Lessons for Budding Angel Investors from Y Combinator’s AngelConf: Part 1

8/2/10Follow @wroush

You’ve been a part of the startup world for a while, and you’ve had a successful exit or two. You have some money laying around that you don’t know what to do with. You feel a vague sense of owing something back to the technology community, and you want to keep a hand in the startup world. So you’re thinking about becoming part of that mysterious and elusive breed—the angel investor.

If you weren’t at Y Combinator’s AngelConf last Thursday, you should have been. Like the June Angel Boot Camp event in Cambridge, MA, the afternoon of talks by experienced angels was designed to get aspiring angels thinking more carefully about why, how, and where to invest. Successful “super angels” like Ron Conway and Mike Maples stood up for seven-minute talks right alongside newer, younger investors like Paul Buchheit, Andrea Zurek, and Joshua Schachter.

They all shared their insights on the rewards—and the hazards—of being an angel investor. If there was a common theme, it was that angels need to be ready to lose everything they invest—but that the privilege of working with new entrepreneurs and innovators will probably make it the most enjoyable thing they ever do.

Collected here are edited excerpts from the most interesting talks. There were a lot of great remarks, so I’m breaking up this post into two parts. Today I’m excerpting thoughts from Jeff Clavier, Greg McAdoo, Mitch Kapor, Andrea Zurek, and Paul Graham. Tomorrow: Naval Ravikant, Joshua Schachter, Mike Maples, Paul Buchheit, and Sam Altman.

Jeff Clavier (SoftTech VC) on the definition of “super angel”:

We have become almost a new asset class in the ecosystem. You have traditional angels, you have VCs who have raised funds, and then you have this group of about 12 to 15 people who provide the vast majority of the early-stage financing in Silicon Valley, New York, and the rest of the U.S. I would venture to say that 90 to 95 percent of the companies getting funded involve at least one of these super angels. As we were successful as angels, there has been interest in the investment world to back us to do more deals and to put more money into the companies. That’s how a lot of these super angels made the transition to be micro-VCs. For whatever reason, the press has decided that the term “super angels” is more fun. But in fact, we’re VCs. What that means is that we’re full-time, and we have funds that we have raised. I have a $15 million fund. And we have very defined investment strategies and bite sizes.

Greg McAdoo (Sequoia Capital) on the role of angel investors, and how venture firms want to interact with them:

The Valley is awash with wonderful talent and great ideas, but early stage investing is largely about investing in business plans, products, and technologies. People and ideas are? important, but you need teams and you need technology. Often the angel community fills the gap. In many cases, the check you write is the least important thing you do. It’s important, but … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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