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I believe the rise in angelinvesting is here to stay and the professionalization of this class (aka “super angels&# or “micro VC&# ) is a good thing for the VC industry and for entrepreneurs. But I fear that for most angel investors who invest over the long haul angelinvesting will not be a profitable endeavor.
As I’ve posted before, angelinvesting is risky. A 2007 study found that angelinvestments in which at least 20 hours of due diligence was done were five times more likely to have a positive return than investments made with less due diligence time. So what is the right amount of due diligence for you?
Versatile VC runs a no-cost community for founders in transition, “ Founders Next Move “ We have collected a wide range of resources for founders who may be considering launching a new company ; angelinvesting/becoming a VC ; buying a company ; joining boards ; consulting ; serving as an interim executive , or just getting a job.
Angelinvestment from a former Erlang Systems sales manager, Jane Walerud, followed and she put Klarna’s founders in contact with a team of developers who helped build the first version of the platform. Siemiatkowski left undeterred. But it wasn’t really that technology driven,” he concedes.
Angelinvesting in tech startups is a gut wrenching and risky business. Most of them lose, but sometimes you invest in a “unicorn” and make 100 times your money or even more. They were part of the Ycombinator Cambridge class of 2007, after being rejected by YC in 2005 and 2006. None of the local VC firms invested.
Angelinvestment from a former Erlang Systems sales manager, Jane Walerud, followed and she put Klarna’s founders in contact with a team of developers who helped build the first version of the platform. Siemiatkowski left undeterred. But it wasn’t really that technology driven,” he concedes.
It needs a couple of successful exits, which in turn drives angelinvesting as entrepreneurs growing increasingly wealthy look to help new founders building companies reach their own goals. It requires accelerators and incubators and coworking spaces to help nurture early ideas, and it needs VC firms investing across stages.
After assisting in founding four angel groups - the Frontier Angel Fund (2006), Vegas Valley Angels (2003), Tech Coast Angels (San Diego - 2000), and Aztec Venture Network (1999) – it was clear to Bill that angels needed comprehensive education, no matter where they were in their investing journey.
For this round of investment, the angels collectively purchase 20-40% of the equity of the company and are seeking a return on investment of 20-30X in a period of five to eight years. Active angelsinvest in a diversified portfolio of 10 or more companies, usually spreading their investments over a few years.
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