Back to the Future with Super Angels

Lately, the rise of so-called Super Angels – mostly successful entrepreneurs who first became traditional angels (e.g. investing only their own capital) that are migrating to managing pools of capital contributed by themselves and other successful entrepreneurs interested in early stage venture investing – has been getting a lot of attention.  Some people – mostly institutional VCs – are worried about Super Angels encroaching on their turf.  Others – mostly early stage entrepreneurs – are more or less pleased to have a new source of early stage capital willing and able to invest smaller chunks of capital than their larger more traditional institutional VC relatives.  Which is the more convincing take?

In my view, the Super Angels are indeed filling a funding gap for early stage deals that don’t need millions of dollars to get off the ground.  But they are doing it in a way that is far from original, and certainly not a threat to the larger VC community.  Indeed, from what I have seen, Super Angels like Ron Conway are not just filling a funding gap that larger funds can’t efficiently fill, they are doing it with a model – a group of individuals (family money) trusting another individual to manage their early stage venture investing – that sounds a lot like the venture capital business circa 1970, doesn’t it?  What will be interesting to see is if this new breed of “family and friends” early stage venture capital funds stays true to their roots or, like their ancestors in the early days of venture capital, themselves evolve over time into a new generation of bigger and better(?) VC megafunds.

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About Paul A. Jones

Serial venture capital backed entrepreneur, angel investor and venture capital investor; Co-chair of the VentureBest team at Michael Best & Friedrich, LLP.
This entry was posted in Entrepreneurship, Venture Captal and Angel Investing. Bookmark the permalink.

One Response to Back to the Future with Super Angels

  1. Andy Reuland says:

    As I haven’t been around long enough to know what happend 30 years ago, my guess is that the system, while still new compared to many other industries, is going to be cyclical. We may be seeing the start of this right now, and just seeing the conversion of Angels to Super-Angels (They are successful Angel’s turned VC basically), it’s only natural with continued success that some grow to the next uber VC’s. The intersting twist though, is that at the same time, the cost to fund and build a startup is going down dramatically. So will they just become giant VC’s with super gigantic portfolio’s? A great example is Dave McClure’s recent fund 500startups. The name says it all, as he plans to fund more than 500 startups, with a relatively small (compared to uber VC’s) fund, like 50MM. They’ve already funded 50 companies in a few months!

    The other change is the style of the new VC’s, in that they are creating very transparent (at least to before) systems for funding, incubators, and giant groups of experienced and successful mentors/advisors. First Round Capital links all it’s CEO’s to a unique community and communication system for collaboration and problem solving. They even offer the ability for founders to get a special mutual fund style equity share, that all founders share with each other (basically you get a small piece of all the other portfolio companies, and give up a small share of your own, to succeed/fail together).

    These style of VC’s are attracting the best deal flow, as entrepreneurs are currently gaining more power and control, and demanding more.

    Andy

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