SFOs and Angel Investing, Part II by Dave McClure & Miles Spencer

SFOs and Angel Investing, Part II by Dave McClure & Miles Spencer

An update to the 2011 SFOs and Angel Investing, Part I

Plus que ca change… begins an old French saying, but Yogi Berra’s french was much more elegant; “It’s like deja-vu all over again!”

So much has changed since our White Paper on angel investing for SFO’s was first published in [2011] by the Family Office Association, but many of the basic tenets of successful angel investing have remained unchanged.

In the tech market Facebook, Apple and Google have exerted themselves in so many ways. While leveraging their core businesses, they have ventured into everything from entertainment to driverless cars, purchased everything from OTT apps to headphone companies, and raided great engineering talent all over the globe. Very busy indeed. Throw in MicroSoft and Amazon to round out the big five of tech players and you have a nexus of desire: Startups want to be bought by them, and talent wants to work for them.

And yet, some don’t.

Uber and AirBnB have led the sharing economy, driving possibilities- and enthusiasm- for peer to peer platforms in a variety of fields. Now you can book on demand for everything from dog walkers to valet drivers with just your phone. It’s disrupting a lot of old school businesses, and making plenty of municipal agencies crazy with how exactly to tax them.

VC’s have become brand conscious content machines, trying to add value and maintain relevance with talented genius first-time entrepreneurs who need mentoring and leadership. This tips the scales toward the technical types who can talk code, and away from the mis-fit banker types who were happy to check in every quarter at board meetings and perhaps add a little less value.

“Guilds” have now acquired critical mass, throwing the knowledge base and leverage back in the founder’s favor for a moment. YC, Techstars and 500 StartUps (founded by co-author Dave McClure) have funded and nurtured literally thousands of savvy, connected founders who have been able to standardize best practices around valuations, deal structures, product market fit, distribution and the so many other subjects.

Bay Area valuations have rocketed for those special few baby unicorns who are showing traction, but ironically, funds from China still think them cheap. Angel Syndicates have allowed founders to access capital more effectively than ever, and VCs have largely had to react by going up market, or making pre-emptive bets in earlier rounds to access to the best deals.

This update will attempt to synthesize these new trends with the basic tenets of SFOs and angel investing published in our prior Family Office Association White Paper.

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