Angels Are The Real VCs...
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.