Archangel Ventures organised a casual chat with a few angel investors last Friday. For those who missed out, below is a short summary of our discussion. Thanks to everyone who made it a lively discussion.
What are some of the COVID proof startup opportunities?
- Ecommerce and logistics are obvious ones but there are challenges to scale in COVID times
- Smaller players might find difficulty scaling a network due to supply side constraints (eg lack of drivers).
- Logistics players more generally are under a lot of pressure due to demand spikes from lockdowns.
- Businesses that support hybrid and remote workforces — eg Remote Social.
- We discussed Space tech.
- A lot of hardware focussed companies especially upstream — only starting to adopt start-up tech more recently.
- Space industry was on hiatus due to COVID providing opportunities for new players.
- Some emerging players are using existing infrastructure which lends itself to VC investment as there is not prohibitive initial capex in hardware.
YC post demo day valuation discussion
- Very hot market globally
- YC post demo day, we see pre-revenue @ $15m — 2nd time founder @ $20m valuation.
- Also can lead to unfavourable deal terms for investors — eg uncapped SAFEs with no discount.
- Valuations are running all the way through the curve — seeing consistently secondary deals with ordinary shares worth 150% on the round value within 12 months (in the US). A lot of undisciplined money coming from overseas which is pricing the IPO into the later stage rounds.
- Discussed AngelList roll up vehicle (RUV) product — no fee no carry service for accredited investors to potentially put in a few thousand dollars each. Can be very useful to bring on strategic investors without having to cut big cheques.
- Hot deals on syndicated platforms can go super quick even at high valuations — rounds can be filled in 20 minutes.
- Some companies being actively coached to not provide pro rata
- YC becoming known as an established place to find winners so increased competition — valuation is all relative — it still can be a great place to find deals given their vetting process potentially does add value especially in challenging geographies.
Best places to find deal flow for certain verticals
- We talked about places to find quality deal flow for female led startups and facilitated an introduction with Springboard.
The importance of an “accountability buddy” when you angel invest
- A lot of angels expressed that they do use a buddy or group of friends to keep each other honest and benefit from shared experience.
- Prevents you from only talking about the winners.
- Long feedback loop — having someone that you can share the wins and losses over the journey can be very beneficial. Multiple perspectives help you see around corners — helps making decisions not to invest in companies.
- There are some communities starting to build eg Startmate First Believers — 42 people — weekly/fortnightly master classes — starting to share some deal flow.
Insider rounds — what are they and what do they tell you
- Generally is one of two opposite signals. eg either a really hot deal rewarding initial investors or an attempt to save the company to bridge to the next phase. Usually it’s the latter and as an insider you will know!
- Differences between venture funds vs angels — funds make an implicit commitment to see the company through to the end and you will usually follow on unless you’ve really lost faith.
- Investors may throw a lot of good money after bad to bail failing companies out
- Can be helpful to clearly set the expectations with the founder before the initial investment, what progress you need to see to justify following-on and investing more.
- Execution rarely goes to plan — trouble can be an opportunity to be a contrarian and get the best deals. Challenge is spotting what is real trouble vs. “teething issues”.
Thanks to Andrew for the notes.
