Fascinating article in Wired about the resurgence of angel investing in the US, as well as a new software platform for angel investors that seems to be a category killer for now. Alok, would you know more about this?
Okay, so what? Well, the classic V.C.’s simply have too much money under management, and too expensive a talent pool, to waste time looking at investing anything less than $10 million in a project. Meantime, no entrepreneur wants to give up equity by taking in more money than he absolutely needs. So, when it only costs a few million to get a serious new company off the ground, how can the V.C.’s really play? They have to find places to make gigantic gambles, usually overpaying because the other big V.C.’s are also trying to invest in the few really big-dollar opportunities out there. It has become a system doomed to failure.
The flip side of the story is the rise of angel investor groups. These investment consortiums have always been ideally positioned to provide $500,000 to $5 million equity injections; but until recently, that wasn’t enough to get a serious effort off the ground. More fundamentally, however, they have historically not been terribly investor-friendly, largely because the individual members have other occupations.
The individual members didn’t work in the same place or even at the same times, so angels were terribly inefficient at evaluating transactions, sharing information, and negotiating and documenting deals.
Those days are over, thanks to software developed by David Rose, founder of the New York Angels (yes, I belong). Angelsoft is a wonderful collaboration platform that manages deal flow, helps match talent and expertise to projects, provides easy-to-use data rooms for potential investors, and generally drives the investment process. It combines project management and social networking in a way that, for the first time, makes the angel process efficient for both the company seeking capital and the potential investors.
The big news now is that, in a period of just a couple of years, over 400 angel groups around the globe have standardized on the platform. That means, of course, that they will also be able to share deals between themselves, vastly expanding the capital and expertise available for any given project.
- Mary Meeker’s 2014 Internet Trends report - May 28, 2014
- Andreessen-Horowitz raises $1.5B for its new fund - February 1, 2012
- WestBridge launches India “evergreen” fund - November 15, 2011
You might want to check:
http://www.gobignetwork.com/ as well. While this doesn’t fly for investor groups quite as well, it’s good for one-on-ones. As many propel have probably seen, angel investment is usually never about groups, but one-on-ones.
I must say I’m not a fan of group investing unless it’s big ticket. For small sums – sub 1 crore in today’s parlance – it shouldn’t have to be decided by a group, which tends to only delay stuff. A committee has a productivity of 1/(number of people in it) compared to an individual.
I think angelsoft addresses certain investor concerns, like those that get too many enquiries. In an age where a company can be kickstarted with less than 20 lakhs – indeed less than 10 – it might make sense to raise small sums with say 4-5 investors that truly know your space. If that’s true, the need of the hour is to link startups with individuals for small ticket investments.
But that would mean both startups looking for many people x small ticket money, which is not a very easy transition to make.
Prady – good thought – it might be even possible to talk to angelsoft to see if they want to partner – they seem to have a lot of base stuff done, and it would be great just to build on top of it,
Alok…Good to hear that you are thinking such kind of a platform. Here is my experience with Angelsoft.I just wanted to post a message in angelsoft, the website told me “Angelsoft charges a non-refundable $250 application fee for posting to the Investor Community.” India is, of course, a different market. What about the global market with less fees to build/run the non-profit website? The same website that can cater India with minor modifications can cater the whole world.
Does somebody (angel,investment analsyt,mentor) has the patience to build a business model around it.Which aliens the missing link in business models,aliens various individuals .Act as convergent to startups in similar spaces to match their resources.
Vikas
well, some of the numbers mentioned above are out of whack – VCs routinely do $3-5M investments. Angels more typically do a million or less. However, it is correct that in US, total VC money and total angel money are about equal buckets (angels investing in far more companies, of course) – $20bn each if I am not mistaken.
I have heard good things about angelsoft – in fact, met the founder there, and we have been evaluating the same for Indian angel network as well. Dont have first hand experience on it though. From what I understand, it helps angel investors and groups manage investments and the investment process. I personally have been thinking of a platform that allows angel investors manage a large set of consideration companies – before a serious investment dialogue happens… of course, it may just land up being a not-for-profit like venturewoods 🙂