Ohio TechAngel Fund IV (OTAF IV)

Ohio TechAngel Fund IV (OTAF IV)
What is OTAF?
Ohio TechAngels Funds are a group of for-profit angel investor funds that invest in highly
promising early stage Ohio-based C-Corporations in IT, advanced materials, and life
sciences. More than 340 high net-worth accredited investors contribute to the funds, making
it the largest angel network in North America. While OTAF founder, John Huston, is the
Manager of each fund, TechColumbus serves as the Managing Member of each fund and
provides key administrative and entrepreneur support. The Ohio Third Frontier Program coinvests in the funds, and OTAF also has a strong network of collaborators and partners.
OTAF’s mission is to “Turn great ideas into prized companies to build entrepreneurial
wealth”. To-date, OTAF and its sidecars have invested $28 MM in 44 companies that have
raised $355 MM from other sources. Four companies have achieved positive exits and 10
companies were complete losses. The 30 active companies currently employ 421 people with
average salaries of $87,275, and are generating about $50 MM in annual revenues.
The typical OTAF investee is in the late “Seed”, “Start-up” or “Early” lifecycle stages –
depending on the industry. We prefer software companies to have demonstrated commercial
feasibility by revenue generation. To qualify for investment consideration from OTAF, the
company must be (or plan to be) the following:
1)
2)
3)
Based in Ohio (any region)
Organized as a C-Corp legal entity, incorporated in Delaware or Ohio
Part of one of these subsectors: IT, Life Sciences, or Advanced Materials
How are OTAF investments structured?
OTAF IV will make 14 initial investments of $325,000, and seven of these companies will
receive follow-on investments of $175,000. Individual OTAF members who are interested in
increasing their exposure may write checks and invest alongside the fund as “sidecars”. Our
typical round size is $750,000 to $2.5 MM, and if this is more than OTAF and sidecars will
fund directly, then we will formulate a syndication strategy to socialize the company with our
investment partners around Ohio and the Midwest.
OTAF uses a standard term sheet and deal documents based on the NCVA model term
sheet. Standard deal terms are: participating convertible preferred equity with an 8%
cumulative dividend (paid at exit); an incentive stock option pool of 10-15%; cash investment
by the founders (in most cases); a 5-year redemption feature; and the right to appoint a
member to the company’s Board of Directors (typically a five-seat board). OTAF and the
founders should be aligned with the goal to build value and sell the company in 3-5 years.
Ohio TechAngel Funds
1275 Kinnear Road, Columbus, OH 43212
www.ohiotechangels.com
Twitter: @OhioTechAngels
(614) 487-3700
Entrepreneur’s Guide to the OTAF Process
• The first step is to submit a business plan and funding application via
ohiotechangels.com. Suitable and attractive opportunities will be invited to pitch to
the OTAF Investment Screening Committee (ISC).
• Our ISC requires a $500 administrative fee paid to Ohio TechAngel Fund IV, LLC.
• The entrepreneur must send a two-page executive summary (one page front-and-back
as printed) as well as a PowerPoint presentation (generic presentation deck available at
TechColumbus.org).
• At the meeting he/she is allowed 13 minutes to present and 15-20 minutes of Q&A,
and the ISC votes after the presentations and follows up in the same day.
• If the company is approved by the ISC, then the entrepreneur provides the same
presentation to the full OTAF membership the following week at the monthly
members’ meeting. The entrepreneur is expected to bring 80 copies of the executive
summary be placed on the tables prior to the meeting.
• The members of OTAF IV will vote ‘yes’ or ‘no’ to proceed with formal due diligence
that evening after the presentation and Q&A. A simple majority vote of those OTAF IV
members present is sufficient to commence due diligence so long as at least three
members volunteer to join the due diligence team (which will be led by either the
OTAF Manager or Senior Director).
• The DD Team must complete its work within two months, or the deal is ‘shelved’ and
must recommence the entire process, starting with the ISC, if company wishes OTAF
to reconsider an investment. Milestones for reengagement are sometimes provided.
• If the due diligence team does not ‘solve for stop’ and agrees that the investment
opportunity is appropriate for the Fund, we sign a term sheet based on the standard
OTAF terms provided to the entrepreneur at the beginning of the process. We
recommend that the entrepreneur not hire an attorney to create a Private Placement
Memorandum (PPM) without first ensuring the terms match OTAF’s standard
requirements. (When OTAF leads a funding round, its counsel will draft the
documents.) Using OTAF’s standard documents should save money and time, and will
make deal syndication easier and smoother.
• We then invite the entrepreneur back to present one final time to the membership,
again bringing 80 copies of the executive summary. (The company must sign a term
sheet prior to the final pitch.)
• The due diligence team presents its findings immediately after the entrepreneur’s
presentation, followed by Q&A. The DD team sets a minimum investment raise
required to break escrow and achieve first close, and this is included as part of the
term sheet and final recommendation deck.
• The membership makes a final vote, and if affirmative by simple majority, we move
forward on the definitive documents and first close.

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