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So You Want to Angel Invest...Be Prepared to Lead and Follow
Howard Lindzon
September 29, 2013
This week I spent a day In San Francisco (at the amazing Bloomberg West HQ) listening to some top Venture Capitalists and Angel Investors talk about the industry and the business of investing.
The conference was held by Michael Kim, founder of Cendana Capital who has built a unique firm that deploys capital to angel funds.
Needless to say it was an optimistic crowd, but the right kind of optimistic. Everyone in the room has some winners and a pile of losers. Everyone in the room had been through a few cycles.
My friend Jon Callaghan at True Ventures really brought the optimism into perspective best by explaining how his small Venture Firm, started in 2005, could be lead investors in mobile software (The iPhone did not exist when he started his firm, hardware (Makerbot and 3D Robotics) and even a submarine company (funded with less than $1 million). The cost of starting and building a Company today, in most parts of the world,has plummeted.
Naval – founder of AngelList – took the stage and talked about AngelList Syndicates. If I did not have a fund already, I could use my ‘Klout’ to have other accredited investors follow me into a deal in which I would earn a carry. Our fund has actually invested in Sqwiggle.com through a syndicate led by Naval.
Angel investors with a good track record and a lot of trust built in their networks are loving this idea. Here is Jason Calacanis’s lovefest tribute.
I have run a fund now for 13 years and acted as a lead, a follower, a limited partner, a board member, a complainer, an agitator, a salesman, a business development arm, a shutterer, and cheerleader.
I don’t know much from all this, but I do know having a good eye in a bull market won’t cut it as a ‘Syndicate’ leader. Like picking entrepreneurs themselves, picking ‘Syndicate’ leaders will be HARD. I can’t see myself ever blindly following a ‘Syndicate’ lead, even Jason or Dave Morin. Maybe I am too much a control freak, or maybe like Fred Wilson says:
…
It also means that they will have to learn to lead and lead well. They will have to step up before anyone else does. They will have to negotiate price and terms. They will have to sit on boards. They will have to help get the next round done. Essentially they will have to work. That’s why they are getting carry from the syndicate, after all.
And over time we will get to see who is actually good at this and who is not. And I can tell you this. Not everyone is good at this. In fact, very few are. It’s hard to be a great lead investor and a completely different thing than being a well sought after angel investor who can get into someone else’s deals. Some will turn out to be great at this. Many won’t. And only time will tell who is and who isn’t.
Angel Investing can be extremely thrilling and rewarding, but it is not very neat and tidy. It will take time along with a lot of trial and error to get ‘Syndicates’ packaged just right. Naval is the right guy to have pushed the envellope here. It is ok to watch the market evolve for 6-12 months like you would an IPO. Let is season and mature. Chasing in any market is how you make mistakes.
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