Dear Reader

Well poor old Gordon Brown missed a big opportunity in the budget. He simply didn’t do much for entrepreneurs or investors. Is he listening to the right people?

There is a bit more about our thoughts on this in the AngelNewsletter. I hope that new readers as well as old will enjoy and then challenge what we write. You can always email modwenna@angelnews.co.uk with your thoughts and comments on what we are saying.

This month we have commissioned a special article considering what angels should think about when it comes to the leisure sector and we have a fascinating interview with Richard Kemp of Kemp Little – a truly entrepreneurial lawyer who has built his own tech law firm. Richard's interview can be read by clicking on this link [The April Interview]. We have also raised the issue of balanced portfolio theory – do angels get it right or are there lessons to be learned from the VCs?

As usual, there are several bits and pieces to make you smile. Take a peek at our new “That’s neat, that’s neat, that’s neat, that’s neat, I really love your…” section for a quick summary of what’s in the news stories etc.

Remember you are welcome to pick up the phone to the companies that have signed up this month or in the past. Every month we look for a great bunch to tell you about and they would love to hear from you.

For readers who want to meet up with us, see the Events section, particularly our Partner, Predator or Prey event on 9th May in London and, as I mentioned in the last AngelNewsletter Online, you must come along to our 26th June “For those who matter” evening seminar and celebration at BT Tower. We have worked out a very special and unique way of networking for the party afterwards by the way, but you will only find out what this is if you come along! There is more news on both events in the special promotions below.

Lastly NESTA published an article we wrote recently. You might be interested in it so here is the link: http://www.nesta.org.uk/informing/articles/vc_vs_angels.aspx.

Have a great Easter break!

Modwenna

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1. What is OSS?

OSS is a community type approach to writing software that has brought with it new types of software licensing. It helps businesses take out cost from the software development process – by licensing in free of charge ‘pre-baked’ software components, typically in more routine areas like operating systems (where Linux has a lot of traction), database systems like SQLite and other well known OSS products like Apache.

2. And it's free?

The Free Software Foundation says that, "free software is a matter of liberty, not price...you should think of 'free' as in 'free speech' not 'free beer'." Although you do not pay for OSS, you take it subject to the terms of a licence. There are a number of different licences associated with OSS which vary in terms of what they allow a licensee to do. The licensee will usually bear the risk of any errors in the code and will rarely be protected if such code infringes upon a third party's intellectual property rights.

3. Why do I need to bother about it?

Depending upon the terms of the OSS licence, you may find not only that you do not own any OSS code you have modified, but if you have combined it with your own proprietary software, there is a risk that you are obliged to share it with the community. This could have a major impact on the competitive position of your business and seriously and negatively impact on the value of your business when you fundraise or sell.

4. What do I do to protect my business?

Risk can be minimised by understanding what OSS products your business is using and the terms of the various licences. You should ensure that you conduct ongoing audits of OSS in conjunction with speaking to your lawyer. It is best to talk to a lawyer before you start developing (or doing any more development).

5. What else should I use my tech lawyer for?

Tech lawyers also have particular expertise in areas such as data protection. If you are working in Web 2.0 you should talk to them about high level licensing issues and liaise with your lawyer and your patent agent about IP protection.

You should be talking to lawyers generally about competition law and employment law.

Hi, we have organised another seminar with you and your colleagues in mind.

Do you wonder what your relationship with today's technology giants should be? Do you see them as a partner, a predator or are you ambitious enough to believe they will be your prey? And how do you think they see you?

You probably already have a relationship with at least one of these giants, either as a customer or as a supplier, but how do they think of you?

We have brought together three people to speak to you about this crucial issue.

David Rajan, Oracle David is the Director of Emerging Business at Oracle. He is ideally placed to tell you exactly how Oracle is approaching the SME market and what you should be doing to build your relationship with Oracle. Find out just what he has to say.

Raimo Lenschow, Merrill Lynch Raimo is the European Software/IT Services Analyst in the Technology Equity Research team at Merrill Lynch. He will be explaining just how the companies he follows are dealing with the issue of doing business with high growth SMEs like yours Hear from someone who oversees today's giants and assesses their SME strategies

Andy Moseby, Kemp Little Kemp Little is the UK's leading technology law firm. Andy acts for large acquisitive companies on their M&A strategy and SMEs executing their exit strategies. He will be identifying the main legal issues faced by his clients today. Understand how to position yourself legally with the tech giants

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If you think you are busy doithng the paperwork, take a look at what Companies House has to deal with.

Companies House - workload

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Over the last year or so AngelNews has been doing a lot of work analysing what deals angels do and it is fairly clear that many people take a fairly opportunistic approach to the investments they make. Many rely on selecting all or the best of the deals they are shown by intermediaries or at investment events. Understandable, but the more we think about this the more dangerous it seems to be. We are sure that you would be pretty unhappy if you thought your stockbroker was selecting your quoted portfolio on a “the best of what walks through the door” strategy.

Before we suggest another way of considering your investment strategy, we can champion one aspect of “what walks through the door”. If the deals you are seeing really are early enough and exciting enough “new tech” or “new way”, serendipity will play a part and you will find some good deals. Equally, if the opportunities you see are developed enough commercially, risk diminishes. However, the balance of probabilities is that if you don’t see enough dealflow you won’t be able to make these judgements. So it is worth considering pursuing a more active strategy by joining more networks or proactively looking for deals from all sorts of sources. And if you are going to be more proactive this opens more issues when it comes to balancing your portfolio.

Clean-Tech is a hot area at the moment, but did you know, in wind power alone, technological development is moving at the pace of chip development i.e. doubling all the time? So whilst the area may have great potential, angels need to go in with eyes wide open when they take a punt on a technology which might just be overthrown in 12 months. Richard Kemp has made the same point in this month’s The Interview – for some areas of IT and the internet the window may only be 3-6 months. That should be factored into any investment calculation in a rapidly developing sector.

Many investors are coping by moving into later stage apparently “safer” deals. There are good reasons for this. At the excellent London Edge – Life Sciences: IPO seminar on 29th March 2007 (www.londonstockexchange.com/londonedge) Gareth Powell, biotech fund manager of AXA Framlington Fund Managers, showed a slide on the probability of successful commercialisation of pharma and related technologies. For all drugs there is a 12% chance at Phase 1, growing to 17% at Phase 2, and 38% at Phase 3. In biologicals, the numbers are considerably better - 25%, 31% and 53% respectively - and in natural products they are 18%, 23% and 37% - slightly worse. So in this area it suggests that not only should you adopt a ‘the later the better’ approach, but remember that best sub-sector counts too.

The key is to talk to the experts – and take more than one point of view. Factor in the fact that probably the hotter the area, the more likely it is that there is another entrepreneur with a pretty identikit idea touting their opportunity at another investment event elsewhere in the UK, or Silicon Valley or Beijing or Bangalore. Management and ability to implement become much more important in this context. Bigger companies are becoming more entrepreneurial – this is becoming another threat to the solus entrepreneur. Just look at what Google is doing.

In the UK investments in seed and start-up deals by many VCs and angels have effectively collapsed. Government and private equity wants to push early stage risk onto the angels. Angels are voting with their feet and pushing the risk onto the entrepreneur.

That is right enough in one sense. However, it does not square with the investment strategies of the cleverest VCs, and it is from these players that perhaps angels can learn their most important lessons in the art of portfolio construction and risk-return. Top quartile VCs manage risk in three ways which we could all learn from. First they focus hard on sector (in its broadest sense) and, second, they invest at a range of stages in those sectors. Lastly they love volume. Take a look at Sequoia Capital www.sequoiacap.com in the US to see the point. Back here in the UK, 3i is not conceptually so very different – it still invests smaller amounts as well as larger amounts in the best deals it can find and such deals can be found early as well as later in the target’s development. What they avoid is investing the wrong sum of money at the wrong stage.

So when you next want to write a cheque consider this – would £100,000 be better spent on 5-10 companies in one sub-sector all at the same stage, or should it be invested in 1-2 start-ups, 1-2 seeds, 1-2 early stage deals, the odd development capital deal and one MBO? Better still is there a way you can get into 15 or 25 deals?

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We know you all want to meet each other, get more out of us and our Preferred Partners and generally make AngelNews work for you. So we have decided to up the ante on the number of events we would like to invite you to. Here is a list of them. We do hope you will be able to make it to one soon.

Mobile pornographer beats off Disney - No happy ending for Disney lawyers
Iain Thomson, vnunet.com 06 Mar 2007

Lawyers at Disney are feeling grumpy after losing a copyright battle with a British producer of mobile phone pornography.
Michael Wightman, from Newcastle, trademarked 'A Place Where Dreams Come True' for his mobile porn company.

However, Disney uses the slogan to advertise its theme parks in Europe and the US. Preparations for a court case had been made, but Disney lawyers have now backed down.

"It's a David v Goliath victory," Wightman told The Metro.

Disney has now agreed to use 'The place where dreams come true' instead.

The legal team at Disney are renowned for being quick to litigate in copyright disputes. The firm helped sponsor the Sonny Bono Act, which extended copyright to 95 years from 75, spending $6.3m in campaign contributions during the year in which the Act was debated. Source: http://www.vnunet.com/vnunet/news/2184831/mobile-pornographer-beats

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REMEMBER YOU CAN RECEIVE FREE EMAIL ALERTS FOR ALL NEWS STORIES AND SECTORS if you login at www.angelnews.co.uk and select your preferences. While you are there you can also change your password to something more memorable.

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