The goal of Sorin Angel Capital Fund IV is to produce a high return by making minority equity investments in a portfolio of ten (10) to thirteen (13) scalable seed stage technology companies that are applying technology in transformational ways to disrupt established markets.
Jim and the folks at Sorin Capital have been a pleasure to work with. As an early stage company we need investment partners that understand our stage, and have the patience and foresight to look at the big picture. Jim was instrumental in helping us raise an oversubscribed seed round that allowed us to raise twice as much capital as we had been targeting. This will give us substantially greater runway and will make a huge difference in our near term goals.
Bo Davis, CEO, MarginEdge
This philosophy is largely based on Sorin Angel Capital’s experience with his previous 31 investments since 2013, as well as his other entrepreneurial ventures since 2001, and is a reflection of the types of businesses that:
- are well represented in the deal flow to which the Fund is exposed,
- have the possibility of 10X returns in the prescribed timeframe, and
- are within Sorin Angel Capital’s ability to thoroughly understand and evaluate.
Examples of the types of companies that fall within and outside of this philosophy are shown on the following table:
|Within the Philosophy||Outside of the Philosophy|
|The Internet of Things||Vagabond Vending, Zagster, Brain Sentry, Aquicore, CargoSense Eyelation||Restaurants||My Burger|
|Marketing and Social Media Marketing||InGo, YaSabe, Loop88 (PinBooster), Bubbl, Vennli||Food/Liquor||Tico Libre, Hatfield & McCoy, Relay Foods, Daily Serving|
|Real Estate Technology||Rentlytics, Aquicore||Life Sciences or Medical Devices||Vagogenix, Neoantigenics, NanDio|
|Financial Technologies||StreetShares, TradingView||Education Technology||Naaya, LessonCast|
|Internet||Blue Triangle, Technologies, DivvyCloud||Unapplied Technologies||NanoFoundry|
|SaaS Applications, primarily but not exclusively B2B||RIVS, AppCast, HomeCare||Consumer Goods||SoapBox|
|Entertainment, Movies or Plays||Rivet Radio, Circle Media|
|Games||North Star Games|
|Social Impact||Keeping The Faith, Grounds & Hound|
Portfolio Investment Philosophy
Sorin Angel Capital’s experience over the past three (3) has resulted in a better understanding about the ideal pre-conditions that a company should meet to reduce the risk of an already risky investment decision.
The table below outlines the ideal pre-conditions that investments in Sorin Angel Capital Fund IV will meet in order to qualify for consideration to become part of the portfolio. Investors should recognize that the conditions below describe an ideal that is unlikely to be universally applicable to all investments made.
Any one of these pre-conditions may be overridden if others are overwhelmingly encouraging; however, it is the clear intent of Mr. Koehr to ensure that every portfolio company substantially meets the following pre-conditions prior to investment:
|Within the Philosophy||Outside of the Philosophy|
|Done in conjunction with the collective wisdom of others, particularly the IrishAngels and the New Dominion Angels||Lone Ranger investments where Sorin Angel Capital is the sole evaluator outside the context of an investment group or other team.|
|A Board of Directors is in place, ideally with a member that Sorin Angel Capital knows personally||Lone Ranger Entrepreneur(s)|
|Possible to envision a 10X Return||Non-Scalable or High-Touch|
|Some customer has paid full-price||Very early offerings yet to be validated by the market|
|Easy to see a planned 3 to 5 year exit||Planned exit of greater than five (5) years or limited exit possibilities|
|Very large addressable market||Cannot see the company being over $25 million in revenue in 5 years|
|At least 20 hours of due diligence with people knowledgeable about the industry involved||Deals outside of investment groups where complete due diligence cannot reliably be completed by knowledgeable trusted people|
|A team with entrepreneurial experience or significant corporate experience within the domain||College kids with no other real work experience or Entrepreneurs who have only worked for the Federal Government|
|Low Capital and Working Capital Requirements||Capital or inventory intensive businesses|
|Recurring revenue||Non-recurring revenue|
|Reasonable Valuations, generally less than $6 million||Uncapped Convertible Notes or Valuations over $10 million|
|Based in the United States||Based outside of the United States|
|Advisory Board is very negative on the opportunity|
Finding the best possible portfolio companies for Fund IV will require Mr. Koehr to take full advantage of his widening network in the Angel investment community, so investments for Fund IV will not be limited to these two primary affiliations.
During the course of the execution of Fund IV, other affiliations are certainly likely including the following:
Middleburg Capital Development (MCD)
MCD, based in Middleburg, VA, is run by Notre Dame Trustee and Fellow Tim Sutherland and his son David Sutherland.
Mr. Koehr serves on their Advisory Board and has cooperated in several deals with them in the past including Vagabond Vending and CargoSense.
MCD has a broader mission than the more targeted Angel Investment groups: “We partner with entrepreneurs, growing businesses, private banking groups, university incubation centers, funds, and other private equity groups.”
Center for Innovative Technology (CIT)
CIT is a non-profit corporation created by the State of Virginia that “creates technology-based economic development strategies to accelerate innovation, imagination and the next generation of technology and technology companies” in Virginia.
CIT runs a series of CIT GAP Funds to fill the funding gap for high potential Virginia-based technology companies.
The northern Virginia-based CIT GAP Funds are run by Tom Weithman, Notre Dame Class of 1984, so there have already been several cooperative investments between the New Dominion Angels, the IrishAngels and CIT.
Blu Venture Investors
Blu Venture Investors is a venture capital investment company that supports early stage entrepreneurs in the Mid-Atlantic Region – Maryland, Virginia, Washington, DC and North Carolina.
Blu has already overlapped with Sorin Angel Capital, the New Dominion Angels and the IrishAngels on numerous deals.
Evaluation Criteria for Investment Decisions
A still evolutionary part of the Fund’s business process is a formal methodology for evaluating investments, beyond simply evaluating necessary pre-conditions. The following criteria are based on the New York Angels Screening and Evaluation Worksheet plus the personal experience of the Jim Koehr. This draft criterion is anticipated to evolve as they are methodically applied to Fund IV investment decisions. For today, there is no particular threshold result that must be achieved with the criterion below. The criterion are simply presented as an early draft of a possible scoring system that may or may not evolve into something more than a subjective checklist against which investment decisions will be evaluated:
1. Strength of Management Team – 30%
|a. Founder’s business experience|
|i.||Wonderful||Wonderful – Clearly a veteran CEO with enormous competence|
|ii.||Great||Experience as a CEO|
|iii.||Good||Experience as a COO, CTO or CFO|
|iv.||Acceptable||Many years of experience as a Product Manager or Technologist|
|v.||Poor||Many years of business experience|
|vi.||Unacceptable||Straight out of school|
|b. Founder’s domain experience|
|i.||Wonderful||This business is a virtual repeat of a prior business|
|ii.||Great||Successful experience in the space|
|iii.||Good||Experience is directly analogous space|
|iv.||Poor||New Entrant into the space|
|c. Willingness to step aside, if necessary, for a new CEO|
|i.||Great||Understands the possibility and a strong Board capable of doing it|
|ii.||Good||Understands the possibility and Board probably capable of doing it.|
|iii.||Acceptable||Not openly unwilling but Board capable of doing it|
|iv.||Unacceptable||Reluctant and no Board capable of doing it|
|d. Is the Founder coachable?|
|iii.||Acceptable||May be Coachable|
|iv.||Unacceptable||Openly shows signs of being uncoachable|
|e. How complete is the management team?|
|i.||Wonderful||A complete and experienced management team|
|ii.||Good||A mostly complete team with some strong leaders|
|iii.||Acceptable||A strong leader with a good start assembly a team|
|iv.||Poor||A somewhat incomplete team|
|v.||Unacceptable||A very incomplete team|
2. Product or Service – 20%
|a. How well is the product/market defined|
|i.||Great||Extremely clear, focused and succinct|
|ii.||Good||Clear, focused and succinct|
|iii.||Acceptable||Some definition, but needs focus|
|b. Is the product or service compelling?|
|i.||Great||Product is a pain-killer with no side effects|
|ii.||Good||Product is a pain-killer with no side effects after further development|
|iii.||Acceptable||Product is a pain-killer|
|iv.||Poor||Product is a vitamin|
|c. What is the path to acceptance?|
|i.||Wonderful||Product is incredibly easy to understood and adopt|
|ii.||Good||Product is an easily understood and adopted improvement|
|iii.||Great||Product is an innovative approach that will be reasonable to adopt|
|iv.||Acceptable||Product is an innovative approach to a known market|
|v.||Poor||Product defines a new industry category|
|d. Can the product or service be easily copied?|
|i.||Great||Solid, issued patent protection|
|ii.||Good||Product is unique and protected by trade secrets, parts are patentable|
|iii.||Acceptable||Duplicated or replaced with great difficulty|
|iv.||Poor||Duplicated or replaced with some difficulty|
3. Size of Opportunity – 20%
|a. Size of the addressable market for the company’s product or service|
|b. Potential Revenues in five (5) years|
|c. Strength of Competition in this marketplace|
|i.||Great||Almost none, yet|
|ii.||Good||Weak or indirect|
|d. Exit Possibilities|
|i.||Wonderful||They have already been put under NDA for a plausible exit|
|ii.||Great||Very easy to see possibilities, including the chance for an early exit|
|iii.||Good||Multiple plausible exit opportunities in 3 to 5 years|
|iv.||Poor||Limited exit opportunities, but planned for 3 to 5 years|
|v.||Unacceptable||Unclear exit opportunities or a planned exit that exceeds 5 years.|
4. Sales Channels – 10%
|a. How strong are the sales channels|
|i.||Wonderful||Multiple channels established and moving product|
|ii.||Great||Channels established and moving product|
|iii.||Good||Initial channels verified|
|iv.||Poor||arrowed to one or two channels|
|v.||Unacceptable||Channel strategy not yet established|
5. Stage of Business – 10%
|a. How much has this business been validated by the market|
|i.||Wonderful||A wide variety of customers generating significant revenue|
|ii.||Great||Customers generating significant revenue|
|iii.||Good||Positive, verifiable acceptance|
|iv.||Poor||Product in Beta|
|v.||Unacceptable||Product not ready to market, in prototype or only planned|
|b. Size of This Investment Round|
|i.||Wonderful||The entire round is taken by a single Sorin affiliated Angel group|
|ii.||Great||$250K to $750K|
|iii.||Good||$750K to $1,500K|
|iv.||Acceptable||$1,500K to $2,500K|
|c. Need for Subsequent Funding|
|ii.||Acceptable||Less than $3 million|
|iii.||Poor||$3 to $10 million|
|iv.||Unacceptable||Over $10 million|
6. Other Factors – 10%
|a. Quality of Business Plan and Presentation|
|i.||Wonderful||Incredibly compelling, one of the best I’ve ever seen|
|ii.||Great||Clear, compelling and convincing|
|b. Burn Rate|
|i.||Wonderful||Cash flow positive with this this round|
|ii.||Great||Cash flow positive possible, if necessary, with this this round|
|iii.||Good||More than 18 months of runway|
|iv.||Acceptable||More than 12 months of runway|
|v.||Unacceptable||Less than 12 months of runway|
|c. Attractiveness of Deal Terms|
|i.||Wonderful||Low Valuation, Preferred Stock with uniquely good terms (i.e. Warrants or 2X liquidation preference)|
|ii.||Great||Good Valuation, Preferred Stock with uniquely good terms (i.e. Warrants)|
|iii.||Very Good||Good Valuation, Preferred Stock with liquidation Preference|
|iv.||Very Good||Convertible Note with low cap and uniquely good terms|
|v.||Good||Valuation Not Low but Preferred Stock with liquidation preference|
|vi.||Poor||Unreasonably High Valuation or Note Cap|
|vii.||Unnaceptable||Unreasonably High Valuation or Common Stock|
Given that the Fund Manager, Sorin Angel Capital, LLC, is a sole-member LLC with James G. Koehr as the sole member, the Operating Agreement for Sorin Angel Capital Fund IV, LLC contains provisions for a successor Manager of Sorin Angel Capital, LLC in the event of Mr. Koehr’s death or incapacity.
In those extraordinary cases, William T. Patchett, CPA, will assume the role of Managing General Partner as a result of his appointment as the Managing Member of Sorin Angel Capital, LLC. At that time, Mr. Patchett will not make any new Capital Commitment Calls nor will the Fund make any new investments beyond any unconsummated obligations committed to by Mr. Koehr while he was still the Manager. Mr. Patchett’s role will simply be to monitor the investments and disburse earnings per the Agreement.
Sorin Angel Capital Fund IV will exercise its exemption from Registration with the Securities and Exchange Commission (SEC).
Fund offerings were conducted under an exemption from registration under Section 4(2) of the Securities Act and Rule 506(c) of Regulation D promulgated under that Act.
The Units were offered and sold only to “Accredited Investors” as defined under Regulation D.
Prospective investors were required to provide any information that Sorin Angel Capital Fund IV or its manager believed was necessary to verify their status as Accredited Investors.