Monday, November 01, 2010

Dave McClure: Super Angel: Foulmouth

Master Of 500 Hats: July 2010: MoneyBall for Startups: Invest BEFORE Product/Market Fit, Double-Down AFTER.
Super Angels are a recent enough phenomenon that even Paul Graham only very recently wrote about it. There used to be angels and venture capitalists. Super angels have wedged themselves between the two, supposedly wanting to threaten both. Super angels are not your rich uncles, they are not family and friends, they have millions of dollars that they themselves raised, but they are not VCs. They pay way more attention to you than VCs can, they are agile, they have way more money than the traditional angels, and in many cases they are out to make quick money. They are not looking for the next Google, they are looking for the next company Google will buy.
Master Of 500 Hats: July 2010: MoneyBall for Startups: Invest BEFORE Product/Market Fit, Double-Down AFTER.: VC funds are getting smaller (good), & angel investors are growing (also good), but both need to get smarter & innovate. Startup costs have come down dramatically in the last 5-10 years, and online distribution via Search, Social, Mobile platforms (aka Google, Facebook, Apple) have become mainstream consumer marketing channels. Meanwhile acquisitions are up, but deal sizes are down as mature companies buy startup companies ever earlier in their development cycle.
They like to come in early. They hover around Y Combinator and Y Combinator clones like vultures, always ready to pounce and fly away with the catch. These people sometimes act like they might be on drugs. They exhibit frenzied motion.

They can be disrespectful, especially of old school VCs. If that is their complete act, I think they are in for some rude awakenings. What if some of their catches are meant to go big? In such scenarios they are better off working with those old school VCs who do raise in the hundreds of millions. When the startup to which you gave its first million is now a year later ready to take in 20 million dollars you don't have, who you gonna call?

You should not need family and friends. You should be able to go straight from idea and team and basic product to the super angel. And you should not need big exits, very few need IPOs. Super angels can be great vehicles to bring about super, quick exits. But that still leaves a lot of room for so-called old school VCs. Maybe those VCs, instead of fishing for the angel funded startups will now stay on a lookout for super angel funded startups that are promising, that are not quick exit materials.
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