My humble opinion: Angellist's syndicates and the CSC fund are great for startups, a bit of a negative for the long tail of angel investors and a net positive for traditional VCs.
We're seeing a glut of capital at the seed investment stage, which means higher prices for all and more competition for hotter deals. This means that a lot of angels are getting forced out of a lot of deals they might have been in before, or have to enter a deal through a syndicate and take a 20-30% haircut on the carry.
On the other hand, we're seeing good startups getting funded now because of the excess capital -- startups that might have had a hard time raising because they didn't have the right cachet with the investor network and didn't hit the right milestones to make investment an easy case. A $25k investment today is going to be more expensive or more risky than a $25k investment a year ago.
The increase in startups coming down the pipe is a good thing for traditional VCs. More startups are going to pass the series A hurdles and find their way into the VC pipeline. The VCs will end up with a larger crop to select winners from.
If you don't have good dealflow as an angel right now, I'd say that it's a good time to sit out from the startup scene and become an LP in a fund or two instead.
Alternatively -- I'm biased here, admittedly -- US angels should take advantage of the strength of the US dollar and find some early-stage deals north of the border up here in Canada before AngelList opens up Canadian syndicates and the seed valuations rise up to meet the US valuations.
> This means that a lot of angels are getting forced out of a lot of deals they might have been in before, or have to enter a deal through a syndicate and take a 20-30% haircut on the carry.
Or maybe the growth of these super-angel funds means "only" money isn't enough to get direct access to deals. "Only" money means you're going to pay the toll/carry. But money + advice/connections/intros/brand is your ticket to direct participation.
At a time when startups can start with relatively low capital requirements, the "strategic" part of "strategic investor" would seem to be the valuable part.
But, I wouldn't worry too much about angels getting cut out entirely. If "their margin is [your] opportunity" (Jeff Bezos), then founders should be able to get better terms from a direct angel investment. Or, maybe more accurately, an angel investing directly should be willing to pay a higher price given that there is no carry.
What about syndicates becoming big enough to replace Series A (and maybe even Series B) rounds? An old angel investment was ~$300k, now it's $3m, and Series As have become $6-10m. It seems likely that more angel money means larger rounds, and that they could reach $6m regularly soon!
We're seeing a glut of capital at the seed investment stage, which means higher prices for all and more competition for hotter deals. This means that a lot of angels are getting forced out of a lot of deals they might have been in before, or have to enter a deal through a syndicate and take a 20-30% haircut on the carry.
On the other hand, we're seeing good startups getting funded now because of the excess capital -- startups that might have had a hard time raising because they didn't have the right cachet with the investor network and didn't hit the right milestones to make investment an easy case. A $25k investment today is going to be more expensive or more risky than a $25k investment a year ago.
The increase in startups coming down the pipe is a good thing for traditional VCs. More startups are going to pass the series A hurdles and find their way into the VC pipeline. The VCs will end up with a larger crop to select winners from.
If you don't have good dealflow as an angel right now, I'd say that it's a good time to sit out from the startup scene and become an LP in a fund or two instead.
Alternatively -- I'm biased here, admittedly -- US angels should take advantage of the strength of the US dollar and find some early-stage deals north of the border up here in Canada before AngelList opens up Canadian syndicates and the seed valuations rise up to meet the US valuations.