria?
A: AIM uses the following criteria in selecting companies to present to the network:
• Early stage companies that offer high opportunities for high returns on investment.
• A business opportunity with the potential for rapid, scalable growth within a reasonable time frame.
• A compelling, well-articulated strategy for capturing and defending a significant market share.
• Proprietary technology, early market lead, or other strong barriers to entry.
• A strong management team to execute the business plan with relevant and successful experience.
• A credible exit strategy for investors.
• A team with a desire for mentoring and coaching
• A reasonable valuation that fits within the risk/reward expectations of our members.
Q. Will AIM sign a non-disclosure agreement or a confidentiality agreement?
A: AIM operates in a very professional and transparent manner ensuring proprietary business ideas are kept confidential. However, neither AIM nor its members sign non-disclosure or confidentiality agreements for initial proposals.
Q. What happens after I submit my application?
A: Once a proposal is received by AIM, it will be reviewed by a pre-screening team. Based on the team’s review of the opportunity, they may: 1) ask for a meeting in order to gather additional information about the company; 2) recommend that the entrepreneur present at a Screening Committee meeting; 3) determine the company is unlikely to receive AIM funding. Regardless of the outcome, the application and Executive Summary will be posted to the member’s area of the website and will be accessible to all AIM members for review for 90 days. If a member indicates an interest in the opportunity, the entrepreneur will be contacted so that a meeting may be scheduled with the prospective investor.
Q. What occurs after the pre-screening process?
A: Screening: The next step after pre-screening is the Screening Committee. At the screening stage of the process, entrepreneurs will be asked to make a 10-15 minute presentation regarding their opportunity to the Screening Committee. This will be followed by a 10-15 minute question and answer period. Following the screening meeting, entrepreneurs will receive prompt feedback from the screening committee, regarding their decision. Once an investment opportunity is approved by the Screening Committee, a due diligence team is formed and the company will enter into due diligence with AIM.
Q. What happens during due diligence?
A: Due Diligence: During the due diligence review process, interested investors will analyze the company in great detail. Entrepreneurs will be provided with a list of information they will need to make available for review. Entrepreneurs will also need to make members of their management team available for discussions. Additionally, entrepreneurs will be expected to pay any legal fees associated with the review. These fees will be discussed with the entrepreneur in detail before the due diligence process begins. Strategic and Business Plan Revision: One possible outcome of due diligence is that the entrepreneur will be asked to consider some plan adjustments prior to investment. These might include reshaping the strategic plan, refining the product offering, expanding the management team, focusing the sales effort, etc. The due diligence team will report its findings to AIM members along with a recommendation. If the recommendation is to proceed with an investment in the company, a term sheet will then be negotiated with the entrepreneur.
Q. How is the term sheet negotiated and how are investments made?
A: Term Sheet Negotiation: Once AIM members have identified the amounts they wish to invest in an opportunity, an AIM member will negotiate the term sheet with the entrepreneur. AIM members’ terms of investment follow “standard” terms for financings developed over the years by venture capitalists and other sophisticated investors. These terms explain what is contemplated and what is prohibited. Investment and Closing: Each interested member of AIM makes an individual investment decision. Then, AIM aggregates the funds and typically invests in a company as a single entity (Limited Liability Company or similar). As part of the investment process, AIM may require 1-2 board seats, and/or observation board seats.
Q. Does AIM continue to work with a company once an investment is made?
A: Post-Investment: Following investment, AIM members will be available to assist the entrepreneur in a number of ways. AIM members can help identify and assess management candidates and board members. They can help craft the company’s financial strategy in raising follow-on capital, and assist with customer acquisition and alliance building. They can also assist with issues involving organizational structure, sales, marketing, and distribution strategies, and other challenges entrepreneurs face in building a strong company. In addition to AIM members, the angel group has relationships with other organizations and incubators that are available to further assist entrepreneurs, and those support services would be made available to the early-stage company as well.