Anyone can say they want to be “Boston’s super angels.” But Chris Sheehan and James Geshwiler are trying to back that up with some action.
The managing directors of Lexington, MA-based CommonAngels announced last week they are adding a key new component to their firm’s financing strategy: the ability to invest in a greater number of startups at earlier stages, and in smaller amounts. Those types of investments—intended to be part of total financing rounds of less than $1 million per startup—will complement the firm’s larger and more traditional angel investment rounds (typically around $1.5 million total), which it will continue to do. And they will enable the angel fund to act in some cases more like an individual angel investor. [Editor’s note: CommonAngels is an investor in Xconomy, and Sheehan is a member of Xconomy’s board of directors.]
It’s a potentially significant development for CommonAngels—and for the Boston startup community. These days, it seems like every tech investor in America (well, Silicon Valley especially) is trying to get involved at an earlier stage with promising entrepreneurs, mostly in Internet software. That’s because it’s far cheaper and faster to test out different Web interfaces and business concepts than it was just a few years ago, and so both startups and investors need to have more of a “fail fast” mentality to get to something that works. (The deeper impact of all this remains to be seen, but in the meantime it has generated lots of entrepreneurial buzz, and investors are jockeying for position.)
Instead of going through the CommonAngels committee process, Sheehan and Geshwiler alone will make decisions about their firm’s earlier-stage investments. The two have been busy raising a new fund, but can’t talk about it yet. (The fund will not be exclusively devoted to the new kind of seed deals.) To be clear, they say, CommonAngels has been making what people would call seed-stage investments for 10 years; what’s changed is that the target companies will be at even earlier stages of development (alpha versus beta software, say), and the investors essentially are paying the founders to build out their first product and get it to market, rather than betting on a certain amount of revenue growth, say.
“Early on it’s about backing the team and the idea, and you don’t need months to do testing,” Sheehan says. What’s more, the success of these fast, early-stage investments will probably depend more on the business model, marketing, and distribution than the companies’ technology per se.
So what will these new investments look like? CommonAngels will continue to
