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Our August 2016 presenting company was KIYATEC out of Greenville, South Carolina.
KIYATEC is ushering in a new world of cancer drug response profiling that use living cells grown and tested in a more relevant 3D tumor microenvironment. They are dedicated to changing how the pharmaceutical industry and clinicians evaluate, test and deliver innovative cancer therapeutics.
Over eight meetings in seven cities, KIYATEC raised almost $700K with AIM Group. While we see this investment as one of the more risky in our portfolio, we believe the upside will be huge.
This past Wednesday, our current due diligence effort was terminated when the company under due diligence announced that they had accepted funding from another source. This makes the third such effort this year that has been terminated and the twelfth time it has happened since AIM Group was started 4 ½ years ago. That may seem like a lot, but when you consider AIM Group has initiated 54 such efforts, that comes out to a termination rate of 22%.
So, why are some due diligence efforts unsuccessful? First, let’s remember that AIM Group receives 30 to 50 applications per month. When one of those applicants is selected each month, Clay and I have committed about four or five hours to reviewing the application and interacting with the management team. Once selected for due diligence, we currently average about 140-150 hours of research by the due diligence team. We find out a lot about the applicant during that 150 hours that you just can’t discover in 4 or 5 hours during application processing.
Reasons for terminating a due diligence vary all over the place. The most common, and definitely the most frustrating, is when the company under due diligence finds funding from another source. This has happened to AIM Group four times out of our twelve terminated due diligence efforts. In every case, the new funding source was a wealthy individual angel investor. These investors are usually not familiar with the current market and often are willing to pay much more than current market value.
Other AIM Group due diligence terminations were the result of a bad technology review by a subject matter expert; too small of target market; disagreements over the term sheet; and the failure of the company to raise the minimum level of funding required to close. Probably the most interesting termination was the result of due diligence team getting concerned about the “volatility of the CEO” and his/her ability to get along with other management team members.
At the end of every due diligence effort, the due diligence team votes whether to allow the company to present to the network. A simple majority vote is required to approve for presentation. The most unusual vote ended in a tie. Since a majority vote of the due diligence team is required to approve for presentation, the company was not approved. Interestingly enough, Clay and I vote differently —- and I was on the losing end of the vote!
While it almost always saddens and frustrates me to see a company fail due diligence and not be approved for presentation, I also think it is a healthy sign that our process has structure and discipline. Yes, we may not have a presentation two or three months out of the year, but in the long run, I believe our investment portfolio is better off. We do not want to invest in bad technology, small markets, volatile CEOs, or over pay.
Assume that Point A is the value at which we, as angel investors, originally invest in a company. Point B is the value at which we exit from the investment. In a perfect world, if we were to graph our investment over its lifetime, we would proceed along a straight line from our original investment value to the exit value.
If we make money, the line is sloping upward until we exit. See Diagram A below. If we lose money, it is sloping downward. Regardless of whether we make money or lose money, both are a straight line. In terms of our scorecard ratings, ratings for a winner would go from “C”, to “C+”, to “B-“ to “B” to “A-“ etc. Losers would go from “C” to “C-“ to “D+” to “D” to “D-“ etc.
But we do not live in a perfect world. Almost every investment that we make seems to have a series of significant events. Some of those events are positives and some are negatives. And the value of the company rises and falls with each of those events. A graph of the company value over a period of time resembles a roller coaster rather than a straight line and looks something like Diagram B.
To show how drastically circumstances can change over a short period of time, let’s examine Kredible and Predikto since the Spring. In late Spring of this year, Kredible was in due diligence to sell to a large public company for 2½ times our investment value one year earlier. It was one of our highest rated companies in the 1Q scorecard. The deal falls through, Kredible misses on two large contracts, and almost runs out of money in early 3Q. The ratings scorecard ratings take huge hit in 2Q. In the Spring, Predikto was a major disappointment. The company had failed to produce any significant level of revenue and the 1Q scorecard ratings reflected the disappointing performance. The company signs three huge contracts in July and the ratings skyrocket in 2Q.
MemberSuite, our largest investment, has probably had more swings in valuation that any other portfolio company. After we make our original investment, the company actually exceeds its revenue projections and the scorecard ratings go up for two or three quarters. Then sales dry up and ratings go down. The company raises more money to implement a new sales program. The program initially is a disappointment and ratings fall further. Then the program kicks in big time and revenues along with scorecard rating, increases. Then the company has a disappointing 2Q when it is raising its Series B round of funding in 3Q of this year. The Series B gets completed, but at a lower valuation than anticipation. Our scorecard rating goes down as a result of the dilution. The company is now taking the proceeds from Series B and pumping money into marketing. The sales pipeline is growing and the outlook for 4Q may be the best sales quarter ever. If that happens, scorecard ratings will enter their third period of time where significant increases were happening. But the company has already two periods of time when the ratings were going down. That is five major swings in valuation in less than four years.
So what is the conclusion of all this? Going from Point A to Point B is not a predictable constant straight line. It is more like a roller coaster with all sorts of ups and downs.
AIM Group’s newest chapter is Selous Venture Society in Nashville, TN. This opening marks the first of our established chapters outside of Alabama and makes us the largest network in the Southeast.
This week we will host our first meeting in Nashville with a special presentation of MemberSuite. MemberSuite is our single largest investment and currently has the highest scorecard rating issued by the AIM staff. MemberSuite, located in Atlanta, has developed a software platform that allows associations and non-profits to manage their back office processes and allows their members online access to manage their relationship via an online portal. The company provides over 20 modules to support associations’ processes, including membership, billing, certifications, events, committees, communication, and fundraising.
New Nashville members will be presented with an introduction and overview of AIM Group, and an opportunity to invest in MemberSuite. We look forward to the new season ahead with Selous Venture Society.
For more info on MemberSuite, visit here.
Last week, AIM Group welcomed two new staff members to our number. We are excited to announce the hiring of Anderson Hicklen as our Birmingham and Huntsville Executive Director and Lowery Thomas as our Nashville Executive Director.
Anderson graduated from Samford University with Business Management and Marketing majors, and has been in a business development role calling since graduation. He came from an IT recruiting company where he recruited software developers for Huntsville and Birmingham, and most recently worked at a banking software start up in Birmingham selling compliance software to community banks. Born and raised in Huntsville, Anderson currently lives in Birmingham with his wife Allison.
Lowery will serve as the Executive Director for AIM Group’s newest chapter in Nashville, Selous Venture Society. He is a graduate of The University of Georgia’s Terry College of Business where he was also a member of the UGA Men’s Golf Team. Prior to AIM Group, Lowery received extensive experience in financial services where he worked with entrepreneurs and early stage companies from his past tenures with A. Logan Brokerage in New York City, and Rhodes Risk Advisors in Atlanta. Lowery works hand in hand with our members to provide them with opportunities to build the best portfolio of early state companies.
Our new staff looks forward to meeting their members and starting work to grow the chapters in number and influence. Be looking for our email announcement for the next road show and make sure to come out to meet these new Executive Directors in your city!
Now that AIM is over four years old, I am getting asked more and more about exits, particularly about profitable exits. This is only natural, since profitable exits is why we invest— and they are a whole lot of fun!
Given that I am a finance/numbers guy, I’d like to share my the answer to the question about profitable exits. But first, we need to review the industry statistics that drive angel investing. These are the same statistics we have been quoting in our new member orientation/Angel Investing 101 seminars since the beginning.
Industry wide, 3 or 4 out of 10 angel investments crash and burn and the angels lose their entire investment. 3 or 4 out of 10 investments break-even and angels make a profit on 3 out of 10 investments. Of the 3 investments that make money, at least one of them is usually a home run. A home run is where angels get 4-5 times their original investment in 3 years or 8-10 times their money in 5 years.
We also know that the average holding period for profitable angel investments is 4.3 years. For my calculations, I am assuming that 10% of profitable exits occur 3 years after investment, 40% after 4 years, 40% after 5 years and 10% after 6 years. These are just my best guesses and yield an average holding period of 4.5 years.
Now we need to review how many companies we invested in each year. In 2012, we invested in 7 companies; in 2013, we invested in 6 new companies; and in 2014, we invested in 7 new companies. We are on track to invest in 6 new companies this year, giving us 26 portfolio company by the end of 2015. Using all of the above stated assumptions, here is a table that reflects the number of profitable exits we should expect by year if we achieve the industry averages.
Projected Profitable Exits
|7 companies in 2012||.21*||.84*||.84||.21|
|6 companies in 2013||.18||.72||.72||.18|
|7 companies in 2014||.21||.84||.84|
|6 companies in 2015||.18||.72|
|7 companies in 2016||. 21|
|Total Profitable Exits||.21||1.02||1.77||1.95||1.95|
* 7 companies X 30% chance of a profitable exit X 10% chance of an exit in year 3.
So what does this table tell us? We have a small chance for a profitable exit in 2015, but we should experience our first profitable exit in 2016. The number of profitable exits should increase each year until 2018 when we should top out at 2 profitable exits per year. As long as we keep investing in 6-7 new companies each year, then we should maintain the rate of 2 profitable exits per year beginning in 2018.
Remember, this table only reflects profitable exits. There will be just as many exits where we get some or all of our investment back, but no substantial profit. And finally, please remember that these calculations are based on industry averages. Only time will tell what we actually experience.
Software company that provides a suite of services designed to help hospitals manage and coordinate patient care once the patient leaves the hospital.
Workforce management software that helps companies in the Events and Entertainment industry schedule and manage its on-demand talent.
An Atlanta-based technology company that provides a social sourced contact data solution for enterprises.
Built a patent-pending software as a service solution for disaster recovery.
Technology-enabled services company that provides customers with immediate access to quality medical care from board certified emergency medicine physicians via a secure mobile health platform.
An online credibility management software solution helping individuals and organizations maximize the effectiveness of their online presence.
An outcomes-based preventative health company offering customized and technology-driven exercise and nutrition programs for corporations.
Develops software to help asset-intensive industries gain predictive insight into the health of their industrial equipment.
Builds software to enable remote telepresence and other practical functions while working on complicated industrial tasks using a pair of customized smart glasses.
Biotechnology company that provides innovative genomic research tools for the life science research market.
Next generation project management solution for the design and construction industry, which allows collaborative exchange of data, workflows, documents and the creation of custom applications.
Manufactures a wireless electronic maternal-fetal monitor sensor replacement system that measures labor contractions and the heart rates of both mother and child.
Real time pricing intelligence tool for online retailers and shoppers.
Produces a small wireless sensor platform that can detect color, temperature, humidity, ambient light, toxic gases, and barcodes.
Develops association management software complete with all of the tools and functionality to perform every task necessary in supporting the organization.
Marketing and merchandising platform for convenience stores designed to help convert fuel-only customers to multi-product purchasers.
Provides risk management and business continuity software for enterprises.
An animal pharmaceutical focused on developing a vaccine to control horn flies in cattle.
Vehicle telematics company with mobile software that gathers odometer data and images for the auto insurance, vehicle parts & services, and maintenance industries.
Cloud-based student engagement platform that enables instructors to engage students with a highly interactive feature set.
Mobile app that helps international travelers navigate the language and culture with ease.
Develops remote presence software that enables a user’s hand to be overlaid onto a live video stream.
Provides an innovative e-commerce experience for communities of collectors.
Learn About Our Investing Process
How We Work
Applications for funding are reviewed by AIM Group on a monthly basis. The field is narrowed down to a group of finalists that best fit our criteria and each company is thoroughly evaluated. One or two companies each month will be selected for due diligence.
The common due diligence process can swing to one extreme or the other when either too much or too little is done. AIM takes pride in a balanced due diligence process, identifying the key pressure points without spending countless hours digging into every minor detail. Our due diligence typically lasts about four to five weeks. AIM’s priority is to interact as much as possible with the company’s management team and their real or prospective customers to evaluate true potential for growth and acquisition.
Once a company successfully completes our due diligence process, we take them on the Roadshow to present to every chapter of AIM Group. The Roadshow is a series of eight investment presentations given in seven cities over four days. Our goal is one Roadshow each month, with one presenting company requesting funding from our membership. The results: we expect every company that completes the Roadshow to be funded, and we have a long history of doing so.
The primary source of investment comes from our membership and the secondary source comes from our sidecar fund. Each of our members makes their own investment decision for each opportunity. The collective investment interest is gathered into a single purpose LLC that ultimately invests into the target company as single shareholder. We look to complete the initial closing within three to four weeks after the completion of the Roadshow.
Funds are transferred, the investment is made and then, a true partnership in growing the company begins. We make it a priority to support our portfolio companies in any way possible. We expect to have a board seat associated with our round of funding and to receive CEO updates and timely financials, keeping our management teams and their AIM investors connected. With our large membership and their associated contact networks, AIM can help make connections to potential customers, employees, advisors, or service providers. The experiences and relationships from our large pool of portfolio companies can help add meaningful value well past dollars raised.
Meet Our Team
Clay is a founder and managing partner of AIM Group. He is an experienced entrepreneur and early stage investor. Under Jim and Clay’s leadership, AIM Group has become one of the largest and most active early stage funding sources in the Southeastern United States. Clay has quarterbacked over 30 early stage technology investments. He serves as an advisor or board member for a number of companies in the AIM Group portfolio. His experience in investment banking, private equity and as an entrepreneur have allowed him to see multiple perspectives associated with investments and fundraising.
Clay earned his Bachelor of Science in Business Administration with a concentration in Finance from Auburn University.
Jim is a founder and managing partner of AIM Group. He is a serial entrepreneur having started eight companies during his career. The largest of these startups grew to over 2,000,000 customers and over 2,000 employees. A vast majority of his companies were in the telecommunications industry and ranged from local & long distance service to long haul fiber optics to cellular. From the mid 1980s to 2010, Jim invested in 46 early stage companies as an individual angel. It was his experience as individual angel investor that led to his appreciation of investing with a group and ultimately the creation of AIM Group.
Jim earned his Bachelor of Science in Finance from Auburn University and his Master of Business Administration from the University of Texas.
Member Services Director
Kelly grew up in Birmingham and graduated from Auburn University with a focus on Entrepreneurship. After relocating to Montgomery and working in communications with the development community of Downtown, Kelly started Anchor Communications, providing social media management and web communication services to small businesses. She joined AIM Group at the beginning of 2015, and now that AIM Group is her primary focus, she hopes to help create an excellent membership experience for the entire angel investor network.
Mobile Executive Director
Bo Megginson serves as our Executive Director for the Mobile Chapter of AIM Group. Bo is a Mobile native who attended Rhodes College, Auburn University and the United States Sports Academy, concentrating in journalism and communication. With tenures in insurance, financial services, information technology as well as private equity, Bo brings unique knowledge and perspective to AIM members and companies seeking investment capital. Bo currently sits on the board of Victory Health Partners and the Mobile Sports Hall of Fame, and serves on the Alabama Sports Hall of Fame selection committee.
Dothan Executive Director
Ben Freeman is our Executive Director for the Dothan Chapter. Ben has both his undergraduate and graduate degrees from Auburn University. He has worked in the steel business for 20 years, first in Birmingham with Commercial Metals Co. and the last 16 of the years with Sabel Steel in Dothan. Ben currently manages various properties and is involved in a handful of Dothan civic and local organizations. He and his wife, Dr. Michelle Freeman, have twin daughters Mary Lynn and Anna Beth.
Montgomery Executive Director
Clay McInnis is AIM Group’s Montgomery Chapter Executive Director. Clay is a graduate of Auburn University and majored in Entrepreneurship and Family Business with a minor in Sustainability. Clay launched SoutherEco, a company specializing in small scale biodiesel production and the distribution of biodiesel equipment. He went on to develop a 30,000 s.f. mixed-use real estate development in downtown Montgomery in 2011. Today, he is the President of Montgomery’s Downtown Business Association, works as an ambassador to Montgomery, and sits on several local non-profit boards.
Nashville Executive Director
Lowery serves as the Executive Director for Selous Venture Society in Nashville and for the AIM Growth Fund.. He is a graduate of The University of Georgia’s Terry College of Business where he was also a member of the UGA Men’s Golf Team. Prior to AIM Group, Lowery received extensive experience in financial services where he worked with entrepreneurs and early stage companies from his past tenures with A. Logan Brokerage in New York City, and Rhodes Risk Advisors in Atlanta. Lowery looks forward to working hand in hand with our members to provide them with opportunities to build the best portfolio of early state companies.
Birmingham Huntsville Executive Director
Anderson graduated from Samford University with a degree in Business Management and Marketing. Over the last several years, he has served in business development roles throughout Alabama. He came from an IT staffing company where he recruited software developers for Huntsville and Birmingham, and most recently worked at a banking software start up in Birmingham selling compliance software to community banks. Born and raised in Huntsville, Anderson currently lives in Birmingham with his wife Allison.
We invest in early stage tech companies. Early stage for us ranges from pre-revenue to several million dollars in revenue. Our sweet spot is early revenue of $1,000,000 to $2,000,000 and companies that are looking to aggressively expand. We will occasionally invest in pre-revenue opportunities; however, the product or service needs to be market ready and revenue must be a sure thing.
When it comes to industry focus, we are fairly industry agnostic. First and foremost, we look for tech enabled opportunities addressing a a large market. The technology needs to give the company a substantial competitive advantage over the competition. As evidenced by our portfolio, we invest in a wide spectrum of industries that ranges from software to big data to healthcare.
Our average investment size is $750,000 per round. The minimum investment size is $500,000. The largest amount we invest in any one round is $1,000,000. We often co-invest with other investors and are happy to help bring in several investors to complete a larger round. We have participated in round sizes as small as $500,000 and as large as $10,000,000.
If you believe your opportunity is a good fit for us, we would like to hear from you. To submit an application for funding, you will need to complete an application and email it to us along with an executive summary. Click below to download the application. We try to reply within a few weeks to those applications that meet our criteria.
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Are you an angel?
An angel is a high net-worth individual who invests his or her own money in startup or early stage companies in exchange for equity ownership or debt in the businesses. Angel investors must meet the Securities Exchange Commission’s (SEC) standards for accredited investors.
Benefits of membership
There is strength in numbers, especially when investing in early stage tech companies. Some of the primary benefits include: a better deal flow–both quantity and quality, the opportunity to build a diversified portfolio of early stage companies and invest fewer dollars in a larger set of deals, better deal terms and increased negotiating power by pooling money alongside other members, better due diligence and professional staff along with access to subject matter expertise, and finally, networking and learning, the chance to connect with other successful like-minded business people in your community while learning about the next generation of technology solutions.
AIM Group is the largest angel network in the Southeast US with 7 chapter locations, including Nashville, Birmingham, Huntsville, Montgomery, Mobile, Dothan and Auburn. If none of these locations work for you, contact us for information about the AIM Growth Fund, a different way to invest in these early stage opportunities.
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