

VCs And Super Angels: The War For The Entrepreneur - cwan
http://techcrunch.com/2010/08/15/venture-capital-super-angel-war-entrepreneur/

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adamsmith
This is a good overview of today's funding ecosystem.

I'm not sure how concerned I am about having enough founders swinging for the
fences and building big companies.

Certainly founders are getting more of what they want as these small exits
happen more frequently. For first time entrepreneurs a few million in the bank
is a huge fucking deal.

Acquiring companies are getting what they want, too. Often at the lower prices
they want the talent, and I think companies are starting to understand more
and more the value of acquiring founder talent.

I think we'll see where this goes. Everything is still playing out and it's a
very rapid evolution. Examples:

1) Founder cash-outs are happening more and more, likely in direct response to
more frequent early acquisitions.

2) Acquiring companies are still experimenting with how to motivate founders
after a talent acquisition. The state of the art for the median case -- shelf
their code and throw them into a team often with little creative freedom -- is
quite stark.

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edanm
"Certainly founders are getting more of what they want as these small exits
happen more frequently. For first time entrepreneurs a few million in the bank
is a huge fucking deal."

This is the important point, imo.

More small startups -> more small exits which "solve" the money problem for
first-time entrepreneurs -> more entrepreneurial-minded people creating
companies for "fun" without worrying about the money.

I.e., solving the money issue for entrepreneurs by them having one smallish
success is probably good, since they're the kind of people who will go on to
create much larger, more interesting companies.

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Cmccann7
Mike actually makes some interesting counter arguments against the super angel
movmeny. I'm curious to hear what HN thinks about this statement:

"And without those occasional but huge exits, the entire ecosystem can fail.
Venture firms need big returns to raise new funds. Without venture money a lot
of the innovation in Silicon Valley would end.

So in effect, the argument goes, the angel investors are like a quickly
growing cancer. Without radically invasive surgery, Silicon Valley will
eventually flatline."

~~~
_delirium
It's a sort of strange argument, because it seems to be making a good-of-
society kind of argument, but via free-market investing, in a weird hybrid.
The argument is that _one_ kind of free-market investor ought to bow out,
because they're hurting the other kind, who, the argument goes, are ultimately
required for innovation. But what's this asking for? Government regulation?
Angels foregoing profitable deals in order to altruistically keep the VCs in
business?

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bl4k
Something to be wary about as an entrepreneur: the angel investors who are now
raising larger funds will have to invest in more companies, which will result
in them being able to spend less time and less energy with each startup.

The traditional VC model is to have a large fund spread out across a number of
partners who can each invest in around 3-10 companies each per fund. As an
entrepreneur, you have the benefit of more attention from your VC partner, as
well as the resources of the partnership as a whole.

These super angel funds will likely start hiring associates and bringing in
other partners to share the load, and at that point they become no different
to, and competitors to, the traditional VC firms.

Every investor has limited deal bandwidth, regardless of if they are an angel,
a super angel, or a VC.

~~~
revorad
_Every investor has limited deal bandwidth, regardless of if they are an
angel, a super angel, or a VC._

I guess the difference is that the new breed of "super angels" can provide a
lot more technical help compared to traditional VCs.

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donaldc
It seems like the most fundamental difference between VCs and Super Angels is
that VCs have more checks and balances (and overhead) surrounding where they
invest their money. With Super Angels, one person makes the final decision.
For making $50 million bets, checks and balances seem like a good thing. For
making $500,000 bets, perhaps one (very competent) person is the better
approach.

Some of the appeal of the VCs and their checks and balances may be for
reassuring the LPs investing in the VC fund, rather than with its actual
effectiveness in improving investment decisions. As Super Angels invest larger
and larger sums, perhaps we'll see to what extent the VC approach is (or is
not) needed when large sums of money are involved.

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nanospider
"But if big companies aren’t being built because of this small thinking, we’ll
all suffer sooner or later. "

This assumes that SV has only web and software startups. Certain kinds of
companies (biotech, telecom, etc.) do need VC, and these companies are built
to IPO. That won't change.

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OoTheNigerian
Isn't this the free market speaking? Maybe the message is that the VC's need
to change their ways. Treat founders better, have their interest and they will
come back.

If the ways startups are created is changing (nimble, cheaper), why shouldn't
the way their being funded change?

