World’s Largest Gathering of Angel Investors to Converge This Month on Washington, DC

Dramatic changes in angel investing mean both threats and opportunities for the angel investment community and the tens of thousands of entrepreneurs they support, according to the Angel Capital Association (ACA), the world's leading professional association for angel investors. The global angel investing community will debate and assess this new environment at the 2014 ACA Summit, "Angel Impact: Entrepreneurial and Economic Success," March 26-28, 2014, in Washington, D.C.

U.S. angel investors – individuals who support startup companies with passion, experience and funding - in 2012 invested nearly $23 billion in about 67,000 ventures, according to estimates by the Center for Venture Research at the University of New Hampshire. Their impact on the economy is huge, as the kinds of innovative startups angels invest in create all of the net new jobs in the country, according to reports by the Census Bureau and Kauffman Foundation.

"This is the place to be for both experienced and (especially) new angels who want to share great ideas, to learn unique investment practices from each other, and don't want to be left unaware of how the seed stage investment landscape is changing - particularly from a regulatory perspective,” said David Verrill, ACA’s chairman.  "We are hosting this meeting in Washington, D.C. for a reason - the Securities and Exchange Commission is not only assessing the underlying definition of who can be an accredited investor, but is also reviewing significant rules around the JOBS Act involving general solicitation and online crowdfunding platforms. Now more than ever is the time to join with angel colleagues to learn about, to shape, and to nurture this powerful economic engine."

This ACA Summit is the world’s largest annual gathering of accredited angel investors. More than 700 angel investors, including those among the most active, sophisticated and successful in the world, will share expert advice and ideas. The Innovation Showcase, a related event at the Summit, will show angels in action when dozens of promising startups will receive invaluable advice and feedback from angels.

Discussions will include:

·         New and proposed federal rule changes, including a potential change to the definition of an "accredited investor," which could dramatically reduce capital available to startups and eliminate as many as 60 percent of the current accredited investor population, dramatically affecting the economy and job creation.

·         Congressional leaders, including Sen. Chris Murphy (D-Connecticut), will discuss how they support angel investing and its vital role in innovation and the American economy.

·         Insight into tactics angels deploy to identify the best investment opportunities in top industries including life sciences and medical devices, information technology and internet, cleantech and cyber security.

·         2013 angel group deal trends, collected from more than 200 angel groups, will be shared by Rob Wiltbank, VP of research at the Angel Resource Institute (ARI), with the live release of the 2013 Halo Report, by ARI and Silicon Valley Bank, with data powered by CB Insights.

·         Compelling stories, including from Blackboard co-founder Michael Chasen, who will recount how he took his learning management system company from angel backing to IPO.

·         New accredited online platforms are disrupting the angel investing market. Leading platform companies including premier sponsor FundersClub will lead the discussion.

·         Which are the most angel-friendly countries in the world --  and how is angel investing helping spur their economies?

To attend the ACA 2014 Summit, register here. Registration is open to ACA members and accredited individual investors from around the world, as well as accelerator and incubator leaders, university innovation professionals, economic development leaders, and public policy makers.

Note:  Your Editor, having been among the founders of the ACA, could not be more pleased with their activities.

About Angel Capital Association (ACA)

The Angel Capital Association is the leading professional and trade association focused on fueling the success of accredited angel investors and portfolio companies in high-growth, early-stage ventures. ACA is the voice of the angel industry, providing comprehensive services in support of members working in angel groups, through portals and individually. ACA provides professional development, public policy advocacy and significant benefits and resources to its membership of 220 angel groups and more than 12,000 individual accredited investors. www.angelcapitalassociation.org; @ACAAngelCapital.

Do Angel Investors Make Money? Data show 2.5X over four years.

After ten years of research into Angel Investing, Robert Wiltbank presents us with the following conclusions.

• In any ONE investment, an angel investor is more likely than not to lose his or her money (i.e., earn less than a 1X return). However, once an investor has a portfolio of six or more angel investments, his median return exceeds 1X.
•  Production of cash is highly concentrated in winners; 90 percent of all cash returns are produced by 10 percent of the exits. This is essentially the same concentration as in venture capital. 
•  When you aggregate all of the data, angel investors (across the U.S. and UK) produced a gross multiple of 2.5X their investment, in a mean time of about four years. This return is absolutely competitive with formal venture capital returns.

For more details, I urge you to CLICK HERE to check out Wiltbank's recent post in Tech Crunch and, if sufficiently motivated, his Kauffman Foundation Angel Returns Study and NESTA Angel Investing Study. You can also read a more formal academic paper on how entrepreneurial expertise influences returns for angel investors.

Robert Wiltbank, PhD, is a professor at Willamette University who I first met in the early days of the Angel Capital Assn.   He has co-authored two books and many academic articles.

And many thanks to Hambleton Lord of Launchpad, who posted a link to this study on Twitter this morning, @hamlord.

How can we explain the incredible shrinking venture capital industry

How can we explain the incredible shrinking venture capital industry and the disappearance of many venture funds before our very eyes? In an article, “How Venture Capital is Broken,” Felix Salmon of Reuters recommends a new Kauffman Foundation study.

“I read quite a lot of papers about finance and investing, but I can’t remember the last time I came across a 52-page paper which I simply devoured, avidly, reading every word, and even following the footnotes,” says Salmon.  “ But such is the latest publication from the Kauffman Foundation, on the foundation’s own experiences in the world of venture-capital investing. This is required reading for all institutional investors with any kind of exposure to VC, and I sincerely hope that it succeeds, at least at the margin, in forcing those institutional investors to behave a bit more like investors, and a bit less like chumps being bullied into throwing millions of dollars into a series of opaque black boxes delivering decidedly subpar returns.”

As we angel group members know well, The Kauffman Foundation, created to encourage entrepreneurship, has contributed significantly to the development of the angel community and to the formation of the Angel Capital Association. Apparently, its endowment currently stands at $1.83 billion. Of that, $249 million is invested in VC and growth equity funds; the foundation has been investing in VCs for 20 years now. “As a rich, long-term institutional investor devoted to the cause of early-stage companies, the Kauffman Foundation is — or should be — pretty much the perfect LP as far as VC funds are concerned. And indeed, over the years, it has invested in 100 such funds, and therefore now has a spectacular real-world backward-looking dataset of VC returns from an LP perspective,” says Salmon.

“This is the kind of dataset that money, literally, can’t buy: VC funds’ investment agreements have such tight confidentiality clauses that Kauffman and other institutional investors would never be allowed to share this information with anybody else. But by anonymizing their data, and by self-critically coming clean on their own returns from venture capital, Kauffman’s investors have managed to put together a detailed and compelling report with a very simple conclusion: venture capital is not much of an asset class, and insofar as it is an asset class, it’s very, very broken.

“Over the past 20 years, net of fees, Kauffman has been paid out 1.31 times, on average, the amount that it invested in any given fund — well below the standard “venture rate of return” of twice committed capital. The payout is meant to come after no more than 10 years, but the 10-year figure is honored mainly in the breach: Kauffman alone has 23 funds more than 10 years old, and eight funds more than 15 years old. One fund, at age 19, still retains more than 20% of the capital that Kauffman committed way back in 1992.”

If the charts in this document would reproduce properly in this blog format I’d introduce them right here, but instead I’d recommend clicking through.

It appears to me that over the very long term, those few angels I know who maintain rigorous records and share them  have earned returns  far exceeding the numbers in this report. I’ll have to refresh my memory, but I recall that George Schwenk of the Breakfast Club and the late Luis Villalobos of the Tech Coast Angels both generated long term net returns exceeding twenty-nine per cent.

You can find the complete report here.