ACA to be the over-arching, trusted authority on accredited Angel Investing

In a major policy shift, the Angel Capital Association is about to allow individuals to join as members, hoping thereby to broaden its reach and influence beyond just organized angel groups.  “The ACA risks irrelevance if our focus is too narrow,” ACA President David Verrill told interested members on a Webinar today. Other potential new members include family offices, accelerators, and seed funds.

The ACA was founded in 2004 as a group comprised of a coalition of 46 Angel Groups.  Notably, ten of these founding groups were from here in the Northeast (they are listed below). Today, membership includes 185 Angel Groups located in the US and Canada as well as 20 affiliates.

Defining its mission as “fueling the success of Angel Groups and Private Investors in high growth, early stage ventures,”  The ACA describes its member benefits as:

• Professional development, including networking and training activities,
• Portfolio enhancement, including information sharing, discount programs and directors insurance, and
• Providing a voice to the Angel Community, advocating public policies that support and promote angel investing.

The reason for the membership changes is clearly illustrated in Angel Ecosystem (below).  In the US today, there are 8 million individuals who meet the legal definition allowing angel investing. There are just over 300,000 active angels. Eight thousand of these are currently members of ACA member groups. Most angels have no organization representing their interests. Thus, in Washington and in our state capitals, it is always the squeaky VC that gets the grease. Economically, this is very poor public policy since VCs fund relatively few start-up companies while new companies provide the greatest number of jobs.

The public policy goals of the ACA are summarized below.

The sign up process for new individual angels is not yet ready, but according to Marianne Hudson of the ACA, “Angels in ACA member groups can get access to our member only site and receive on-going ACA member information by signing up at this location.”

Founding  New  Englanders that are still current ACA members include: Angel Investor Forum, Cherrystone Angel Group, CommonAngels, eCoast Angels, Hub Angels Investment Group, Investors’ Circle,Launchpad Venture Group, Maine Angels, River Valley Investors, and Walnut Venture Associates

 

Hey Nerd, want to send an authentic romantic MIT epostcard to your sweetie for Valentine’s Day?

The MIT Alumni Association held a valentine writing contest last year.  “Submissions were judged on creativity, originality, humor, and a connection to MIT. After a week’s worth of entries, ranging from original poetry to mathematical equations, the Academy of Valentine’s Day Arts & Sciences is happy to announce two winners: John Springsteen in the “scientific” category and Brandy in the “romantic” category. You can find the cards here, ready to send.”

Life and love often being unjust, we were runner up. What was our entry?

Will you be my Valentine
At 2.14159?
- George

To understand our card, you must first understand that one of the high holy holidays at MIT is Pi day, 3.14159, celebrated each year on March 14 at 1:59 PM.  By our calculation, Valentine’s Day should be celebrated on Feb. 14 at 1:59 PM, or 2.14159. Kabish?  Capiche?

Fortunately, Punchbowl, an eCoast Angels backed company, will allow you to personalize and send free eCards, including valentine cards.  You can find our eCard here, conveying a sentiment specially aimed toward you. Use this card as a template to design one of your own.

If you choose to enclose a gift with your eCard, remember  the advice of Ogden Nash: “Candy is dandy but liquor is quicker.” Or view Gene Wilder’s version in “Willy Wonka & the Chocolate Factory.”

Late Breaking News.  Over at Punchbowl, CEO Matt Douglas asked his content team to whip up a design based on our slogan.  "You ask, we deliver," Matt says. "Share this card with your friends today! Fully editable, and ready for sending."

 

Twitter Acquires Crashlytics while, at 364% IRR, Angels and VCs Sing their Glorious Strain

While the actual numbers remain a widely held secret, Gregory T. Huang of Xconomy states that Twitter just paid  over $100 million in cash and stock  for Cambridge based Crashlytics, which provides bug fixing tools for mobile developers. This appears to be Twitters largest purchase to date.

“Crashlytics  raised about $6 million from Flybridge Capital Partners, Baseline Ventures, and a lineup of angel investors who are household names in Boston tech,”  says Huang.   “I’m hearing that those angels got a higher-than-10x return on their investment, plus some of their original money back (because the company apparently didn’t spend it).” We are unsure of the actual closing dates, but seed round to exit appears to be about 16 months.

Among seed investors was the Common Angels. "We were very fortunate to back two world-class founders, Jeff Seibert and Wayne Chang,” says Managing Director Chris Sheehan.  “Jeff, Wayne and the Crashlytics team built a very successful crash reporting solution used in many of the top iOS apps today. And while the purchase price was not disclosed, this was a great outcome for the team and investors. We wish the team all the very best on the next part of their amazing journey."

Other Angels participating in Crashlytics’ funding were Joe Caruso, managing partner at Bantam Group, member of the eCoast and Common Angels; Jennifer Lum, Cofounder @Adelphic Mobile, Mentor @TechStars; Ty Danco, founder of eSecLending, member of North Country Angels and Anges Quebec; David Chang, COO of @PayPal Media Network;  Lars Albright, co-founder of Quattro, now Apple iAds; and Roy Rodenstein Co-founder & CEO, SocMetrics, Co-founder HackerAngels.

Our recent post on M&A activity said it was a tough way for an angel to make a living.  Not true with an IRR of 364%.

And what do we hear from the Angels? “As an investor, I’m thrilled with the returns from the Crashlytics acquisition,” says Lum.

2277 tech companies were acquired in 2012, but selling them is a tough way for an Angel to make a living.

 The 2012 Tech M&A Report from CB Insights, based on their private database, was released yesterday. CB Insights is the firm that worked with the Angel Capital Assn. to produce their recent Halo report on Angel Investing. This new report covers acquisitions of both Angel and VC backed private companies.

 

Conclusions, some surprising:

Globally, 2012 saw 2277 private technology companies acquired.  For deals with disclosed valuations, acquirers paid $46.8B with 30% of deals accounting for 80% of the value.

In a big surprise, 76% of tech companies acquired in 2012 had not raised institutional investment (VC/PE) prior to acquisition. While there were no bootstrapped or strictly angel-funded billion dollar exits (of which there are few in any case), it is clear that there are a lot of tech companies being formed and sold who sustain themselves on their bootstrapping  profits, angel (friends & family) financing, etc.

While there is much fanfare when the billion dollar exits happen, they represent 2.5% of all private tech company acquisitions in 2012 (translation: they don’t happen often). More than 50% of deals are for less than $50M and more than 80% of the acquisitions are less than $200M.

Google and Facebook were the most active acquirers, each doing 12 private tech company acquisitions in 2012. Five of Facebook’s acquisitions were talent acquisitions. Google and Cisco were most frequent disclosers of private company valuations.

California saw the most private tech companies acquired in 2012, not  all that surprising given that a majority of tech investment (both deals and dollars) goes to the Golden State. However, Cal’s dominance was something to behold as the state had more private tech companies acquired in 2012 than the next five states combined.

Massachusetts was not a top 3 destination for acquirers. Mass remains a top market for tech VC despite losing some of its mojo to NY which has now usurped the #2 spot. On the M&A front, Mass was somewhat surprisingly not in the top 3 as it got edged out narrowly by Texas.

Here in the Northeast, the number of companies acquired in each state were as follows:  MA-87, CT-14, NH-10, ME-5,VT-5, RI-3.   New York had 138, South Dakota had none.

Are these acquisitions really good for the investors?

Where the data was provided, the median raised was $16.6 million, the median acquisition price was $73.5 million.  For discussion let us assume that we could buy the median investment, much like an index fund.

At first glance one might assume that we can sell the company for about 4.4X our investment but this is incorrect. We didn’t purchase the company; we invested, so the founders and others also hold shares. Assuming that after investing our 16.6 million, perhaps in several rounds, we own 70% of the company. We then sell our stake for $51.5 million, or 3.1X our investment, possibly a good return.

An old time venture capitalist, such as Bill Congleton who negotiated the original investment in DEC for AR&D, would have been happy with a 3X return, as long as it took place in three years. (His target, 3X in three years, 5X in five years). Alas, an exit today can easily take seven to ten years with our rate of return diminished accordingly.

We are working with medians, so half of the time we can do better.  Alternatively, we can join the Lake Wobegon Angels, where all the women are strong, all the men are good looking, and all our investment returns are above the median.

An Angel’s Diary.  Three decades ago, Bill Congleton was looking at a company I had founded.  Boldly, I asked his partner, John Shane, what they might be thinking about pricing. “Bill can be tough on valuation,” replied Shane.  “After all, he once bought 70% of DEC for $70,000, and he likes his new deals to be better than his old ones.”