peHUB has an interesting interview with Aydin Senkut, a West Coast angel investor who is at the forefront of angel investing. There has been a ton of chatter about the “angel investing bubble” and the idea that “angel investing is where venture capital was 20 years ago.”
Aydin’s new angel fund, Felicis Ventures, seems to be the new face of where the angel market is headed. He has just raised a $40 million seed fund from institutional investors (mainly fund of funds) and intends to invest mainly in startup companies seed rounds, which some reserved for follow-ons in later rounds.
Aydin says:
we have a seed-stage bucket out of which we’ll continue making investments like before. We also have an allocation for Series A deals, including for companies that we haven’t had a chance to discover at the seed level. And we have a Series B allocation, based on my positive experience of [investing in the personal investing site] Mint [which sold to Intuit last year for $170 million, after raising $31 million over four rounds in two years], so we can keep our pro rata portion of a deal…
At the seed stage, we’ll invest between $100,000 to $500,000. At the Series A stage, we’ll invest between $500,000 to $1 million, and at the Series B stage, we’ll invest between $1 million and $2 million. These are definitely smaller amounts, and it’s intentional.
I hope this strategy works. I realize there are a lot of angel investors out there, and I’m sure some of them will not be successful. But as someone interested in seeing new ideas tested quickly and as someone who love seeing new entrepreneurs getting funded these types of funds will hopefully be very positive.
Other angel investors can learn a lot from the reserve allocation strategy proposed by Felicis Ventures. Keeping capital on the side to support good companies through their subsequent fund raising rounds can significantly boost returns – assuming the investor is disciplined enough to stop backing companies that are having problems!
