So here are some meandering thoughts about the current state of the NY Angel market that I don't have the time or the intellectual capacity to synthesize into a coherent thesis/essay:
- People, including myself, say that there is an angel funding gap in NYC. The reason why is that they cannot readily identify very many firms or individuals who are known to do angel investing.
- At the same time, I don't know of any really fantastic startup companies in NYC who are struggling to get angel money raised. In fact, quite the opposite. I know of several companies who are raising or have raised significant angel capital just through their own network or introductions. Many of the investors have been people who do not usually do angel investing or at least don't have a shingle out to do so. So, angel gap or no?
- If there was an angel gap, how best to fill it? Early stage firms could go earlier. A USV incubator perhaps, a la what Charles River is doing?
- How about banding groups of angels together in a fund or group?
- What about other types of incubators? Corporate? CBS Interactive incubator?
- Well, we know from the last go around that anyone who doesn't have a larger fund who isn't 100% in the main business of venture investing over the long term are the first ones to get wiped off the face of the earth in a bubble... does that make them inherently bad structures or just more risky?
- There's a lot of money in NYC that isn't connected to the entrepreneur community... hedge fund and banking money. Would it be wise for someone to package up $5-10 million of that to do seed stage financing at 50-250k a pop? Who should do such a thing? Isn't a small investor like this going to get crushed in latter rounds because they don't have the money to maintain ownership positions? That brings us back to the USV incubator idea... and also brings us back to the "Why would USV be interested in entrepreneurs who aren't savvy enough to raise 100k on their own?"
- Is "professional" angel investing, i.e. someone setting up a smaller fund to invest in people not necessarily known beforehand, adverse selection? If an entrepreneur has never been successful before and isn't connected to enough powerful industry people with a compelling enough product to get backing from community insiders, what are the chances they'll be able to build a successful company? Same thing with incubators. If you can't find a space to build your business, how are you ever going to actually build a business?