the quality of deal flow, your ability to pick winners, your ability to win the deal once you get excited about it, and the market environment. Let’s forget about picking winners, because it’s all BS, revisionist history—past successes cause others to believe a few people have the magic touch, therefore they win the best deals, therefore they have better exits, and on goes the loop. So when you reduce it, there are only two things: your ability to see a bunch of deals and evaluate them and win the ones you want to invest in; and dollar cost averaging.”
David Frankel, Managing Partner, Founder Collective (40 angel investments): “Some people feel that their ‘edge’ [as an investor or entrepreneur] is a concept–like ‘applying social gaming to dieting.’ Some people view their edge as people. I fall viscerally into that last camp. If you have been an entrepreneur and you have worked at a company and there have been people who impressed you as extraordinary, those are the people to back. Your edge is that you know those people better than others do.”
Jean Hammond, angel investor, Golden Seeds: “A lot of things are missing from the angel community here in Boston. Early-stage investors are hard to find…Consumer deals are almost impossible to get done, because the people who are investing in this town didn’t make their money doing those kinds of deals. I’m incredibly excited to see the ‘micro-VCs’ coming up like Founder Collective. Even small amounts of fund-based money will be huge for filling the capital gap.”
Dharmesh Shah, founder, HubSpot: “I am the worst angel investor you will ever find, because I suck at the mentorship part. I don’t help at all. I have money but I don’t help. So what’s in it for me? Angel investing has been very helpful getting me into the right groups of people, and that has helped me in my third startup [HubSpot]. I learned as much from going into angel investing as I got out of my Sloan MBA.”
Shah continued: “One thing we do wrong is this delusion around due diligence. It doesn’t map to how startups work. There is no business plan. They just don’t know. The business plan will be completely different in three months, if they are doing it right. So either you like the people or you don’t. The idea doesn’t deserve due diligence because there is nothing to ‘due.'”
Chris Sheehan, managing director, CommonAngels: “There’s a confluence of trends that make this environment really exciting. The first trend is the rise of angel groups. The great catalyst was the tech crash of 2000-2001, when individual angels got burned, leading to the idea of sharing deal flow and pooling capital. And in the last three years, what’s really exciting is the cost to test a lot of ideas around the Internet, mobile, and SaaS spaces has come down tremendously, so now with a small amount of capital you can achieve a lot more than you ever could in the past.”
Lee Hower, formerly of Point Judith Capital (now reported to be part of an as-yet-unnamed early-stage venture fund with Rob Go, formerly of Spark Capital, and David Beisel of Venrock): “It’s not just the technology infrastructure cost that has gone down, but when you have a product in these spaces you can scale up to a medium-sized audience just through social networks, Twitter, and mobile app stores, and prove out monetization through the ad networks. You can create value at an early stage. Why am I doing this as opposed to something else? I do think there’s the potential for
