Yesterday, I received an interview request for an Inc. Magazine article concerning angel investing. The article is being driven by a recent survey by George Washington University that found 58% of venture capitalist respondents said that angel involvement “sometimes” or “mostly” makes a company unattractive.
The main reasons given were that angels tended to give start-ups overly high valuation, made negotiations unnecessarily complex, or were unsophisticated and uninformed about the requirements of venture financing. Occasionally my interview requests are via email (preferred) so in this case I wrote up my thoughts. I have no idea what will end up in the article so I figured I’d post the thoughts here for anyone interested in my point of view on the angel / VC dynamic.
While 58% is a nice number, I think that an aggregate statistic isn’t that useful. I’ve had a large number of experiences with angel investors – both as an angel and a VC. I’ve found – not surprisingly – that there is a wide range of quality and experience among angel investors – if they are experienced and high quality, they are good; if not, they are have no impact or are not good.
When I actually read the study (after the interview, of course), the lead result was that 94% of VC respondents answered “Yes” to the question “Do VCs consider angels beneficial to the venture industry?” In fact, only 6% of VCs responded that angel involvement “mostly” makes a company unattractive (52% said sometimes – which is where the 58% mostly/sometimes stat came from.) So – as with many articles – the data is being munged in a way to tell a more provocative story. Only 5% of VCs said that angels “never” make a company unattractive – if you take off the tails of the normal curve (“mostly” and “never”), you end up with 89% of VCs saying angels “sometimes” and “seldom” make a company unattractive to VC investment – a total non-story as far as I’m concerned (at least around this measure.)