

'Super Angels' Alight - grellas
http://online.wsj.com/article/SB10001424052748703321004575427840232755162.html?mod=WSJ_hps_LEFTWhatsNews

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hiro
As someone working in a "super angel" / "micro VC" firm, I can attest to this
shift. Happy to answer any questions HN has.

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necrecious
VC's have been hindered by a lack of IPO exits. I guess "super angels" are
benefiting from the increased M&A activity.

I guess the question is if IPOs will rebound and "super angels" will then fade
into the background again as startups go for the home run again.

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hiro
I think the fundamental shift that has occurred and carved out this space for
Super Angels is that the cost of starting a company has come way down. It no
longer takes $1mm to get a startup off the ground (2 guys and a pallet of
ramen seems to be standard now). This increased capital efficiency has allowed
startups to raise less money to reach the same inflection points that they
historically have. As a result, a seed round of $500k can take a company to
the point that normally, a $2mm Series A would have required.

Not needing millions of dollars in capital means that startups don't have to
knock on the doors of VC firms with large funds. Instead, they can approach a
Super Angel to lead a $500k round with $300k with $200k left for 4 to 6 value
added investors.

I doubt that even if IPOs rebound, Super Angels will fade away. I think it's
more of a tectonic shift and Series A's are de facto turning into earlier,
smaller seed rounds.

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necrecious
Perhaps the lowering of barriers for a web type startup also makes large IPO
exits harder? Since any hacker can copy it in China, Russia, Brazil and
Israel.

Your perspective is that Super Angels are basically taking the place of VCs
for certain scale of funding, which was previously not very popular (100k-1m
range).

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hiro
I don't think that IPO exits are necessarily harder because barriers of entry
are coming down. I think two things:

1\. It's a hard economy in general, which is suppressing IPOs overall.

2\. The IPOs that the tech community are "used" to were during artificially
high periods, setting the watermark at levels that realistically, not many
companies can touch.

Addressing your point about copycatting, I think that there will always be
competition abroad and it will be successful, but not nearly as successful as
the original idea. There are countless Groupon clones out there, but only 1
has earned a $1.2b valuation. Further, I think that an integral part of the
nebulous equation that makes a successful startup is the founder/team. Getting
the right people behind the right idea is absolutely crucial, and if you don't
have the right people, it will almost always fail.

I think that Super Angels are offering startups a metaphorical stepping stone
where previously, financing was tough. As the niche grows, however, I think
that the stepping stone will start looking more like its own plateau.

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alexdmoore
This is a great article. The shift to super angel is primarily a model that
favors entrepreneurs structurally. I would expect the trend to continue until
the entrepreneur/angel group is hard to differentiate. Talented people will
jump back and forth and fund each other's companies so that it appears your
startup is funded by a ton of other startup CEOs.

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joshu
Aydin and Dave are a real pleasure to work with. I've co-invested with both of
them, as well as their funds.

