Wednesday, September 8, 2010

Angel Investing: Some observations and resources

Having helped run the Angel Forum for a few years (link: AF's Nov 4th workshop on "Exit Strategies for Investors & Entrepreneurs"), I got to see and hear some interesting trends in the angel and VC world. Some were controversial at the time, but are becoming more 'normal' today. The general trend is that VC's are attracting too much capital and have moved up-market to look for deals that have higher pre-money valuation AND high growth potential. On the other hand, angels are happier with smaller investments with moderate-to-high growth potential. The troubles began when VC's moved up-market before angel groups and super-angels stepped in to fill the "valley of death." The valley of death is the gap between seed funding (by friends, fools and family, plus some angels) to get to prototype, and the resources required to get to market growth. Angels used to fund up to market entry (not necessarily growth), and VC's would fund market growth, only after early customers had proven the market exists. Filling this gap included a combination of angels forming groups to pool their knowledge, contacts and cash, plus quicker exits by targeting exit by acquisition, not IPO. This is perhaps good news for angels and entrepreneurs. VC's on the other hand are being challenged to demonstrate massive returns on large investments (sorry guys, it's easier for small companies to grow, than big ones). For the rest of us .. well, maybe it's time to find an angel to invest along side with, or wait for an IPO to fuel later stage growth.

For further reading, here are a few sources:

So what does it all mean? Well, funny you should ask.
In Sydney (and elsewhere) more and more people are getting together to launch seed funds. Each has their own particular theme. For example:

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