A new source of money has arrived on the venture capital scene. So-called “super angels” (or micro-venture capitalists) have upped the ante by pooling resources from multiple investors in a way that enables them to raise considerably more money than angels have in the past.
US $500,000 is enough competition to annoy a VC firm and anyone raising a few million is considered a threat. But some of these super angels are strong enough to completely upset the VC status quo.
Former Google executive Aydin Senkut recently raised US $40 million for his super angel fund, for example, and former PayPal executive Dave McClure is raising US $30 million. Meanwhile investor Mike Maples is in the process of accumulating more than US $73 million for his super angel purse.
Super angels seem to also be super agile, because they find a variety of ways to create lucrative partnerships. Some are funded by teams of individual angel investors. Others are capitalized by a combination of wealthy individuals and institutional investors.
In the case of the super angels, the old saying that “the sum is greater than the whole of its parts” is definitely true, too, because the synergy of super angels seems to generate a snowball effect by attracting other investors. Once a super angel takes flight, in other words, the momentum builds and other angels come aboard – adding greater strength in numbers.
That makes super angels super appealing to entrepreneurs. But it also gives these pioneering investors serious clout. They can forge friendly alliances with VCs, for instance, by bringing them sweet investment partnership opportunities.
But they can just as easily compete with them toe-to-toe for a bigger slice of the pie. So as far as large venture capital firms are concerned, the advent of super angels is a double-edged sword.
Super angels may fill a niche and play a helpful role by supporting pre-seed and seed stage deals that are too risky for large VC funds. By partnering with these super angels, the big VCs can participate in potentially lucrative young deals.
Or the super angels might pose a threat to old-fashioned venture capitalists as upstarts with the vigor to aggressively push them aside.
Regardless of whether large-cap venture capitalists see this new breed of investors as a good thing or an ominous sign that their golden age is fleeting, the fact is that capitalism thrives on healthy competition. Even if super angels do pose a problem for big venture capitalists, they may turn out to be a real godsend for startups and entrepreneurs hungry for financial backing.
Super angels have already been responsible for startups including Facebook, for instance, and as their success builds they will surely start to siphon away some dollars and deals that VCs used to take for granted. The bottom line is that large venture capitalists no longer have exclusive control of the game, and that bodes well for entrepreneurs and startups.
* For series, references are published in the last installment of the series.
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