It is 2am the night before a board meeting. I have put in a big week of travel (2 days in NYC; 2 days in LA and now back in Boulder getting ready for said board meeting) and I am exhausted. As I work on our board deck, which is kinda a mess, I keep thinking about “AngelGate.”
Not exactly the best time to write a post about something that seems to be just heating up.
For those that dont know what “AngelGate” is, basically, a bunch of investors (mostly ”Super Angels”) got together and talked over dinner. There is a lot of conjecture over the content of that conversation, and depending on what you believe, either there are a bunch of Super Evil Angels in Silicon Valley, or this is just a big explosion over nothing.
If you were to ask me, I would say its a bit of both.
The Valley has long been an echo chamber that relies on its own ability to drink its own kool-aide and believe in its own self-worth. I know, I grew up there.
The genius of that environment is that risk is part of the culture, and if you are not a risk-taker, then you are ejected from its bosom, and left to fend for yourself outside of the community. But, if you are willing to take risk — real risk, not the I will dip my toe in the risk waters risk — you are welcomed with open arms, even when you fail.
That basic belief is what makes the Silicon Valley unique and different.
Recently, there has been this “rise” of the “super angel.” Angels have long been thought of as emotional investors, who get enamored of an entrepreneur, and then put cash into the venture. These amounts tend to come in around $25,000, but they could be much larger (or smaller).
The super angel phenomenon is interesting in that it requires the professionalization of the angel. No longer playing only with their own money, the angel must approach investment differently. Its no longer about personal gain (completely) but rather about ROI and IRR. The basic emotion (I love this entrepreneur, so I will invest in him) shifts to having to balance between emotion and responsibility to investors.
In addition, lately there has been this growing celebrity surrounding the super angels. Chris Sacca and Dave McClure (two friends, mentors and investors in Graphic.ly) are both well known as investors and personalities. Chris road his bike across the US, was involved with Obama, tirelessly raises money for Livestrong and Charity:Water. Dave spends the lion share of his time in the air flying around the world to meet, work with, and sometimes, invest in entrepreneurs. He hosts events like Startup2Startup, and every once in awhile is caught on film dancing.
Both of them are brilliant in their investment decisions (if I say so myself), and its a mix of gut and analysis. Very stereotypical of super angels. Some big wins (Chris with Twitter; Dave with Mint) and some bad breaks.
When raising money for Graphic.ly, many investors, some of which I consider to be friends, passed. Rob Hayes of First Round Capital, in passing, spent time with me to help me better understand what parts of Graphic.ly were not only interesting, but potentially very valuable. Tony Conrad of True Ventures, in passing, gave me great advice, much of which I implemented. Bijan Sabet of Spark Capital continues to spend time with me listening to my hair brain schemes and helping to refine my thinking. Would I have liked to have Bijan, Rob or Tony involved with Graphic.ly? Sure. But, I also know that they will be available now and again to bounce an idea or two off of, and I will truly listen to what they say.
Here is the part that was lost in all this AngelGate talk:
Most entrepreneurs will seek investment only from investors that TRULY WANT TO BE SUPPORTIVE AND HELP.
Money isnt always green. And, if you are smart as an entrepreneur, you are looking for investors that can provide more than a check. Whether its connections, or ideas or admonishment, a true investor provides so much more.
When I raised the first money, I sat down with Brad Feld, another person I consider to be a friend and mentor. I told Brad that I really wanted him on my board. It would be great, I said. He could watch our growth and progress up close.
“Micah,” Brad said leaning back in his chair “there is no value to having me on your board. You get everything from me for free.”
Investors that truly put entrepreneurs first are the ones that realize that success comes from giving, not taking. Much like so many companies today talk about putting their communities first, investors are learning that their money isnt the important part of the equation.
Now, I know that most people are concerned about the idea of angels getting together and deciding to work to increase their returns and decrease the entrepreneurs potential upside. Price fixing, collusion, and lots of other evil sounding words have been thrown around. Did it happen? I have no idea.
What I do know is that the best investors know that the moment you put the potential of your return ahead of the potential of your entrepreneurs, you lose.