Understanding the Changing Landscape in the Angel and Venture Industry

Elijah Kim, Entrepreneur in Residence at BCG Digital Ventures in Manhattan Beach, reflects on his time at The Upfront Summit.

I had the opportunity to attend the highly coveted Upfront Summit in Los Angeles last week. In an event that began as Upfront Ventures’ annual board meeting, it’s fast becoming the place to engage with the Los Angeles venture capital community. In the days that followed the premier tech event, I’ve been reflecting on how the angel and venture industries are evolving.

One talk in particular struck a chord; Joanne Wilson from Gotham Gal (wife of prolific VC Fred Wilson, Union Square Ventures) and Satya Patel from Homebrew hosted a stimulating breakout around the topic of angel and venture investing. They were joined by an esteemed group of attendees that included Rich Jun (BAM Ventures), Matt Mazzeo (Lowercase Capital), Clinton Foy (Crosscut Ventures), Suzy Ryoo (Atom Factory), Joe Fernandez (co-founder of Klout) and many other high-profile investors and founders. If any group could tell us about the state of play, this was the one.

The group discussed the challenges of early-stage investing. Whilst there can be many benefits to being early in a deal, there are also negatives, especially since the relaxed and open approach to funding that many startups enjoyed last year could be coming to an end. In fact, the reality is many investors need liquidity. Fred Wilson, for example, very recently made the point that Uber owes it to its early investors to go public.

On one hand, being early entitles the investor to a lower valuation for their investment. This “special pricing” is a good incentive, but it doesn’t always work in favour of the investor. Down rounds are becoming more frequent, and sometimes going in early results in taking a loss (even in growing ventures that are seemingly on their way to an exit).

Given that early-stage founders need significant help beyond funding, I wanted to know how Joanne and Satya balance their involvement in an early-stage venture as both an investor and operational advisor. At what point does the advising and investment line blur? Interestingly, Joanne didn’t think there was a line, whereas Satya preferred working with founders that could benefit from Homebrew’s involvement, and he specifically targeted deals that would recognize that. As an entrepreneur myself, it was reassuring to hear that both Joanne and Satya like to roll up their sleeves and take a hands-on approach towards investing. Equally, I wasn’t surprised to hear that the appetite for that level of help amongst startups is mixed; some welcoming it with open arms, and others point-blank refusing.

There were some interesting takeaways from this panel on angel and venture investing. It’s clear that the right early investor can impact a venture far beyond just an injection of money, and more collaborative relationships between ventures and investors are evolving with the potential to deliver even greater returns.

BCG Digital Ventures invents, launches, and scales industry-disrupting new businesses with the world’s most influential companies.

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