Like
us, John Frankel collects research on Angel and VC returns. He is particularly
bullish on small-cap VC funds investing in the angel space, of which we have a
couple of new entries founded by local angels: SideCar
Angels by Rick Lucash and Jeff Stoler, and Beta Fund by Dan Von Kohorn and Norm Meisner.
“I finally have had the time to
collate the research we have found, and am happy to share it. This post is
quite technical, but the bottom line is simple: angel-stage funds outperform,”
says John
Frankel founder and
partner of ff Venture
Capital, writing in TechCrunch. His
conclusions:
Venture capital funds, in aggregate,
managed an anemic 4.41 percent end-to-end pooled return over the last 10 years.
"Despite the risk and illiquidity of the asset class, they haven’t outperformed
public markets."
“Angel groups, on the other hand,
have done exceptionally well,” he says. Every large angel return study has mean
angel IRRs ranging from 18 percent to 38 percent. Detailed exit analysis has
revealed that angels have robust rates of “home run” (5x or more) investments,
while maintaining a decisively lower level of risk.
Frankel argues that “smaller funds,
focused on the angel space, with deep resources for due diligence and an
ability to help their
companies get to the next level, should outperform.” Click here to access Frankel’s
excellent tables, diagram, and
references, as well as to view his full conclusions.
Band of Angels
We first met Ian Sobieski, Cordinator of the Band, roughly a decade ago at planning meetings leading to
the formation of the Angel Capital Assn.
From the web site:
“The Band of Angels is Silicon Valley's
oldest seed funding organization. We are a formal group of more than 130 former
and current high tech executives who are interested in investing their time and
money into new, cutting edge, startup companies.”
“The Band has invested more than
$208M into 240+ companies since 1994. Of these 54 have been acquired and 9 have gone public on the
Nasdaq. The cumulative IRR for all band investments since inception,
including the losses suffered through the bust, is a positive 54%.”
New Funds
“SideCar focuses on filling out
investment rounds that are syndicated by angel groups and microVCs. As
you know, most angel group rounds in the Boston area have more than one group
participate,” says Rick Lucash. “Our goal is not to compete with established
groups, but to increase deal flow and assist angel groups and companies by
bringing additional money to the table.”
According to Norman Meisner, the Beta Fund intends to raise $5 million. The fund will focus primarily on emerging high-tech and bio-tech companies. “We are a small fund for small companies. We invest early, typically at the angel financing stage, prior to typical venture capital financing, and in collaboration with other angel funds and groups. We see this as the time when value grows fastest, capital can have the most impact, and good judgment and execution can make the biggest difference.”
According to Norman Meisner, the Beta Fund intends to raise $5 million. The fund will focus primarily on emerging high-tech and bio-tech companies. “We are a small fund for small companies. We invest early, typically at the angel financing stage, prior to typical venture capital financing, and in collaboration with other angel funds and groups. We see this as the time when value grows fastest, capital can have the most impact, and good judgment and execution can make the biggest difference.”
Who’s Next? Rumors abound that other small funds are on the way.
1 comment:
Great article. Thank you for mentioning Beta Fund; here is a link to the website: http://betafund.co
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