In order to receive consideration to present to the Arizona Angels your company must first complete an application.

Strong preference is given to Arizona-based companies.

After applications are reviewed, we may be in touch to request more information or to schedule a screening interview. This process may take upwards of two months, so please be patient.

A limited number of companies are selected to present, and, of those selected to present, not all get funded - as each individual Angel investor in the group makes their own decisions of whether to invest or not. It is therefore strongly recommended that you view this as only one possible avenue for investment and continue to pursue all other avenues until your financing goals are met.

Thank you for considering the Arizona Angels.

ENTREPRENEUR BENEFITS

Large Capital Source. The Arizona Angels have over 100 members that have been screened for financial means and investment/business experience. Each member brings the ability and willingness to invest in promising private companies, while understanding the inherent risk. By bringing these top local investors together, entrepreneurs are able to save time by going to one group to raise capital for either special situations or for the difficult funding gap between founders/friends/family start-up capital and venture capital.

Broad Pool of Knowledge & Contacts. Each member of the Arizona Angels has extensive investment and/or operational business experience. This experience spans a number of industries. Entrepreneurs looking to avoid the mistakes of others and gain access to key decision-makers and suppliers, customers, or partners are able to tap the knowledge and contacts of all members. This resource helps entrepreneurs accelerate the growth of their companies.

Efficient Process. The Arizona Angels have established an efficient process for entrepreneurs to raise capital from this large and diverse group of investors. For applicants without a lead investor, the process begins by attracting one. The lead investor becomes the entrepreneur's main point of contact for the rest of the process, including company evaluation, performing due diligence, negotiation of valuation and terms, organizing investor meetings, managing the closing process, representing the Angel members on the company's board, and relaying company reports to the members.

Clean Structure. Managing a high-growth business requires management to be nimble. However, a long shareholder list of busy (travel, other businesses, etc.) individual investors often does not permit swift action at critical moments such as closing a venture capital round or responding to an acquisition offer. The Arizona Angels thus encourages and helps facilitate receiving the entire Angel investment round from a single source in the form of a special-purpose LLC entity where members invest in the LLC and the LLC invests in the company and then the lead investor (or other manager as decided by the members) votes all shares held by the LLC. For an entrepreneur, this structure maximizes the benefits (able to tap the knowledge and contacts of a large group of experienced investors) and minimizes the hassles (provides a single point of contact for interacting with large group of busy shareholders) of working with angel investors.

Capital Connections. The Arizona Angels are constantly expanding our network of investor institutions and groups. By co-investing with regional, early-stage VC funds, incubators and other angel groups, the Arizona Angels help entrepreneurs raise sufficient capital to demonstrate proof-of-concept. As the company achieves its milestones, the Arizona Angels help provide introductions to later stage VC funds, corporate investors, and strategic partners to raise the next round of capital or attract an acquisition offer.

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TARGET INVESTMENTS

The Arizona Angels focus on two types of investments:

1. VC Track. Early-stage, high-growth companies (often, but not exclusively, technology companies). Capital to fund at least 9 months of operations and to reach business proof of concept (complete development, beta test with initial customers, fill management gaps, begin marketing/PR, build initial sales/distribution channels, etc.). Next step: venture capital financing round or strategic sale. Minimum potential return of 10X within 2-6 years.

2. Special Situations. Later-stage, traditional businesses. Capital to fund business expansion, acquisition/roll-up strategy, management buyout/transition, short-term business loans or other special situations. Typically in conjunction with expanded debt financing. Next step: growth from operations then strategic or financial sale. Minimum potential return of 3-5X within 1-3 years.

Our target investment size and structure:

Investment Size. $500,000 to $1,500,000.

Valuation. $3 million to $5 million pre-money

Structure. Series A Preferred Stock. Typical venture capital terms and conditions. Representation on company board of directors.

Co-Investors. Willing to co-invest with other individuals, angel groups, incubators, and VC funds. Also willing to coordinate with lenders to provide equity in support of expanded subordinated debt, lines of credit, equipment leases, or other debt instruments.

Characteristics of companies that are attractive to the Arizona Angels:

Management. Relevant industry and functional experience, team worked together previously, and financial commitment (cash investments and deferred salary).

Cash Burn. Able to manage cash burn rate according to capital market conditions (i.e. grow faster if the next round is available, or slower if it is not).

Use of Proceeds. Demonstrate business proof-of-concept in the marketplace via initial customer sales, distribution agreements, strategic partnerships, positive press reviews, etc.

Customer-focused. Understand the needs of the target audience, who the decision-makers are, how to reach them, what their expectations are and how to exceed them.

Market. Targeting an attractive niche of a large and growing marketplace. Market is large enough to support a public company ($25M+ revenue and 40%+ growth) and/or attract a strategic acquirer.

Competition-aware. Understand who else is solving the customer's problem today, including direct and indirect competitors. Have competitive intelligence on each and are able to demonstrate differentiators important to customer. Hold reasonable perspective on current lead, if any, and its sustainability.

Characteristics of companies that the Arizona Angels avoid:

Management. Inexperienced management that are not conscious of the interests of outside investors.

Business Model. Models that require a large, upfront capital investment to demonstrate proof-of-concept.

Company Stage. Seed or very early-stage companies that have not yet demonstrated the technology proof-of-concept (i.e. does it work). Exceptions for experienced management teams.

Valuation. Entrepreneurs stuck on Internet-bubble valuation expectations.

Location. Companies based outside Arizona without strong ties to the state (example of "strong ties": lead investor is a member and has a second home near the company in another state).

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FREQUENTLY ASKED QUESTIONS

1. How do I apply to present to the Arizona Angels? The first step in the Investment Process is to complete an application! There is no fee to apply. Your application will then be reviewed (generally within 14 days) to determine if it meets the investment criteria of the Arizona Angels. We will then be in touch to either (1) request additional information, or (2) accept or reject your application.

2. What happens if the application is rejected? We will try to provide a brief note as to what the reason was. If you can remedy the objection we encourage you to reapply at a future date.

3. What happens if the application is accepted? There are three possibilities. (1) We may accept your application to present at one of our monthly gatherings at which you may network with and make a brief presentation to the members in attendance. A brief summary blurb of your opportunity (maximum of 200 words) will also be sent to the Angel Membership via email in advance of that gathering, and any interested Angel may then request to see your full application and/or contact you directly to learn more about your opportunity. Some of our members choose to receive the full applications as they come in, so this is yet another way that you may get your opportunity before members. (2) We may instead accept your application for everything except presenting live before the group - you would instead have the opportunity to be viewed by members electronically as described above. Please note that we are limited to the number of companies that can present at our gathering each month, so please consider this an option significantly better than outright rejection - as it still gives you an opportunity to get your opportunity in front of investors! (3) If you are accepted for option #2 and there is enough interest in your opportunity from members, then we may then also accept you to present before the full group.

4. What happens after presenting to the Angels (either electronically or in person)? If one or more members become interested in your opportunity, they will wish to get to know the company and the team better before proceeding. This often takes the form of the following:

Information Gathering. After reviewing the company's application, an interested member will likely request additional information before the first meeting, including a detailed executive summary, full business plan, an investor presentation, management references, etc.

Meetings. An interested member will request a series of meetings to get to know the management team. Companies should prepare presentations that provide different levels of detail, including a basic investor presentation slide show, product demo, and facilities tour with plenty of time for Q&A. Often other investors experienced in the company's industry will attend subsequent meetings to assist in the review process and possibly co-invest in the company.

Term Sheet. Either the investor or company will present a term sheet and use it as the basis to negotiate the basic valuation and terms of the investment. The member commits to invest a specific amount subject to due diligence and reaching a minimum total investment this round.

Due Diligence. Companies should prepare a standard package of financial and legal documents for all investor's review. Members will likely also request a technical product review, an analysis of competitors and market dynamics, detailed management and customer reference checks, etc.

Documentation. The lead investor hires the investors' legal counsel to begin drafting, or review from the company's counsel, legal documents for the transaction.

Recruitment. At any stage of this process, the Arizona Angels will work with a lead angel to help facilitate additional member participation.

5. Who are the members of the Arizona Angels? We have two types of members: individual and institutional. All individual members are screened on the basis of being accredited investors with business/investment experience. Institutions include venture capital funds, corporate venture investors, incubators and other angel groups. The Arizona Angels have over 100 individual and institutional members. Members generally fall into one of three categories: (1) Financial - former or current venture capitalist, investment banker, commercial banker, etc., (2) Technology - semi-retired entrepreneur that sold prior business or executive at large technology company that cashed in options, or (3) Traditional Industry - former or current owner of real estate, manufacturing, service or other traditional business.

6. What types of companies do you invest in? Reflecting the diversity of our membership, the Arizona Angels invest in companies in a variety of industries and stages of growth. We focus on companies with potential for significant equity appreciation in a reasonable timeframe. However, members generally prefer to avoid product or technology risk (i.e. will the product work when it is built, is the technology scalable, etc.). Most members are more comfortable with business risk (i.e. how do you attract and retain customers; do you sell the product direct or through distributors / resellers / reps; how much will it cost to sell, install and support a customer; etc.). Thus, companies that have completed initial product development and are executing a plan to address the business risks (business proof-of-concept) are more likely to receive investment from the Arizona Angels. Exceptions are sometimes made for strong management teams with prior start-up experience.

7. Do you invest in companies outside Arizona? Because successful angel investments often require significant hands-on effort, location does matter!

8. How long does the process take? Unfortunately there is no standard time table for the entire investment process. Areas that tend to take the most time are attracting a lead angel and due diligence. Once a lead angel is ready to invest, a company well organized for investor due diligence can go through the process of meetings, documentation, and closing in about a month.

9. Where do I go to raise capital if my business is too early-stage for the Arizona Angels? Raising capital for an early-stage or start-up business is difficult at best. One trait of successful entrepreneurs is being resourceful. Tapping friends, family and others with a personal relationship that know you and are are willing to bet on you (not necessarily your business plan) is a common source of start-up capital. These funds along with investments by the management team demonstrate a personal commitment to making the business a success. Negotiating credit from suppliers and advanced payments from customers helps cashflow and provides third-party validation of a company's business model. Corporate investors and strategic partners also provide this validation. Convincing key employees and contractors to work for options instead of salary or cash is another common technique. A word of caution: get good legal counsel (at a reduced rate of course) before you solicit any outside investment to avoid the many pitfalls in securities, employment and intellectual property law.

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