Last week there was a meeting of the Angel Capital Association in Boston attended by investors and angel group managers (mostly the latter) from all over the country. It was held in a warehouse building devoted to housing local startups.
The Angel Capital Association is the leading professional and trade association and supports the success of angel investors in high-growth, early-stage ventures. It offers professional development, provides an industry voice and acts as a policy advocate to its members, more than 200 angel groups and more than 10,000 individual accredited investors. ("Accredited investors" meet federal requirements of net worth, income and the like. Essentially this excludes many people from access to these investments. Why, is unclear. It is always said that such accredited investors are more sophisticated but a sophisticated investor is almost an oxymoron. It is more likely that an accredited investor is one who will not be ruined by a loss. However, startups are more transparent, more accepting of advice, more intensely driven and have much larger reward when successful. Again, the individual must be protected from himself by someone who knows better.)
This meeting was mainly a trade meeting aimed at organizers, not investors, of these groups but was nonetheless enlightening. Two main themes emerged. First, the loosening of the requirements to invest in these startups and the loosening of the investment structure has caused considerable anxiety among the organizers. The concern is partly legal; with the legalization of "open solicitation" and "crowdsourcing," the new and less regulated investors may accidentally wander into the stricter more regulated angel groups and result in legal vulnerability. For example, can a student, clearly not an "accredited investor," go to see an angel meeting? Or can a friend a family member or associate go without filling out the accreditation forms? For that matter, can the startup company representatives go? Second, there is a palpable fear that the open investing forum will pull investors away from angel groups and into looser affiliations that are cheaper. One such group was represented there and had 7,000 members and had made 70 investments this year. Those are large, intimidating numbers. It would be a devastating trend.
The second theme was accidental. All of the stages of angel investing were discussed from the organizational template to recruiting to investing to mentoring to exits. What is the crucial element to the entire system? The exit. What was the least discussed? The exit.
The Angel Capital Association is the leading professional and trade association and supports the success of angel investors in high-growth, early-stage ventures. It offers professional development, provides an industry voice and acts as a policy advocate to its members, more than 200 angel groups and more than 10,000 individual accredited investors. ("Accredited investors" meet federal requirements of net worth, income and the like. Essentially this excludes many people from access to these investments. Why, is unclear. It is always said that such accredited investors are more sophisticated but a sophisticated investor is almost an oxymoron. It is more likely that an accredited investor is one who will not be ruined by a loss. However, startups are more transparent, more accepting of advice, more intensely driven and have much larger reward when successful. Again, the individual must be protected from himself by someone who knows better.)
This meeting was mainly a trade meeting aimed at organizers, not investors, of these groups but was nonetheless enlightening. Two main themes emerged. First, the loosening of the requirements to invest in these startups and the loosening of the investment structure has caused considerable anxiety among the organizers. The concern is partly legal; with the legalization of "open solicitation" and "crowdsourcing," the new and less regulated investors may accidentally wander into the stricter more regulated angel groups and result in legal vulnerability. For example, can a student, clearly not an "accredited investor," go to see an angel meeting? Or can a friend a family member or associate go without filling out the accreditation forms? For that matter, can the startup company representatives go? Second, there is a palpable fear that the open investing forum will pull investors away from angel groups and into looser affiliations that are cheaper. One such group was represented there and had 7,000 members and had made 70 investments this year. Those are large, intimidating numbers. It would be a devastating trend.
The second theme was accidental. All of the stages of angel investing were discussed from the organizational template to recruiting to investing to mentoring to exits. What is the crucial element to the entire system? The exit. What was the least discussed? The exit.
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