Investing in startup companies is risky. Experienced angel investors know how to manage this risk. This presentation -- given by OurCrowd's Zack Miller and David Stark -- explains where risk comes from investing in early stage companies and uses cutting-edge research to describe methods to lower risk, boosting investment returns as a result. What kind of returns can you expect with -- and without -- diversification? How to build a portfolio of startups Other methods professional investors use to de-risk investing in early stage companies

1. The 1st Rule in Startup Investing:
How investors lower risk & boost returns in early stage companies
Other methods professional investors use to
de-risk investing in early stage companies
How to build a portfolio of startups
What kind of returns can you expect with --
and without -- diversification?
Tuesday, August 20, 13

2. Zack Miller, OurCrowd
Head of Investor Community
Meet OurCrowd’s Team
David Stark, OurCrowd
Investment Associate
Tuesday, August 20, 13

3. Investors now have access to startups
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4. The angelscometh
Capital raised in Israel
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5. But
investing in
startups is
risky
business...
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6. 52% of startup
investments
returns <1x
Source: Kauffman Foundation
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7. So, where does risk
come from?
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8. Where does risk
come from?
• systemic risk: rising tides float/sink
all boats
• industry risk: just bad bets (like
nanotech, solar)
• geographic risk: emerging markets
are hot...until they’re not.
• execution risk: company just doesn’t
pull it off
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9. that’s why returns compensate investors
for risk
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10. Angel investing returns
Startup portfolios
return about 2.5x
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11. But, you can
de-risk startup investing
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12. optimizing investing for given risk
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13. Harry Markowitz
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14. • Efficient frontier
• CAPM
• Modern Portfolio
Theory
Diversification in finance literature
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15. Building startup
portfolios
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16. Where to find opportunities: See our
last webinar, Finding the Next $billion
opportunity (Source)
Building a startup
portfolio
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17. Parameters:
• Number of investments: At least 6
• Open questions: does an investor need to
diversify across industries, maturity/
experience levels?
• Equal weight vs Overweight (RSP vs SPY)
Building a startup
portfolio
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18. 52% of startup investments
returns <1x
Remember...
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19. Interestingly, less than
40% of startup portfolios
returned <1x
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20. Other ways to de-risk
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21. 3 things appear to
boost returns
1. Time spent in due diligence
1. >20 hours, median returns 5.9x
2. Industry experience
1. Multiples are 2x when investor has industry experience
3. Ongoing participation
1. Investors interacting with portfolio companies a couple times per
month, median returns of 3.7x over 4 years
Source: Kauffman Foundation
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22. structuring an
investment
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23. rights and protections
(anti-dilution rights, preemptive, etc.)
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24. investing tied to
performance (milestones,
tranches)
Milestone 1
Milestone 2
$ $
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25. co-investors
Source: Harvard, Economist
Some data
Co-workers: 60% more likely to invest, but returns -18%
Same ethnicity: 20% more likely to invest, but -25% to IPO
investment
Based on ability: founder with a degree from top university
adds 9% to likelihood of IPO
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26. Summary:
angel investors make
money.
Source: Growthink
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27. Equity crowdfunding
makes building a
startup portfolio easier
than ever
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28. Value of
crowdfunding
• access to deals
• previously high minimums
made portfolio building too
expensive, giving angel
investing a bad rap
• new low minimums turns
every angel investor into a
portfolio manager
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29. OurCrowd’s
value
proposition
Combining DIY of angel
investing with professionalism of
venture capital
One-stop portfolio builder
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30. Intro to Portfolio RESERVE
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31. Portfolio RESERVE
• Automated portfolio building
• 1x funding
• Guaranteed allocation
• Opt-out feature
• Learn more (click here)
Tuesday, August 20, 13

32. Any questions?
Zack Miller, Head of Investor Community
email: zack@ourcrowd.com
Visit OurCrowd.com
Tuesday, August 20, 13