The Rise of the AngelsNaval Ravikant

AngelListangel.co

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“All great truths begin as blasphemies”- G.B. Shaw

The Venture Industry has already changed

The Rise of the AngelsEntrepreneurs

Entrepreneurs gain Leverage

• Cheaper

• Incremental

• Incubators / Combinators

• More hit-driven

• Transparency

• Mostly Seed and Consumer

A Bill of Rights1. Quick decisions

2. Standardized Docs

3. Allocate the round

4. Independent decisions

5. Raise less; dilute less

6. No Control

7. Right to Sell

8. Peer Relationships

9. Specific Knowledge

10.Cash up Front

Venture capital is a business and is open to attack by “startups” with disruptive new business models and technologies

Why Now?

• NASDAQ rebounded; but other asset classes have a poor outlook

• Small exits are creating small angels

• Consumerization of everything

• Small M&A market still strong

• Incubators, AngelConf, AngelList

• Product built at the incubator level

• Continuous, not discrete rounds

• No fixed amounts, no closings, no leads

• Prices beginning to float

• No Board seats (no leads)

• Standardized terms

• Herd mentality (rational); oversubscriptions

• Unbundling of advice, control, money

The New Financings

“By its nature, the Internet undermined anyone whose status depended on a privileged access to information”

- Michael Lewis

• Could just wait for the Series B

• 10 startups that matter

• The ones with traction are obvious

• Used to be about capital, judgement, dealflow

• Now about access

• “Stay hungry, stay foolish”

Wait and See?

• Being an angel is about control, not $

• Hustle; seed programs

• Clear differentiation; specialize

• Give up need for control

• Productize yourself

• Less meeting; more tweeting

• Retreat to higher ground

Moving Upstream

Learning to Fly

• Be picky

• Join the herd

• Brand yourself

• Be humble

• Stick to standard terms

• Shun power

• Buy (not earn) your stock

“But I don't want to go among mad people,” Alice remarked.

“Oh, you can't help that,' said the Cat: “we're all mad here.

I'm mad.  You're mad.”

- Alice in Wonderland

• Un-priced Rounds

• No vesting (bad for entrepreneurs too)

• Acquirers split founders / investors

• Some angels - full anti-dilution, control, tranches

• Doubling prices in a month

• Selling common stock to minority shareholders

“Trust in Allah - but tie your camel”- Arabic Proverb

Predictions

• More angels on their way

• Spectacular fraud will occur

• Entrepreneurs will exploit investors

• Some companies will skip VC altogether

• Super-angel bubble? Unknown

“There's a battle outside ragin'.It'll soon shake your windows

And rattle your wallsFor the times they are a-changin'.”

- Bob Dylan