They finance some of the most innovative entrepreneurs on the planet, and foster inventions that make global business fast, cheap, and easy. So why do so many early stage tech investors still do a big chunk of deals in their own backyard?
Dan Rosen, chairman of Seattle’s Alliance of Angels, says it’s all about trust. And though angel investors banding together on deals is nothing new, many regional groups haven’t employed common due diligence standards that could speed things up for entrepreneurs and put the investors at ease.
That’s changing with the push for a national Angel Syndication Network, a new initiative spurred by the Irvine, CA-based Tech Coast Angels. The Alliance of Angels is joining the effort, along with Golden Seeds of New York and Band of Angels of Menlo Park, CA.
As Wade Roush reported last week, the Angel Syndication Network is a response to trends in the early stage investing scene, where the rise of super angels and micro VCs meets consolidation among venture capital firms, putting traditional angel investors in a bit of a bind. When angel-backed companies need more financial runway, they’re often pushed up to the VC level, where the money and equity dilution are bigger.
“As the number of VCs has shrunk and the size of the funds of the remaining ones have increased, it becomes harder for a company that needs a smaller amount of money to get institutional financing for it,” Rosen says. “And as angels now look at carrying companies through their life, not just through their A round, but through the B and C rounds as well, it stretches the resources of most angels and angel groups.”
A syndication of regional angel groups can help in that situation, Tech Coast Angels’ Richard Sudek said, because entrepreneurs won’t need to re-start their due diligence process, and angels will get to keep companies in their ecosystem a little longer.
Rosen says the Angel Syndication Network is a natural step for regional angel groups. They’ve been working together on deals for years, but it’s been much more informal.
One example is Banshee Bungee, an Eagle, ID-based seller of 10- and 20-foot braided-latex cords with handles, which act like giant rubber bands to launch snowboarders and skaters at speeds up to 35 mph. Alliance of Angels was able to point the startup toward Tech Coast Angels, where Mike Panesis became an investor.
“If we can establish that level of trust between groups so that we can trust the due diligence that another group has done then it works well,” Rosen says. “There have been various attempts to do it through the years, and while most of those attempts have been more informal than formal, this is just like another step in a continuing saga.”
Alliance of Angels also is looking for a new managing director, after Greg Huey left to become president and chief operating officer of Seattle-based Glassybaby, which sells high-end glass votives for candles. It’s a bit of an occupational hazard in the angel investing gig—as Huey told GeekWire, “It’s hard not to catch the startup/entrepreneur bug while working with startups on a daily basis.”
“We are looking for somebody with some amount of investment experience and somebody who likes to work with startups, to help coach them and mentor them. We see it as a service to the community as well as a service to our members,” Rosen says. “And hell, it’s a perfect job—for a couple of years, you get to see every startup in town.”
