Angel Investor Mandate: Seed Deals, Notes and Price Rounds in Silicon Valley
Silicon Valley Angel Investor Club Mandate Interview
Angel investors, seed stage founders and capital raisers who want to understand how an active Silicon Valley angel sizes deals and chooses between notes and price rounds.
5 key takeaways
- Small checks, local companies. Ian's group invests between 100k and a million dollars in seed stage high technology companies. Members want to be able to drive to the companies, so deals are mostly in Silicon Valley, with some in LA, San Diego and Washington State.
- Typical valuation and ownership. Companies usually carry valuations of 3 to 5 million dollars. The group looks for an ownership stake of 10 to 20 percent after the initial seed round.
- Price rounds for small exits. For companies aiming to be acquired for 15 to 20 million dollars, Ian prefers a price round. The goal is a 5 to 10x return, and the defined exit allows methodical diligence.
- Capped notes for big bets. For deals that could create whole industries, Ian describes notes as one approach some angels consider because they are the first dollars in. He prefers caps over uncapped notes and says caps give an implicit price.
- Invest directly, not through funds. Ian says fund returns are mostly unspectacular. In Ian's view, a small allocation made directly offers a chance at a very large return that could change total wealth, though any investment can lose money.
What this talk covers
Ian invests less than a million dollars per deal, between 100k and a million, in seed stage high technology companies. Valuations run about 3 to 5 million dollars, with an ownership stake of 10 to 20 percent after the seed round. He has been an angel investor for more than 20 years and has raised three small funds, including a 50 million dollar fund with institutional investors.
He describes two kinds of deals. Ian says small deals aimed at exits of 15 to 20 million dollars tend to fit price rounds and strict diligence in his experience, while large venture style bets tend to fit capped notes. Ian also shares his view that some angels may prefer investing directly rather than through funds. He names deals that a venture partner championed but lost at the partners meeting as a favorite source.
Facts from this talk
- Ian's group invests between 100k and a million dollars in seed stage high technology companies at valuations of about 3 to 5 million dollars.
- For small deals aimed at 15 to 20 million dollar exits, Ian prefers a price round and targets a 5 to 10x return.
- Ian has raised three small funds, including a 50 million dollar fund with all institutional investors.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Silicon Valley Angel Investor Club Mandate Interview. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around price round terms, convertible note structures and investor eligibility rules. Do not use AI to write your own legal agreements.
In their words
"We very much insist upon a price round, and we design our investments to be able to garner between a 5 and a 10x return based on those kinds of exit outcomes."
"You actually have a chance to get the kind of 3,000 to 1 return that, even in that small sliver of your asset class, could change your entire category of wealth."
"That champion wasn't able to win the battle at the partners meeting. I'm interested in those deals."
Related questions
- How do angel syndicates work for startups?An angel syndicate is a group of individual investors who back a startup together.
- How do I close a funding round?I close a funding round by focusing on investors who fit the opportunity and moving each interested prospect through clear, consistent follow-up.
- What documents do investors request during due diligence?Prepare a clear, organized package covering your operations, investments, compensation, team, and track record.
Questions about this video
How much does Ian invest in each deal?
His group invests less than a million dollars, between 100k and a million, in seed stage high technology companies. Valuations are typically 3 to 5 million dollars.
When does Ian use a price round instead of a note?
He prefers a price round for small deals where the company aims to be acquired for 15 to 20 million dollars. For large venture style deals, he says notes with caps fit better.
What kind of deal does Ian want to see?
He likes deals that had a venture capital champion who lost the argument at the partners meeting. He also likes deals he sees as lower risk, such as a small team building a chip with a clear acquirer and modest capital needs.
Put this into practice with the dilution calculator. See all angel investors resources.
