Tech Coast Angels is the investor of choice for Southern California entrepreneurs
If you have a start-up in Canada or the US, particularly in Southern California, matches TCA’s early stage and industry focus, and is seeking to raise from between $50,000 and $1,000,000, then we should talk. We have the ability to syndicate deals that require more capital. Are you ready to get started? It’s simple!
TCA’s Investment Criteria:
- Usually located in Southern California*
- Resourceful management team with impeccable integrity
- Solution to a compelling business problem
- Large identified market opportunity
- Defensible business model / proprietary technology
- Sustainable competitive advantage
- Some level of market validation
- Ability to attract future funding
- Credible exit potential
* If your company is located outside of Southern California we suggest that you connect with an angel group in your area. We do syndicate deals (inbound and outbound) with many angel groups in the United States. Have a look at the Angel Capital Association website for a list of member angel groups in the U.S.
Ventures That We Seek
We expect you to explain the relevant experience and domain expertise of your team. If the team is incomplete, we expect you to recognize who is needed to round out the team.
TCA defines technology broadly in many industries, including Hardware, Software, Digital Media, Consumer Products and Services, Financial Services, Life Science, CleanTech and Industrial. Regardless of industry, a successful applicant must be able to demonstrate market validation of its technology. Ideally, the company will have revenue and a strong sales pipeline.
You must demonstrate that you can achieve at least a 25% market share in a well-defined niche (i.e., show how you can sell cost-effectively into that niche). The niche can be within an existing market (e.g., Amazon went after the on-line niche for booksellers); or it can be a new niche (e.g., Gadzoox Networks pioneered and coined the SAN niche – Storage Area Networks). Grand visions of a multi-billion dollar market is not attractive unless you can convincingly show how you will dominate that market. With few rare exceptions such as eMachines, dominating a billion-dollar market is usually not possible; and in eMachine’s case, we doubt many would have believed that they could become the #3 PC company in less than one year.
This must be in either a developing market (e.g., Gadzoox Networks forecast the development of the SAN market based on projected storage needs), or in an existing market. You must present a credible plan for achieving that growth, not a Chinese Glove Syndrome (“there are over a billion Chinese, we will sell 1% of them a pair of gloves at $20/pair, which gives us revenues of $200 million”) without supporting data to show how you would sell them.
Some examples: a “blocking patent” (that can keep out competition); a vanity number (eg 1-800-WEDDING); a domain name (e.g., buy.com); “first-to-scale” advantage (i.e., show you already are the first company to achieve some scale in a new niche).
Because TCA members assume a great deal of risk by investing in early stage companies, applicants should be able to make a compelling case for a 10x or better return on investment within 5 years. Investments that are expected to require no more funding than the current round are especially valued.
TCA members look for opportunities where the capital sought will take the company to the next level, and materially increase its valuation. TCA investments often bridge the gap between proof of concept to a larger VC round. A company must be able to demonstrate how it will use members’ investment to complete at least some of the following:
- Proof of Concept
- Prototype of its product or technology
- Patent filing (for broad patent)
- Product development
- Market research
- Product launch
- Major contract or customers
- Management team
- Reduce other investment risks
Screening and Evaluation
Screening is an important part of the TCA funding experience. Each year we have about 500 companies apply on our website for TCA funding. Approximately 25 percent of these companies make it to the screening process and 10 percent make it into due diligence. Although each year varies, we typically fund between ten and twenty new ventures per year. TCA consists of five networks: San Diego, Orange County, Los Angeles, Inland Empire, and Central Coast. Although each network operates slightly differently, the general process is as follows.
1. Web Application
The first step in entering the TCA funding process is our online application. This process includes filling out an application with an overview of your company, including a summary of your financials. You’ll also upload an investor PowerPoint presentation.2. Initial Review
TCA staff and industry-specific investor panels perform an initial screening of the application to ensure it is within our scope of interest. If you pass the initial review stage, you will be invited to present at a pre-screening.3. Pre-Screen Presentation
Each panel’s prescreening process varies, but the general concept is an elevator pitch between 8 and 15 minutes, followed by Q&A. The prescreen presentation is given to a small group of TCA members who have domain expertise in your technology or market on a web conference call or at a separate meeting. The purpose of this pre-screening meeting is to determine if you are ready to present to the larger group, and give you constructive feedback to improve your presentation. You’ll receive feedback, and if you pass the pre-screen, you’ll be invited to present at a screening session.4. Screening Presentation
Typically three to four companies present at a bi-monthly screening sessions. This consists of fifteen minutes of PowerPoint presentation and fifteen minutes of questions and answers. After each presentation, the entrepreneur is asked to leave the room while TCA members discuss whether there is enough interest to move forward into due diligence. The entrepreneur is then invited back into the room and given immediate feedback. Presentations are usually videotaped so that members who are not present can participate later online on our member-only secure website. The goal of a screening session is to get significant interest from TCA members and attract a “deal lead”, who will coordinate the due diligence and be your point of contact throughout the due diligence and funding process.5. Due Diligence
A due diligence team is formed based on the number of interested members who signed up during the screening. A deal lead steps forward to coordinate the due diligence activities. Due diligence consists of verifying representations by the entrepreneur, speaking with customers, reviewing agreements and patents (if any), checking references, backgrounds, etc. The results of the due diligence process are posted on the TCA website (in the members-only section), and if the results are positive, the venture moves forward to a monthly lunch or dinner meeting, depending on the network.6. Monthly Lunch/Dinner Meeting
Companies that pass due diligence present at monthly lunch/dinner meetings at most of the networks, introduced by the “deal lead”, who led the due diligence team. This allows the entrepreneurs to present to members who may not have seen their initial presentation. This is the final opportunity for entrepreneurs to garner enough interest from members to secure funding. Typically a signed term sheet is available when a company presents at this stage. Generally TCA members’ terms of investment follow “standard” terms for financings developed over the years by VCs and other sophisticated investors.7. Funding
Funding occurs after there has been enough interest generated through dinner meetings and internal communication from the entrepreneur and deal lead. Members invest in deals individually; however, everyone invests based upon the same term sheet. Thus, only a small percentage of members our members need to participate for the venture to secure funding. Typically, the minimum individual TCA member’s investment amount is $25,000.Apply for funding!
Entrepreneurs can apply for funding though Tech Coast Angels by completing this Funding Application.
Some advice for completing the application:
1. Complete the application fully and thoroughly. We don’t charge entrepreneurs an application fee, but we expect everyone to treat the application process seriously.
2. Remember that TCA invests about 50% in start-ups headquartered in Southern California. The rest are spread around the United States and many of these are syndicated deals where another local angel group is the lead. But TCA does lead deals in other geographies.
3. Make sure that your application reflects the traits that TCA seeks in an investment to the greatest extent possible: