Posts filed under “Venture Capital”
It’s apparently that time again — the Valley has gone on tilt. Consider the following top ten signs.
10. Conferences are selling out
9. Venture capitalists are launching blogs
8. Everyone you know has a startup
7. Harvard MBAs are trekking to “hot” events, like SXSW
6. Harvard MBAs are fundable as CEOs
5. Private valuations are approaching public valuations
4. CNBC is fawning over the Valley
3. Hot upcoming tech IPOs are headlines
2. Hot VC-backed companies showing up in Wall Street Journal lists
And the number one sign the Valley is on tilt again …
1. Journalists are quitting journalism for startups.
Originally published at Infectious Greed
“The funny thing about all these frothy millions and billions piling up? Most of the value was created by people working free.” -David Carr, writing about HuffPo, Twitter, and Facebook > I have been meaning to address this issue for some time; It started with Seeking Alpha, then moved to RGE and Business Insider, before…Read More
Then: In March 2000, the very month that the dot-com bubble burst, Merrill Lynch launched its Internet Strategies Fund. Talk about dismal timing. “People thought that somehow the Internet boom was going to go on forever,” says Russel Kinnel, Morningstar’s director of mutual fund research. The fund lasted only a year before closing its doors….Read More
I remember my first baseball game: Yankees vs Detroit Tigers. I was in first grade, and my dad took me to Yankee stadium from Teaneck, N.J. where we lived. The seats were directly behind home plate, but several levels up. We walked out from the maze of stairs into the brightly lit stadium, the brilliant…Read More
Boulder boasts the most software engineers per capita of any state, with CNBC’s Carl Quintanilla.
Airtime: Tues. Feb. 1 2011 | 6:15 AM ET
Squawk Box: Brewing a Success Story
Insight on the brewing business in Colorado, with Dan Weitz, Boulder Beer Company.
Airtime: Tues. Feb. 1 2011 | 6:28 AM ET
Squawk BOx: Getting the Ball Rolling Again
Insight on getting back into business after the recession, with John Hayes, Ball Corporation president & CEO.
Airtime: Tues. Feb. 1 2011 | 6:45 AM ET
Back on December 17th, I wrote that Facebook’s founder Mark Zuckerberg getting tagged as Time’s Man of the Year meant the top was likely in for Facebook valuation at $58.75 billion dollars (Uh-Oh: Facebook’s Zuckerberg is Time Man of the Year). This meme has slowly propagated, and quite a few other analysts have looked at…Read More
This reminds em of “Downsizing America” post from 2 years ago (February 2009):
Most Trends Don’t Last Forever … Have Facebook and Apple Peaked?
Yahoo Tech Ticker, Jan 03, 2011 07:15am
“How Crazy Is That?”: Startups Are Safer Than Stocks, Howard Lindzon
Yahoo Tech Ticker Jul 14, 2010
April 16, 2010
By John Mauldin
First, Let’s Kill the Angels
Equal Choice, Equal Access, Equal Opportunity
Some Quick Thoughts on Goldman
La Jolla and Dallas
When you draft a 1,300-page “financial reform” bill, various special interests get language tucked into the bill to help their agendas. However, the unintended consequences can be devastating. And the financial reform bill has more than a few such items. Today, we look briefly at a few innocent paragraphs that could simply kill the job-creation engine of the US. I know that a few Congressmen and even more staffers read my letter, so I hope that someone can fix this. The Wall Street Journal today noted that the bill, while flawed, keeps getting better with each revision. Let’s hope that’s the case here.
Then I’ll comment on the Goldman Sachs indictment. As we all know, there is never just one cockroach. This could be a much bigger story, and understanding some of the details may help you. As an aside, I was writing in late 2006 about the very Collateralized Debt Obligations that are now front and center. There is both more and less to the story than has come out so far. And I’ll speculate about how all this could have happened. Let’s jump right in.
First, Let’s Kill the Angels
I wrote about the Dodd bill and its problems last week. But a new problem has surfaced that has major implications for the US economy and our ability to grow it. For all intents and purposes, the bill will utterly devastate angel investing in the US. And as we will see, that is not hyperbole. For a Congress and administration that purports to be all about jobs, this section of the bill makes less than no sense. It is a job and innovation killer of the first order.
First, let’s look at a very important part of the US economic machine, the angel investing network. An angel investor, or angel (also known as a business angel or informal investor) is an affluent individual who provides capital for a business startup, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.
Angels typically invest their own funds, unlike venture capitalists, who manage the pooled money of others in a professionally managed fund. Although it typically reflects the investment judgment of an individual, the actual entity that provides the funding may be a trust, business, limited liability company, investment fund, etc.
Angel capital fills the gap in startup financing between “friends and family” (sometimes humorously given the acronym FFF, which stands for “friends, family and fools”) who provide seed funding, and venture capital. Although it is usually difficult to raise more than a few hundred thousand dollars from friends and family, most traditional venture capital funds are usually not able to consider investments under $1-2 million.
Thus, angel investment is a common second round of financing for high-growth startups, and accounts in total for almost as much money invested annually as all venture capital funds combined, but invested into more than ten times as many companies (US$26 billion vs. $30.69 billion in the US in 2007, into 57,000 companies vs. 3,918 companies). (Wikipedia)
(Incidentally, angel investing got its name from people who invested in Broadway plays, and the term began to be used for investors in similarly risky startups.)
This has become a very big deal in the US. Angel investors put as much money to work as all the mainstream venture capital funds. And the internet has greatly expanded the network of angel investors. In 1996 there were about ten organized angel networks, most quite small. Now there are many hundreds, and some of them are quite large and organized, with some serious money amongst the members.
“Angel investors committed fewer dollars but increased the number of investments during the first half of 2009,” according to “The Angel Investor Market in Q1Q2 2009: A Halt in the Market Contraction” by the Center for Venture Research at the University of New Hampshire. Total investments in the first half of 2009 were $9.1 billion, a decrease of 27% over the first half of 2008, the study reports. However, 24,500 entrepreneurial ventures received angel funding during the period, a 6% increase from the first half of 2008. The number of active investors in the first half of 2009 was 140,200 individuals, virtually unchanged from the same period in 2008. (Tech Transfer Blog)
And according to a conversation I had with the very enthusiastic David Rose of Angelsoft this week in New York, the numbers are growing as the economy improves. If you assume that as many new ventures were funded in the latter half of 2009, then we are looking at 50,000 new businesses last year. At an average of (my guess) 10 employees a firm, plus all the business they contract for, that is at least 500,000 jobs, with the promise of many more for the firms that become viable.
Angel investors do more than just provide money. Many are successful businessmen, and they give guidance and often bring their networks of contacts and potential business partners to the new venture. While I can’t find the statistics, I will bet you that companies that are started with angel money are more successful than those that aren’t.
And remember, that is 50,000 new businesses or more every year, as 2009 was not exactly a banner economic year. This is the very heart of the job-creation machine in the US. It is what keeps this country competitive. And the Dodd bill places this at severe risk. Let’s look at how it would handcuff potential investors.
Here are a few quotes from Venture Beat, a publication of the venture industry. (http://venturebeat.com/2010/03/26/angel-investing-chris-dodd/)
“There are three changes that should have a particular effect on angel investors, a catch-all category which includes everyone from friends and family members who invest in a startup, to unaffiliated wealthy individuals, to side investments made by venture capitalists acting on their own.
“First, Dodd’s bill would require startups raising funding to register with the Securities and Exchange Commission, and then wait 120 days for the SEC to review their filing. A second provision raises the wealth requirements for an “accredited investor” who can invest in startups – if the bill passes, investors would need assets of more than $2.3 million (up from $1 million) or income of more than $450,000 (up from $250,000). The third restriction removes the federal pre-emption allowing angel and venture financing in the United States to follow federal regulations, rather than face different rules between states.”