Membership Frequently Asked Questions
- What is an Angel Investor?
- How are angel investors different than venture capitalists?
- What about investment regulation?
- Who is an Accredited Investor?
- Why join an Angel Group?
- Why does Northwest Energy Angels focus only on clean technology companies?
- Why does NWEA have a Pacific NW geographical focus?
- Why choose Northwest Energy Angels?
- Who are NWEA members and sponsors and how many are there?
- How often does NWEA meet?
- How many new companies can I expect to see if I join NWEA?
- How many companies have passed screening and presented to the membership and how many have received funding?
- Who runs NWEA?
- I am new to angel investing, how do I learn to make smart investment decisions?
- What does due diligence look like?
- What is a term sheet?
- What is the range of monetary investments typically made by angels?
- Is there a minimum investment requirement?
- Are there opportunities for members to get more deeply involved with NW Energy Angels?
- How do I join NWEA?
What is an Angel Investor?
Angel investors are high net worth individuals who invest in high-risk, early-stage ventures by reserving a small portion of their total investment portfolios to provide emerging companies with seed and startup capital through direct, private investments. The goal is to achieve higher returns than public markets typically provide. Most angels are active investors, who contribute their time and experience to the companies in which they invest by making introductions to valuable contacts and giving strategic guidance.
How are angel investors different than venture capitalists?
Venture capitalists (VCs) generally invest much larger amounts of other people’s and institution’s money, whereas angels invest their own. VCs also tend to invest at a later stage in a company’s development than most angels.
What about investment regulation?
The U.S. Securities and Exchange Commission allows companies to raise money from Accredited Investors through the private placement of securities without requiring registration of the securities. For this reason, Northwest Energy Angels (NWEA) membership is limited to Accredited Investors.
Who is an Accredited Investor?
Individuals are accredited investors if they have a net worth, or joint net worth with a spouse, in excess of $1,000,000 and/or individual income in excess of $200,000, or joint income with a spouse in excess of $300,000, in each of the two most recent years and a reasonable expectation of reaching the same income level in the current year.
Why join an Angel Group?
Individual angels come together to:
- access more and higher-quality potential investments (known as deal flow)
- share the work of reviewing potential investments (known as due diligence)
- leverage the experience and insight of other members on potential investments
- enjoy the camaraderie of other investors
- provide entrepreneurs with a single place to reach many potential investors
Based on the group’s structure, investments are either made directly by individual members, or from funds pooled by the group as a whole. (The members of NWEA invest individually and do not pool funds.)
Why does Northwest Energy Angels focus only on clean technology companies?
The cleantech (also known as greentech) industry lies at the intersection of the NWEA memberships’ desire to make successful angel investments, our personal values and the world we want to leave our children. Most NWEA members place a high value on sustainability, the ecosystems that support life on earth and social responsibility. Cleantech is the fastest growing industry globally and has the potential to provide high returns in relation to the generally high risks of angel investing. Our preferred list of sectors in the cleantech space is here.
Why does NWEA have a Pacific NW geographical focus?
Most angels want to get to know the entrepreneurs in whom they invest before they write a check and that is difficult over long distances and multiple time zones. And angels tend to stay involved at some level after they do write the check. A potentially rewarding part to the investment experience is watching an investment grow firsthand.
The Pacific NW also has unique advantages over other regions to grow and nurture cleantech ventures. The consumer and business ethic here is very “green”, high-tech industries have spawned many successful entrepreneurs who are migrating their expertise to new cleantech start-ups, we enjoy a large, bright and well-educated technical workforce that is attracted to the outdoor lifestyle and natural beauty here and we enjoy great reciprocal relationships with the western Canadian provinces where cleantech activity is very high.
Why choose Northwest Energy Angels?
- NWEA is the only angel group in the Pacific NW that focuses exclusively on cleantech investments.
- The best cleantech start-ups in the region come to us for funding first
- Members have access to our powerful network of investors, entrepreneurs, venture capitalists, executives, elected-officials, scientists, engineers, bankers and attorneys
- Moreover, we carefully pre-screen companies that apply to present to us so that we maintain high quality deal flow
- Members thoroughly evaluate the potential risks and rewards of investing in a cooperative due diligence process that is very supportive of new angels
- The collective judgment and experience of the members of due diligence groups is available to all members to help them make their own investment decisions (although there is no obligation to invest)
- We invite experts to many of regular and special meetings to educate us on cleantech industry and angel finance-related issues
Who are NWEA members and sponsors and how many are there?
Currently we have about close to 70 members who come from many different professions. Many are present and former high-tech and cleantech entrepreneurs and executives. Other members have deep experience in finance, environmental engineering, real estate development and the utility space. The membership also includes appointed and elected officials who are moving Washington to the national forefront on clean energy and other technologies.
NWEA also has corporate sponsors including American and Canadian venture capital funds, professional services firms and others who are committed to growing the cleantech industry in the Pacific Northwest. They bring a wealth of resources, expertise and local and international connections to our business network.
How often does NWEA meet?
NWEA meets eight times each year to hear from pre-screened companies about their investment opportunities, twice each year for social gatherings and several times per year for special member-and-sponsor-only educational events. Companies which have previously presented to NWEA are invited to the social events to briefly update us on their progress, whether or not they have been previously funded by NWEA members. The schedule of meetings, which is subject to change, is here.
How many new companies can I expect to see if I join NWEA?
Our screening committee currently approves approximately 25 new companies each year to present.
How many companies have passed screening and presented to the membership and how many have received funding?
In the seven years that NWEA has been active, members have invested in close to 40 companies out of the close to 120 that have been approved by the screening committee and presented to us.
Who runs NWEA?
NWEA is run by a volunteer Board of Directors and a paid Executive Director.
I am new to angel investing, how do I learn to make smart investment decisions?
Angel groups are generally supportive of new angels. NWEA is very supportive. The best way to learn is by joining an angel group and participating in due diligence. The person designated as the deal lead and other more experienced members will help guide you through the process. You will learn by participating and our experience has been that every angel has different perspectives and knowledge sets that can contribute to a better understanding of the potential risks and rewards in a deal. There is no obligation to invest if a deal is not right for you but the dd process can be a tremendous learning experience.
What does due diligence look like?
Due diligence is the term used by investors to describe the process of deciding whether or not to invest in a particular opportunity. After a company presentation, interested members form an informal due diligence (dd) group and share the work involved. An experienced member normally volunteers to be the “deal lead”, organizes the dd process and is the main point of contact for the company. He or she may elect to set up a private “deal room” on Gust, through which members can share insight, concerns and documents. Some use a standard “due diligence checklist” and other guiding documents provided by NWEA. DD groups meet in person or teleconference among themselves and with company officers. Over a several week period (sometimes longer), the members go through a thorough “discovery” process to understand the market and the company’s potential. The process usually culminates in the members negotiating a term sheet with the company. Individual investors generally decide to opt in or out at this point.
Sometimes, another angel or angel group has already invested in a company that presents to us. In those cases, a term sheet is in place before dd begins and the process focuses on deciding whether or not it represents a compelling investment.
What is a term sheet?
A term sheet is a summary of all important aspects of a deal negotiated by potential investors and a young company during the due diligence process. It is not legally binding. The terms become binding when translated by the company’s and/or investors' attorneys into multiple documents at closing, they are signed by all parties and money is exchanged by the angels for equity (or sometimes convertible debt and rarely straight debt) in the company.
What is the range of monetary investments typically made by angels?
The range is huge, anywhere from $5,000 to $250,000 or more. Individually, Northwest Energy Angel members typically invest $20,000 to $100,000 per deal.
Is there a minimum investment requirement?
Are there opportunities for members to get more deeply involved with NW Energy Angels?
Yes. Many new members become involved by serving on the Screening Committee or the Marketing Committee.
How do I join NWEA?
Joining is a simple process of filling out an on-line application form, positively affirming that you are an Accredited Investor and paying the annual dues (currently $1,000) by check or credit card. You may apply here.