Before I get started…forgive me for my optimistic viewpoints below as this is my view as I started my ride into the hills of Tuscany this morning:
Ok onwards…
Tom Tunguz has a good post titled ‘Where Have All The Angels Gone‘. The gist:
Startup investing is no longer a cottage industry. It’s formalized, a standalone asset class deploying $100B a year. And the earliest stages are no exception.
As one of my partners told me recently, venture investing in the valley started with six men who would lunch on Thursdays and syndicate investing because none could write a big enough check to cover a round on their own. We’re a long way from a white linen tablecloth lunch at a San Francisco oyster bar.
And the implications for startups? It means that angels, while still an important part of the ecosystem, represent a small and shrinking share of investors who will lead your first round. You’re 20x more likely to raise your seed round from an institutional seed than an angel syndicate.
I am living this data out with my partners Tom and Gary as ‘institutional angel/seed investors’ ourselves at Social Leverage.
Good founders with good ideas, need great seed stage investing leads. As Fred Wilson says, a ‘diverse syndicate‘ can follow. In that spirit, all three of us have been independent angels to companies outside the fund scope that have strong teams with good lead seed investors, and we have also backed seed/angel funds of first time managers.
We started out as individual seed investors and our first fund of $6 million was too small to have us lead rounds. We never liked the ‘social proof’ era and party rounds that started in 2010 and mostly died in 2014. They are not good for the founder or investors. Now we lead rounds out of our third fund and look to help founders build ‘diverse syndicates’ as Fred describes.
We are thrilled about the timing as this explosion of activity in entrepreneurship and angel investing begins. Uber, Lyft, Slack, Pinterest, Airbnb, WeWork, Stripe, Robinhood are coming for public markets (conservatively $300 billion in next two years).
Last month at the Upfront summit I was talking to Erin Griffith (a reporter for the New York Times) on this subject.
She agreed it was a big trend and thought it could be a story worth working on. A few days back she dropped the story for The Times titled ‘‘We Know Them. We Trust Them.’ Uber and Airbnb Alumni Fuel Tech’s Next Wave‘. Erin quoted me for the story…
Decades later, early employees of PayPal, known as the PayPal Mafia, are more famous for their successes after leaving the company — many of which they collaborated on with one another — than for their initial breakthrough in digital payments. The group includes Elon Musk and Peter Thiel, as well as the creators of YouTube, Yelp and LinkedIn.
Silicon Valley is now anticipating new mafias connected to Uber, Airbnb and their brethren after the companies go public.
“It’s going to trigger a massive explosion in entrepreneurship,” said Howard Lindzon, an entrepreneur in Phoenix who invests in five to 10 venture capital funds a year. He said he particularly wanted to put money into funds with connections to the Uber and Airbnb networks.
The talent AND money coming out of these companies to solve both unique problems and opportunities created by this wave and hopefully bigger problems is staggering. This next wave of wealth is not going to sit back, buy Porsches, quietly vest and trade stocks or dollar cost average into ETF’s.
They will invest in more startups and take big risk. It will be glorious and it will be messy.
I tell my friends that angel investing is the new stock market.
It is definitely not for everyone, but it should be open to everyone.
It’s easy to be bearish. It’s even easy to sound smart being bearish.
Loonie politicians, cheating banks, mean Facebook, peak California, horrible Verizon, expensive healthcare, student debt etc…
These are distractions to everyone but great founders and great investors.
It’s hard to be nice, ignore, the headlines, hit the streets, make your calls, build your network, hustle, hop on planes, and say no a lot, but if you do, you and your kids will find endless opportunities.