THE PRE-DEAL PROCESS: - 39-Days
All startup applications are being uploaded to our Venture Management System (VMS) Sidepitch. Each deal will go through the following workflow:
- First Screening – Our team will go through the deal flow and initial screen and favor companies based on our primary and secondary sectors.
- Qualification Process – we will qualify the companies based on industry verticals, investment stage, location and management team.
- Due-Diligence – The company will complete our online due-diligence process in collaboration with our team.
- Final Review – By foundation members and CitySide team
- Final decision – based on the above process, we will make a final decision if we will invite the company to present or not. Sometime we will put a company on our “Watch List” and revisit them at a later date.
- Selection – a selected group of companies will present in our Investors Showcase – It will be a monthly event with 3-5 companies at the time
- Investment Preparation – which will be sent to members a week before the scheduled monthly showcase
- Updated pitch deck
- Executive Summary
- Due-Diligence Summary
- Current Term Sheet
- CAP Table
- Evaluations & Interest – the BA members will complete the evaluation and interest form at the end of each event.
- Investor Due Diligence – meetings and/or conference calls will be set up with the Founders and interested investors within 7 days from presentation
- Capital Call Preparation – the Chief Investment Officer will add up the investors that committed to each deal and see if a SPV or individual direct investments are appropriate for the close. The company will be notified regarding the investment means and will take action with the investors. .
Our team is spending precious time going through the deal flow to find the most attractive, investment ready companies. Our screening process is extensive with numerous (100:1) companies being rejected.
THE DEAL PROCESS: -21-Day
After the final decision is made to move forward with the deal, we will now use the following Process:
- Issue a Capital Call – David Weaver, our Chief Investment Officer (CIO) will issue a capital call to all members with a 21 days close date.
- Close the Capital Call – after the closing the Capital Call we will coordinate with the Startup as far as next steps
- Prepare the Transaction – In the event that are less than 3 investors that are committed to the deal the Chief Investment Officer will coordinate with the committed member(s) to contact the company direct, in the event that are 4 or more investors in the deal we will create an SPV that will be prepared by Varnum Law, all the closing activities will be coordinated by our office
- Close the Deal – We will provide support services including our office as the meeting location and any of our team members to attend any meeting that will be requested by the member.
Given that Birmingham Angels is sharing the upside (10%) of the success of our members investment portfolio, we are here to help in any way we can, do not hesitate to use our services as needed, they are here for our members to use.
** Note: We request the members to work within our timeline to ensure the execution of each investment will be done with a high level of completion and integrity.
THE SPV (SPECIAL PURPOSE VEHICLE) MANAGEMENT
BEFORE APPLYING, PLEASE READ THE FOLLOWING:
As part of our members services, we provide full SPV management. In order to serve our members the best way possible, we outline the SPV management process for transparency and disclosure. When the need for an SPV arises, when there are more than 4 investors in a deal Birmingham Angels will administer and manage the process.
- Step #1 – Creating the SPV vehicle for a particular investment – legal management by Varnum Law for a flat fee of $1,800 per SPV. The cost of the SPV will be prorated and charged to the members based on their percentage of ownership
- Step #2 – Incorporate the LLC in Delaware
- Step #3 – Obtaining the EIN number
- Step #4 – Collecting the investors information:
- Name on the SPV
- Other relevant personal information
- Total amount of investment
- Step #5 – Finalize the LLC corporate document, subscription agreement and operating agreement and distribute to the members for review & signature
- Step #6 – Open a bank account for the LLC – Bank of Ann Arbor by Administrative Agent
- Step #7 – Creating an online Quick Books account for the LLC – will be managed by Out of The Box accounting
- Setp #8 – Providing members with wire information and instructions
- Step #9 – Members wire their committed investment amount pulse 3% charge that will allow for payment of the formulation of the SPV, maintain the bank account and file the end of the year tax returns
- Step #10 – The Administrative Agent – City Side Ventures via David P. Weaver Chief Investment Officer will execute the legal document with the receiving company on behalf of the SPV
- Step #11 – Transfer the fund to the receiving company – CitySide Ventures via David P. Weaver
- Step #12 – At The end of each year CitySide Ventureswill manage the closing of the SPV books and prepare for tax filing including complete tax returns, K1 and any other required filing.
- Step #13 – In the event of dissolution of the LLC – CitySide will manage the process with Varnum Law.
THE POST-DEAL PROCESS & SUPPORT
After closing the deal, our team will provide the members with the following:
- Monthly – Quarterly performance update – Collect and manage the startup performance reporting review, make comments and distribute to the members.
- Relevant Market Data – We are constantly collecting market data relevant to our investment portfolio and make it available to the members on a regular basis.
- End of the Year Reporting – We will make sure that our team will follow up with the companies to get end of the year financials and tax reporting which will be reviewed for accuracy and anomalies and will be distributed to the members in a timely manner.
- K1 distribution management – the most critical. We will make every effort to ensure our investors will receive their K1 on time.
- Annual Portfolio Audit – we will provide our members the end of the year portfolio analysis and report
- Access to our sponsors and resource partners – as issues and needs arise, our team will connect our investors to our network of sponsors and resource partners.
- Ongoing Administrative Support – we will provide any other admin support to help our members in their journey.
We cannot stress it enough. You are not alone, we are here to help in any way possible we can. Reach out to us anytime you need support.
To respect the fact that we are dealing with confidential information, trade secrets, Intellectual properties and financial information, from both the companies and our members, we require our members to exercise the following practices:
- We request that you do not share any of the public and or private information of the other members with anyone that is not a member in Birmingham Angels without obtaining permission first.
- We request that you do not share any of the information on any of the companies including but not limited to company confidential information, deal terms sheets and financial transactions with anyone that is not a member in Birmingham Angels without obtaining permission from the company in writing first.
- Regardless if you make a direct investment or area part of an SPV, please report to the our Chief Investment Officer on your activities with the company, during and after you closed on an investment and deployed your capital, which will include:
- What is the investment amount
- What type of transaction ie.. Convertible Note, SAFE, Straight Equity etc..
- Copy of the investment document and terms
- The duration of the investment
- Any capital return such as distribution, profit, a whole or partial sales (copies of any annual K1)
- Just to restate, as part of your membership agreement each member is committed to deploy a minimum investment of $36K a year with no less than $12K per deal.
- We require active members to respond to all Capital Calls within 14 days with their final decision. After a Capital Call is closed, members may not be able to join the deal.
- When attending the monthly investor showcase and any other scheduled pitch event, we request the members to be responsible to turn in their evaluation form to our team.
- We request our members to register for the eventbrite at least 48 hours prior to the scheduled event. For efficiency, we need to know the headcount to make sure we provide appropriate accommodations.
- If a member registers to attend an event or a private meeting and needs to cancel, please notify us 24 hours prior so we will be able to make the necessary arrangements.
In order for our team to support our members the best way possible, we recommend that our members will use the following best practices:
- Please coordinate your investment activities with our team, primarily David Weaver, our Chief Investment Officer.
- Please work with our team to ensure we are keeping accurate records of all investment activities so we will be able to manage what is required and maintain an accurate portfolio and financial performance dashboard
- For full disclosure and transparency, due to the extensive syndication services provided to the startups, Birmingham Angels charge the startup a syndication fee at the time of fund deployment based on the following schedule:
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- To help support you during the investment holding time period, please let us know of any issues, problems and or breakdowns that occur in the process. Remember, we have all the resources you need to address any and all issues that will come up., we are here to help.
- Although you are free to select the deals you would like to invest in, we highly recommend that you will pace your investment to make sure you effectively diversify your portfolio and deployment of your capital such you will be able to build the right risk profile.
- If any of the members reach out to another member for support, help and or advice, please be professional and respond in a timely manner. If providing advice or consulting to another member please, make sure that you are confident in your information, people are counting on it.
Based on 20 years on investment management, we share the following suggested practices to ensure our members will build a high-performance portfolio:
- Follow the Witbank Methods – make sure you deploy your capital across large pool of companies, sectors and stages in order to ensure you will get high return:
|# of Inv||Probability||Return|
- Follow the ROE Trifecta© – in order to increase the return above market average take in consideration the following:
- Level of Diversification
- Level of Involvement
- Level of Governance
- Follow the Money: – A deal that attracts a large number of investors is the one you want to follow. One person can be wrong, 10 people are not likely.
- Ask questions – Please as many as you have. There are no stupid questions, only stupid answers.
- Do not be a “Loan Ranger” – Work with others, remember, it takes a village to raise a child. Be a team player, it will pay off.
- Trust your “Gut Feeling” – if your intuition and your experience works 80% of the time, put some trust in it.
In order to ensure that we will provide you with the best experience and the most effective support, please follow our process and coordinate any and all activities with our office. Both David and I and the rest of our team and resource partners are available to you at any time, do not hesitate to reach out. We are all here with one purpose, to build businesses, to increase our family wealth and to make money, as much as we can, as fast as we can as long as we can.
Together we will build the Michigan ecosystem, one deal and the time
The upcoming year will be full of excitement, activities and movement. In order to provide our members with the most effective and efficient service and support we have created the following guideline to outline our methodology and our process.
COMMITEMENT FOR EXCELENCE
We are committed to establishing Birmingham Angels as a global benchmark for early-stage investing and the most active and respected group in the state of Michigan. There are many moving parts in making a deal. To ensure that our members will get the most of their Membership, investments and the best R.O.E, we created a workflow we stand by and strongly believe will provide our members with the best backroom support.
We request your partnership and corporation to make Birmingham Angels the group to watch.