Angels Are The Real VCs...
By Tom Foremski - April 7, 2008
Sramana Mitra makes a great point about venture capitalists and angel investors. She notes that huge VC funds continue to be raised. This means VCs can't do as much mentoring and guiding to help startups, they have to make large investments to justify their funds (and more importantly, their management fees.)
She cites figures for 2007 that show:
Angels invested $26 billion in 57,120 companies.
VCs invested $29 billion in 3,813 companies.
What I find disconcerting is that some of the best early stage venture firms are basically putting themselves in a situation whereby they cannot do early stage anymore!
From: Sramana Mitra on Strategy.
What happens to Silicon Valley startups if the angel investors can't do the job as well as they used to because of their exposure to numerous financial crises that abound?
This is what seems to be happening, as I found out last week: Out & About: Entrepreneurs Talking About Recession- Are Angel Investors In Trouble?
The loss of the angel investors is potentially a big problem because Silicon Valley VC firms have outsourced much of the seed investing to the angels. The angel investors are a more important generator of the next wave of startups now than ever before, this could hurt Silicon Valley.
April 7, 2008 | Permalink | Comment | Category: VCWatch | Subscribe to SVW
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Comments (4)
I am often amazed how people associate big raises with success. I see lots of companies raising way too much money and then the expectations get out of control. Everyone ends up losing.
Posted: April 7, 2008 7:32 PM
The size of funds is definitely pushing a lot of VCs way out of seed stage.
Angels can and will fill the gap because they're getting more and more organized.
As for the financial crisis, I've heard some angels say that if things take a turn for the worse, then valuations will drop, and investments will be even more interesting. Innovation doesn't slow down when the economy does, even if the larger funds start slowing.
Posted: May 14, 2008 2:27 PM
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Posted: June 4, 2008 1:45 PM
"they have to make large investments to justify their funds "
that may well be the downfall of the industry.
Obviously there's some cross over at the margins with Angel Investments and as the fees can be considerably less, some may be inclined to plump for that alternative instead.
Posted: January 19, 2009 5:40 AM