AngelList's recent $50m funding and a new business model, is shaking up the money tree and even 3,000 miles away, New York city's top VC Fred Wilson is feeling the change.
Angel List Syndicates are turning angels who have traditionally been followers into leads…they will have to learn to lead and lead well. They will have to step up before anyone else does. They will have to negotiate price and terms. They will have to sit on boards. They will have to help get the next round done.
Essentially they will have to work.
I agree with Mr. Wilson, that it could be a problem if angel investors have to work to get their money back — plus a black swan premium.
Over time we will get to see who is actually good at this and who is not. And I can tell you this. Not everyone is good at this.
Without leadership of the right kind, it's going to be tough for the AngelList syndicates to match the performance of VC smart money. They will have to measure up to the average annual 8.5 percent growth rate of the S&P 500 Index — which has outpaced the 7.5 percent growth rate of all VC investments over the past decade.
It's a strange post for Mr. Wilson to make, to be critical of one of Silicon Valley's most innovative angel investment networks.
New SEC rules allow startups to publicly seek investors via any type of marketing but they have to publicly disclose their business plans to every potential investor, and follow strict rules on funding or risk being banned from raising money for at least a year.
Mr. Wilson and his colleagues at Union Square Ventures are situated deep within the narrow aristocracy of New York's deal flow. Surely, this is where the best deals will continue to be presented first because private deals keep things private and that helps deter copycat ventures and other problems?
VC Mark Suster in Los Angeles, is a big proponent of private deals: The Importance of Proprietary Deal Flow in Early-Stage VC
However, Mr. Wilson is clearly feeling the heat. Will the new public funding rules and mushrooming angel networks steal deal flow from the top tier of VC investors? I didn't think it would but maybe Mr. Wilson is right to be concerned.