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'Super Angels' Alight

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24 pointsgrellas11 comments

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

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.

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.

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).

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.

How would you characterize the traction or stage of the companies that receive funding?

Depends, but most of the companies that receive funding at the super angel level have a product, core team (with plans to hire), and user metrics.

Beyond that, it really varies. I've seen companies get funding without any kind of product and based on the entrepreneur alone.

Which one?

Would I be breaking HN etiquette by pubbing it in this thread? Would be easy to find out by looking at my submissions (most from my website) and following my linkedin from there.

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.

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

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