The rise of the Super Angel

By Maureen Aylward

Angel investments are one way that entrepreneurs get funding, especially now that credit and bank loans are hard to come by. We asked Zintro experts to comment on if they see any barriers to angel investing at the moment.

Market Wizard, a global macro fund manager, says that there are fewer barriers to angel investing because angels are stepping in to fill the void left by the exodus of venture capital and private equity investors. “There are no investment banks left like the model of Lehman Brothers or Bear Stearns, which acted like merchant bankers, investing their own capital into projects and syndicating it out to institutional investors,” he says. “Hedge funds lost approximately 75 percent of their head count in 2008, and the anticipated sum total removed from investing in private start ups is $100 billion lost from hedge funds; another $300 billion lost from private equity and venture capital combined.”

What has risen in their place, says Market Wizard, is the Super Angel. “These are previously successful entrepreneurs, like Peter Thiel, co-founder of PayPal and now manager of the extremely successful Clarion hedge fund based in San Francisco. There are many more like him, including family offices and investment entities that represent the likes of Jeff Bezos (himself a former highly successful hedge fund investor from DE Shaw) and multi-billionaires that like to take early stage risk in start-up companies,” explains Market Wizard. “As Super Angels, they bring more to the table than just money. They bring an invaluable network and a complimentary universe of companies that live off of each other’s products, generating a hybrid form of organic revenue.”

If anything, angel investing has become a more favorable outlet and resource for the entrepreneur starting up a company or seeking early stage funding. “But you’re not going to get $100 million for one percent like Facebook did from Microsoft. Super Angels are extremely smart and have been in this from the early ’90’s to the present. As such, they are quite aware of their worth and the worth of the company they invest in. If Super Angels are interested in a project, they won’t try to wrestle control in exchange for capital, a practice wildly popular with the VCs of yore,” says Market Wizard.

Market Wizard says that now is the time to seek out Super Angels and avoid VCs. “VCs have become quite the timid late round, pre-IPO or ‘What’s your exit plan?’ type of investor; very unfriendly to passionate entrepreneurs with a fire burning inside,” he points out. “Super Angels, like the founders of start-ups today, don’t have exit on their minds but instead growth and profitability. Once VCs see the high value of an experienced Super Angel investing early and guiding a company, timid and under-funded VCs will find it irresistible to invest. This is when the wisdom and guidance of a Super Angel will help to negotiate a small insider sale of stock to create liquidity for the founders and the early stage investors.”

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