FAQ Investment & Membership

Early-stage investing is extremely high risk; valuations must be commensurate with risks. Valuation strongly depends on whether or not you are generating revenue.  An idea without a good go-to-market strategy will typically have a lower justifiable valuation.

Pre-money valuation is the value that an interested investor should attribute to the interest (if a note is offered) or equity purchase that you are offering to determine if the offer is for a fair value.

Domain expertise in field or function; passion and energy; credibility; coachability, and the demonstrated ability to work well as a team.

Angel Investors consider several forms of funding to be most accepted. These include: (1) Preferred Equity, (2) Convertible Notes (essentially a short-term – 12 to 36 months in duration loan) that earn interest over the term of the note, and upon the occurrence of either the end of the note term or a pre-defined financing event convert to a specified form or equity, most typically preferred equity the purchase price of that equity is subject to a discount of 10% to as high as 30%, (3) Bridge Notes – a very short term (less than 18 months) form of a Convertible note, which in addition to earning interest and enabling the purchase of the to be issued equity at a pre-defined discount, is also protected by a pre-defined conversion limit or ceiling, which provides superior value protection to the investor at the time of the conversion event.  It is important to realize that notes of all forms should always exist uniquely and should never be issued back-to-back.

Most angel investors will NOT accept offerings that use a SAFE note as the method of investment funding. SAFE notes, or Simple Agreement for Future Equity is a financial instrument used in startup investing that allows investors to provide capital to a startup in exchange for a promise of future equity. A SAFE note has two key components neither is sufficient to imply or ensure “equitable” value for the investment made. These two components are the valuation cap and the discount rate. Of these two features, only the discount rate is assured. The valuation cap is NOT always specified, and even when it is specified it is subject to revocation which may result in the “cram-down” of the value to be received when the “future equity” event occurs. Angel investing is one of the highest-risk types of investment, the use of a SAFE note further exaggerates the risk to the detriment of the investor.

A SAFE is a contract. It is neither debt nor equity, just an agreement. The contract agreement indicates that the company is to distribute shares to investors in the future in exchange for money today. All this means is that the investor holds an “IOU” for equity, should equity ever be issued. It is not debt like a Note, so the investors do not have a claim on any assets of the company if things deteriorate. It is not equity, so the investors do not have any governance rights, information rights, voting rights, or any rights to help steer the company. If the company breaches the SAFE contract, what is the recourse? Perhaps only to sue the struggling startup and incur legal costs, which will not be recoverable, while forcing the company into bankruptcy in which case the SAFE holder has no claims.

While many angel investors come from professional management or entrepreneurial backgrounds, more often they are simply mid- to high-value individuals or family members who are interested in learning more and potentially investing in startup and early-stage business ventures. Desert Angels, as a group, mentors its members who wish to learn more and participate in early-stage investment opportunities.

An accredited investor in the US is an individual or entity deemed financially sophisticated or wealthy enough by the SEC to invest in unregistered securities such as private placements, hedge funds, and startups, which carry higher risk and less oversight.

Individual Criteria

Desert Angels offers a variety of membership levels. All memberships are offered on a twelve-month annual membership basis. The Membership types and annual costs include:

• Active Member – $2,300 per 12-month periodActive members will actively participate in the deal flow management conducted by Desert Angels. An Active Member will invest at the minimum annual rate prescribed (currently $10,000 average per year), and participate in Dealum at a rate of 12-20 hours/month in deal reviews, voting with commentary and questions, participation in screening, due diligence, etc.Active members must certify that they are SEC-qualified Accredited Investors.Guest Policy: Members who invite Guests to Pitch Meetings, virtual, or in-person events must complete the DA Guest Form. When these Guests join as any Membership type within the same season, the inviting Member will receive a $100 credit toward their next season’s dues. There is no guest fee for the first two guests per membership year (season). For each invited guest to a membership meeting, the Member will pay a $100 guest fee.

  Deal Room Rights & Obligations: Active Members shall have full access rights to all deal flow processing functionality, including Funnel Step-enabled voting, Chat, and Document and Link viewing. They will have access to the full Shared Documents Library and may view the full member list.
  Investment Obligation: Active members will participate by investing an average of at least $10,000 each year in one or more deals presented to Desert Angels and measured over each sequential 3-year period.

• Supporting Member – $3,300 per 12-month periodSupporting members participate with no investment or monthly active participation requirement (screening, diligence, etc.), but have access to all deals, investment vehicles, and events. They have full meeting attendance privileges.Supporting members must certify that they are SEC-qualified Accredited Investors.Guest Policy: Members who invite Guests to Pitch Meetings, virtual, or in-person events must complete the DA Guest Form. When these Guests join as any Membership type within the same season, the inviting Member will receive a $100 credit toward their next season’s dues. There is no guest fee for the first two guests per membership year (season). For each invited guest to a membership meeting, the Member will pay a $100 guest fee.

  Deal Room Rights & Obligations: Supporting Members shall have full access rights to all deal flow processing functionality, including Funnel Step-enabled voting, Chat, and Document and Link viewing. They will have access to the full Shared Documents Library and may view the full member list.

  Investment Obligation: Supporting Members as Accredited Investors may make an investment in any SPV formed by Desert Angels for the purpose of investing in an opportunity or “deal” presented to Desert Angels. There is no minimum annual investment obligation associated with a Supporting Membership.

• Sustaining Member – $400 / 12-month periodGuest Policy for Sustaining Members: Sustaining members may invite a guest to any in-person meeting they attend, subject to payment of the then-current guest plate charge.Deal Room Rights & Obligations: Sustaining members will not have access to either the active deal flow funnel or the application database, other than access to the Portfolio, where they may view the investments to which they have made and disclosed the value of their investment in one or more of the Desert Angels portfolio investment companies.Investment Obligation: Sustaining members cannot make an investment in deals presented to Desert Angels beyond their existing disclosed investments made in Desert Angels portfolio companies.
• Emerging Member – $1,500 per 12-month period – enrollment year only -Emerging membership is available only to newly enrolled members with no prior angel investment experience.This membership level is defined to allow new members to build familiarity w/angel investing, without any investment requirement. They are eligible for virtual meetings.Attending an in-person meeting requires paying the guest fee.

  Emerging Members will choose to move to Active or Supporting Members by the end of two seasons.

  Guest Policy: Emerging members may invite a guest to attend an in-person meeting, subject to a $100 paid-in-advance guest fee.

  Deal Room Rights & Obligations: Emerging Members shall have full access rights to all deal flow processing functionality, including Funnel Step-enabled voting, Chat, and Document and Link viewing. They will have access to the full Shared Documents Library and may view the full member list.

  Investment Obligation: Emerging members do not have a minimum investment obligation when participating as Emerging members. Emerging members who are Accredited Investors can participate in deals presented through the Desert Angels application funnel.

Desert Angels uses a thorough vetting process when evaluating all funding requests. We use the Dealum deal-flow management application to manage our deal flow process. You can learn more about our process from the perspective of both founders (applicants) and members/investors on the following website pages. 

• Founders
• Investors

Desert Angels is a national organization with members from across the United States, Canada, and even the EU. Our meetings are conducted using both virtual and hybrid methods (all meetings) and in-person (special and annual meetings).