After the Echelon panel, I started thinking about Super Angels.
Super angels as a category is an important category to be the best of the angel investors especially for very early stage companies. The label being very silicon valley centric right now is not necessary the right label. In my world a super angel is someone who is regularly making investments in the same domain so if they invest in internet companies they regularly make their investments over time. I like to ask the question when somebody says they’re an angel investor I ask them how many investments they’ve made in the last 12 months. And a surprising number of people say zero. I don’t consider that person to be an active angel investor. There is a very big difference between someone who has made zero investments in the last 12 months, someone who has made 1 investment in the last 12 months and somebody who has made 5 and somebody who has made more than 5. I take those to be the break points – 0, 1 and 5. Super angels are people who, in my mind, have made more than 5 investments in the last 12 months.
Most angels claim that venture capitalists are neither venture nor capitalists. They try to take very safe and rather slow decisions, which are not very good nor entirely rational. And they don't have as much money as they claim.
Of course, venture capitalists view angels as rivals, getting to invest in companies before the venture capitalist does. Yet angels, often lacking the resources to put more money into an investment, fail to capture those very high returns. Hence the heavy dilution they face becomes a source of real tension.
Business angels are wealthy individuals who use their own cash – and often their entrepreneurial and business skills – to back early stage companies. They are to be distinguished, in terms of their net worth and probably business acumen, from the alternative source of very early stage funding, namely the three Fs – friends, family and fools. The monicker derives from the rich financiers of Broadway theatre productions and is intensely misleading. Whereas the Broadway financiers were genuinely engaged in acts of philanthropy, business angels are, or should be, hard-nosed businessmen involved in a commercial relationship, and not always necessarily behaving very angelically. The wider catch-all term 'private investors' is probably more appropriate, but the angel term remains common parlance (and so will be used here).
Private investors tend to invest in the industries in which they have:made money, and which they feel they know and understand.
Angels and venture capitalists inhabit the, same ecosystem. All too often, this crucial fact gets lost. Times are rough and animosities flare as angels see their stakes crushed in heavily dilutive later financing rounds. Yet this. is precisely when it is all the more imperative that the two parties work together symbiotically. When the bulk of venture capitalists are moving to larger, later • stage investments, credible angels are needed more than ever to step in at the outset. Otherwise venture firms will, in time, be very stuck for deal flow. A logical response might be for venture capitalists to cultivate dedicated networks of the more sophisticated angels. In a funding bear market, some angels will say they intend to finance a company to profitability without planning to involve venture financiers at all.
