Posts Tagged: Angel investor
Relaunch
The products of start-ups sometimes evolve so quickly that the communication of those changes falls behind – websites suddenly appear outdated and stale compared to the real story. This is how I felt when I looked at the w media ventures site a few weeks ago and decided that it was about time for a relaunch. w media had changed in quite a few ways over the past couple of years and the website was still telling a different story:
- While I was exclusively focused on consumer internet companies when I started in 2007, this focus has expanded to SaaS (GoInstant) and mobile (Flurry, Kima Labs, Rewardloop) start-ups since.
- A similar expansion happend in the geographical focus. While I originally only invested in the Pacific Northwest and Western Canada, 5 of my last 6 investments were either based in Eastern Canada, New York or the Silicon Valley.
- What has stayed the same is the focus on investing in passionate entrepreneurs with deep domain knowledge, great product and design instincts and a desire to change the world.
The Art of the Investor Pitch
I gave a talk yesterday at Bootup about the “Art of the Investor Pitch” – Maura Rodgers did a great job summarizing it and here is the full slide deck. Being good at pitching investors is one of the key success factors for entrepreneurs so have a look at the presentation to see if there are any tips / techniques in there that you are not yet using.
Related articles
- Pitching Without a Pitch Deck (readwriteweb.com)
- How To Pitch (servantofchaos.com)
It has never been a better time to be an angel investor
Paul Geyer – one of the most successful and respected Vancouver-based angels – won the AngelForum “BC Angel Investor of the Year” award yesterday and sent a very simple message in his acceptance speech: “This is a fantastic time to be an angel investor”. Paul (who focuses most of his investments in the medical device area) cited the currently low valuations at the tail end of the recession at the major reason. While low valuations are not really the case anymore in Consumer Internet (some might even see early signs of a bubble again), there are more fundamental changes going on in this sector that makes it a great time to be an angel investor:
- As the cost of building software has come down dramatically over the past decade start-ups require significantly less capital to start and build a business. This development is most beneficial for angels and other early-stage investors: it means a quicker path to break-even / and or an exit, less dilution for the early investors of a company, and less risk as more investments can be done with a given budget. All in all, it means better returns for angel investors.
- In the same way that the founder’s ability to raise capital has lost in importance given the lower capital needs, we have seen a wave of (mostly technical) first time entrepreneurs start companies. Most of these entrepreneurs are hungry for advice from mentors helping them to navigate the difficult waters of starting a company. Angel investors that have seen, done that can create enormous value in such a situation – given their operating experience they usually understand the needs of start-ups very well.
- Last but not least, access to deal flow and the ability to co-invest with other angels has improved dramatically over the past years. This first happened locally through events like the AngelForum and has now moved to a national level with AngelList as the prime example for efficiently matching entrepreneurs and angels.
Just last week, Dorsey & Whitney – a Silicon Valley law firm that specializes in advising start-ups – published a new survey showing that start-ups are increasingly turning to angels, not just for their initial rounds of funding but for subsequent rounds as well. So I fully agree with Paul: it has never been a better time to be an angel investor – let’s go!
Related articles
- As the Startup Funding Model Evolves, Angels are Winning (gigaom.com)
- How to become a (successful) angel investor (techvibes.com)
- Threat to VC is from Regular Angels, Not Super Angels, CEO Survey Says (xconomy.com)
- Angel Forum Investor Choice Award Winners announced (techvibes.com)
After Angelgate, a good moment to go back to the basics
By now, everybody should have heard about Angelgate, from Arrington’s initial walk into the secret meeting of Silicon Valley super-angels to Dave McClure’s blog post as a response to Ron Conway’s email distancing himself from whatever was going on. A lot of drama during these past 3 days, too much drama in my opinion. And drama that had been building up over the past months with the ongoing discussion around super-angels versus VC’s. So after this crescendo, it might be a good time to take a step back and go back to the basics. And if you strip off all of the noise, a few simple truths emerge:
- Entrepreneurs are king: they create the value, they are the customers of investors. And thanks to programs like YCombinator and generally lower capital requirements for start-ups, entrepreneurs are in a better position than ever before when it comes to negotiating deal terms. No investor – if super-angel or VC – will be successful in the long run if they do not respect entrepreneurs and treat them fairly.
- Investors want to make a buck: as much as I wished that investors would only be in this game to be part of shaping innovation and helping entrepreneurs (as Ron Conway seems to be), it must be clear that they need to create significant returns and therefore need to protect their interests as well. A large part of angel investing is driven by passion for entrepreneurs and start-ups and not primarily by the need for financial return but this is unfortunately not a scalable system to bring more money into the ecosystem. We need investors that are driven as much by passion for entrepreneurs as by making a buck.
- Angels and VC need each other: they are part of the same ecosystem and provide money and mentorship at different stages of a company life cycle – sometimes they compete for deals, most often not. So the ongoing super-angels versus VC discussion seems artificial.
- Investors need to add value: it does not matter if you are a super-angel, a micro-VC or VC – if you don’t add value on a daily basis, you will neither have many successful start-ups in your portfolio nor get great deal flow in the future. So start collecting karma points!
The ecosystem is shifting – less capital is required, funds get smaller, new entrants have emerged, entrepreneurs have gotten more powerful – but these 4 truths were valid before this shift happened and are even more valid today. So let’s remember them, stop the drama and go back and build companies!
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- Angelgate is missing the point. What about the entrepreneurs? (news.ycombinator.com)
- Finger-Pointing, Emails, Deleted Tweets, Rage. AngelGate Is Far From Over (techcrunch.com)
- AngelGate cracks wide open as secret meeting attendees bicker (venturebeat.com)
How to become a (successful) angel investor
Angel investors are crucial for every start-up ecosystem and Canada certainly needs more of them (especially of the super-angel kind!). But angel investing is not only good for the start-ups that benefit from early and risk-taking investors, it can also generate great returns for the investors. At least if they follow a few key rules. Mark Suster from GRP Partners published an excellent series of posts on angel investing in the past couple of weeks and I could not agree more with the 5 skills successful angel investors need to have: deal flow, domain knowledge, relationships with VC’s, deep pockets and access to buyers. From my own personal experience there are a few additional points to consider before launching yourself into angel investing:
- Budget for angel investments: determine how much money you want to allocate to angel investments over what period of time. Often people start investing without looking at the big picture and then end up with only 3 large investments before running out of money. In order to have superior returns and spread risk across a portfolio, you should invest in at least 10 deals. So if you want to allocate $1 million to angel investments, don’t invest more than $100K per deal, preferably even less to leave room for follow-on investments.
- Pace: once you are in the market, you will most likely be flooded with investments opportunities and in the beginning an apparent abundance of opportunity will meet a lack of patience on the investor side: you want to build up a portfolio and get your feet wet and all those opportunities look great. But take it easy, especially in the beginning. You will quickly learn how to differentiate the good from the bad deals but it will take time to build up this experience by looking at a lot of deals. So my recommendation is to rather watch and see in the first couple of years instead of getting into the action too quickly – you will most likely burn quite some money with the latter strategy!
- Entrepreneur vs investor view: a lot of entrepreneurs turned investors look at an investment opportunity with their entrepreneurial eyes and imagine what they could do with the business if they ran it. But this is unfortunately not the right way to think about this opportunity as it is much more important to evaluate if the entrepreneur who is pitching the idea is able to execute against it or not. In the end, he is running the company (and not you) and in most cases it is not the idea that defines the success of a start-up but the execution.
So keep all of these points in mind when you start doing angel investments and I am sure you will not only enjoy helping start-ups but also enjoy some healthy returns.
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- Get your nomination in for 2010 BC Angel Investor of the Year (techvibes.com)
- The Future of Angel investing (techvibes.com)
