The document discusses the due diligence process for angel investors from a financial perspective. It outlines key risks to evaluate such as management team, market size, financial model, and numbers. The due diligence process includes reviewing business plans, site visits, references, competitive analysis, and determining valuation. The goal is to identify reasons not to invest and negotiate terms to increase the likelihood of high returns.

15. Due Diligence

20. Due Diligence : A Financial Perspective Today (Series A) Series B Series C Later Stage Valuation Valuations not growing significantly between Series A and Series C rounds VC money moving to later stage

22. Due Diligence : A Financial Perspective Investment Sought Valuation At Exit Multiple $1,000,000 Pre-money Valuation $14 million $6 million $45 million 2X 3X $1,000,000 $2 million $30 million 10X $1,000,000 $2 million

23. Due Diligence : A Financial Perspective 2X 15% 4X 30% 5X 40% 8X 50% 10X 60% 5-Year Returns (Multiple) Internal Rate of Return (IRR)

24. Distribution of Returns by Venture Investment Average Returns

25. High = 1 or 2 times per month Low = 1 or 2 times per year High 3.7X (4.0 years) Low 1.3X (3.6 years) Impact of Participation Mentoring, Board, Financial Monitoring Returns with Monitoring

27. Venture Capitalist Valuation Method $2,000,000 Pre-Money Valuation 33% ($10MM / $30MM) % Equity Required $10,000,000 (Funds Required x 10) Required Cash Return 60% IRR (Multiple: 10X) Required IRR $30,000,000 Company Value 15X P/E Industry Plan expects 10% ($2MM) Net Profit (5 th Year) $20,000,000 Revenue (5 th Year) Year 5 Exit Year (Expected) $1,000,000 Funds Required

30. Typical Deal Terms Convertible Notes vs. Preferred Stock Purchase Status of Company (C-Corp preferred) | Issues with LLCs (K1s) Dividends: Not Mandatory; Prefer no dividends Liquidation Preference: Minimum 1x Protective Provisions: Majority of Preferred Stock Holders must approve changes to ByLaws, issuance of new shares, changes to the number of Board members, redemption of shares, creation of debt, etc. Reporting Requirements: Monitoring reports that include performance to budget, new milestones, new projections, and cap. tables Repurchasing Rights: Not in all cases but more and more deals are requiring the founder to vest his/her shares

32. Contact Information : Troy Knauss Piedmont Angel Network [email_address] (336) 235-0941