The Official Gust Guide to Angel Investing will be the first complete, up to date, guide to the subject, including what angel investing is, how one gets started, how to find deal flow, evaluate opportunities, negotiate terms, join an angel group, structure investments, work with venture capital funds, and, of course, use the Gust platform to do all of the above.

The initial target audience is the 7,000,000+ plus people in the US who qualify as "accredited investors", because they have incomes over $200K or assets of over $1m. These are the people who are legally allowed to invest in private companies. A secondary market are the 33,000,000 "mass affluent' in the US who are potential participants in the equity crowd-funding industry passed by Congress in the JOBS Act of 2012. Follow-on audiences are similarly situated people in every other country (Gust currently supports accredited investors in 75 countries and six languages, and is the official platform of the national angel investment federations in sixteen countries, from the US, Canada, Australia, New Zealand, and France, to Brazil, Russia, India and China.)

The audience will be interested in this book because angel investing has exploded during the past decade, from a tiny niche to the subject of mainstream coverage in every newspaper, magazine and movie. Every year angels invest over $20 billion into startup companies in the US alone (probably double worldwide). "Friends and Family" investors, and other in the mass affluent category annually invest over $60 billion into startup companies. Historically this been a virtually random activity, but over the past several years the Gust platform has now helped to make this a legitimate part of the Alternative Investments asset class, as noted in Bob Rice's Book The Alternative Answer.

DAVID S. ROSE is a serial entrepreneur, Inc 500 CEO and one of the world’s most active angel investors. Described by Forbes as “New York’s Archangel,” by BusinessWeek as a “world conquering entrepreneur,” and by Red Herring as “patriarch of Silicon Alley”, David has founded or funded over 90 high tech companies. He is the founder and CEO of Gust, the international collaboration platform for startup financing used by over 50,000 accredited angel investors, 1000 angel groups and venture capital funds, and 250,000 entrepreneurs. Gust received the SIIA CODiE Award for Best Collaboration Solution in both 2012 and 2013, as well as the 2012 SWIFT/Innotribe Award as the world’s most innovative financial technology company.

David is also Managing Partner of Rose Tech Ventures, an early stage angel fund; Founder and Chairman Emeritus of New York Angels, the most active angel group in America; and Associate Founder and Founding Track Chair for Finance, Entrepreneurship and Economics at Singularity University, the Google/NASA-sponsored post-graduate program in exponential technologies. A native New Yorker, David has a BA from Yale University, an MBA in Finance from Columbia Business School, and a D. Eng. h.c. from Stevens Institute of Technology.

Introduction: How I Became An Angel Investor xvii

Part I The Basics of Angel Investing 1

1 The 25 Percent Annual Return:Why Everyone with Six Figures to Invest Should Consider Angel Investing 3

2 Plus, It’s Really Fun! The Nonfinancial Rewards of Being an Angel 23

3 The Portfolio Theory of Angel Investing: Why Every Angel Needs to Invest in at Least 20 Companies 37

4 The Financial Life of a Startup: Where Angels Fit in the Big Financing Picture 47

Part II The Nuts and Bolts 55

5 Develop Your Deal Flow: Sourcing and Identifying High-Potential Opportunities 57

6 Bet the Jockey, Not the Horse: Evaluating the Entrepreneur and Picking the Right One to Back 67

7 Here Comes the Pitch: Listening to the Story Does It Make Sense for Your Portfolio? 77

8 Look Under the Hood and Lead a Deal: Coordinating Due Diligence and Running the Show 87

9 Valuations and Expectations: Discovering the Secret Economics of the Angels 93

10 Investment Rounds and Their Forms: Common Stock, Convertible Notes, or Preferred Stock? 109

11 The Art of the Angel Deal: Negotiating a Win/Win Relationship with Your Entrepreneur 121

12 Term Sheets and Closing: Trust Everyone…but Cut the Cards Anyway 127

13 After the Investment: Managing Your Portfolio and Adding Value as an Active Angel 133

14 Exits and Other Unicorns: Getting Your Money Out Makes All Things Right 147

Part III Your Place in the World of Angels 159

15 The Entrepreneurship Financing Ecosystem: Grants, Venture Capital, Accelerators, and Other Players 161

16 Building Your Angelic Reputation: Getting the Best Deals to Come to You 175

17 Joining an Angel Group: Increasing Your Opportunities and Reducing Your Risks 179

18 Impact Investing: DoingWell While Doing Good 189

19 Sit Back and Let Someone Else Do theWork: Investing in Startups through Seed Funds and Venture Funds 195

20 Crowdfunding and the Global Revolution: Angel Investing for Everyone 199

Appendixes

A Angel Screening and ValuationWorksheet 205

B Angel Investment Due Diligence Checklist 209

C Gust Convertible Note Term Sheet 215

D Gust Series Seed Term Sheet 223

E Gust Revenue-Backed Note Term Sheet 237

F International Angel Investor Federations 243

G Major Regional Angel Groups 245

H Angel Investing Blogs and Resources 249

Glossary 253

Acknowledgments 265

Index 271