High Performing Angel Groups
By Eric L. Dobson
Angel investing is typically one of the highest performing asset classes. So, it is not surprising that angel groups abound. But, they are not all crated equal. Simply getting a few wealthy people together in a room to listen to wide-eyed entrepreneurs pitch their wears, is not a solution to creating and harvesting dealflow opportunities in your backyard. We learned the hard way over many years that it is the discipline and structure of an angel group that makes it successful! That is not so say this is not also fun. In fact, we love what we do.
Angel Capital Group and RAIN Source Capital merged at the end of 2014. Both have rich histories of angel investing with very different structures. ACG was a “dinner club” structured angel group in multiple cities all viewing and investing in the same deals. RAIN Source Capital was a micro venture fund structured angel group with many unrelated funds distributed over multiple cities. ACG excelled at organizing disparate groups and resources over large geographies. RAIN Source excelled at creating highly focused capital funds discretely over large geographies. With the merger, we took the best parts of both networks to create something exciting and new. And our value proposition is clear. We have created a highly efficient means of investing in local startups across the country identified and evaluated by hundreds, and we hope thousands soon, of great minds.
We learned many lessons along the way. First, clubs are fun, exciting, and flexible. But, they are very difficult to sustain due to a transient membership bases and are unpredictable and inconsistent from an investment perspective. On the other hand, funds are very “sticky,” but tend to be less flexible. So, we have created a structure that offers the very best of both models, infrastructure with flexibility to leverage infrastructure to manage risk while building your own personal portfolio. With these “hybrid” entities, the members unite around a common goal with consistency of purpose and action in a predictable and highly effective way. They allow the individual members to invest through the fund as well as across the entire network independent of the fund. When these entities are properly aligned and allied, they become a very powerful force with buying power and influence across the industry. These are what we call high performing Angel groups. Welcome to the modern ACG (v3.0 if you must know).
Elements of a high performing Angel group:
1. Members commit funds over multiple years to ensure stable, predictable operations.
2. Members make investment decisions based on a majority vote.
3. They move on a timely schedule of events with clear expectations of the members.
4. They leverage a diverse group of minds both locally and nationally to identify ventures with the greatest chance of success.
5. They use a disciplined investment process to reduce their risk.
6. They create a robust, diverse portfolio to spread their risk over market segments and geographies.
7. They reinvest in their successful portfolio companies, ones that prove execution, revenue generation, and scalability.
8. They make side-by-side individual investments in deals for which they have a particular affinity across a broad network.
9. They provide professional support for their members and their funds.
The benefits are also clear:
1. They are organized and committed.
2. They attract higher quality dealflow.
3. They attract diverse deals.
4. They minimize their risk by using a disciplined, timely investment process.
5. They improve their chances of success by leveraging a broad network of subject matter experts, successful entrepreneurs, and experienced venture investors.
6. They enjoy connections and support from investors and entrepreneurs across the nation that all benefit from diverse perspectives and collaboration.
7. They have a high satisfaction index based on time, capital resources, and expertise.
8. They have a higher potential for returns by sharing vast expertise and experience to minimize risk.
We bring national capital to the most promising ventures in communities like yours in the "Heartland." We are not going to build a fund in Silicon Valley, Boston, or Austin. Those places have great groups and serve their constituents. We will partner with those groups if we wish access to their dealflow. We have a modest goal. We just want the other 99% of the country. We find tech and talent to be ubiquitous, but capital is not. That is why we do what we do, find great teams with big ideas across the Heartland and grow them to create resilient communities and life-changing wealth for both investors and entrepreneurs.
We shifted our model to this structure in early 2015 and the benefits have been strikingly obvious: higher quality deal flow, investing more money in more companies, regularly investing in healthy second and third rounds with successful teams, and easier transition of our portfolio companies to next level capital. We are the Angel Capital Group Alliance (syndicate) of high performing angel groups and funds. If you are an experience angel, then we salute you and hope you will join us in our quest to find, evaluate, and invest in the very best startups the industry has to offer. If you an accredited investor and want to become a successful angel investor, come and join us and learn from the best.
Copyright Eric L. Dobson 2017
@edobson865 | @angelcapitalgr | www.linkedin.com/in/ericdobsontn | www.facebook/angelcapitalgroup