Angel Investor Groups: Getting Radical about Transparency?
Angel investor groups have a reputation of being extremely guarded about their activities. As most of you know, we’ve spent the last 4 years helping to make the activity of this hugely valuable sector of our economy more transparent. As part of these efforts, we’re building Group Profiles for all of our 450 angel investor groups to help them network more effectively and to help entrepreneurs make intelligent choices about whom to apply to.
You can see our current wireframe below:
If you take a close look at the screenshot (click on it and expand it to full-size), you can see that we’re encouraging our angel investor groups expose some very sensitive information about themselves. Obviously, our highest priority has ALWAYS been to protect our groups, so we decided to send them a survey to get a sense of how open they were to this idea. The survey asked if they would be willing to show this information and if so how valuable it would be to their members, prospective investor partners, and to entrepreneurs.
The response was somewhat surprising: An overwhelming number of our groups thought this information would be valuable not only to their investors and fellow group managers, but ALSO to entrepreneurs. I’ve linked to the original survey and the response details, but combining the response, you get numbers like these:
Of the 60 angel investment groups that replied, a staggering 62% felt that even the most sensitive data would be valuable to entrepreneurs and only 19% wanted to hide this information from them. If you discount the 4% that didn’t even want to share this information with their own membership, only 15% wanted to keep this information specifically from entrepreneurs.
Obviously there is now a raging debate here about how accurate the survey is, so we’d like you to chime in. Are angel investment groups realizing the value of transparency, or are these results meaningless? We’re obviously hoping for the sake of the angel industry that it’s the prior!
We’re sending out the survey to our entrepreneur community tomorrow and will post those results then.
Ryan Janssen :: Dec.11.2008
Angel Investor
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As an entrepreneur myself, I have to spend my time on many activities, including funding. To avoid spending time futilely on requests from sources that aren't interested in the first place would be much appreciated.
I love your site and the article is useful!
which one would be the end key the red one?
You are a very paranoid man
thank you so much
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Gary James Wentworth
ARTAPART the Gallery.
107 Sir Lowry Road Woodstock,Cape Town
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Thanks for the update. I think the investors have much to gain by transparency. They will probably find they get fewer requests, not more, by giving information entrepreneurs can use to determine their viability.
As an entrepreneur myself, I have to spend my time on many activities, including funding. To avoid spending time futilely on requests from sources that aren't interested in the first place would be much appreciated.
Keep up the good work.
-Tom Doench
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Groups should not confuse privacy and lack of transparency though. The stats in the group profile are a win-win for everyone:
1. Group General managers have a concrete reason to get their angels to participate more fully if that activity is going to be publicly visible.
2. Real entrepreneurs can more effectively manage their fund-raising and NOT spam groups indiscriminately.
3. Groups can get to know each other, so they are more comfortable working together.
No group should be embarrassed about who they are. If their members don't participate during a particular season, entrepreneurs should know. If the current financial climate has slowed investment, potential partners should know. Everyone in this community, entrepreneurs, angel groups, AND VCs, tries to inflate who they are, and it doesn't help anyone.
We're all in this together. We're all trying to promote innovation, build jobs in our communities, and do something meaningful. This ENTIRE industry needs to step into the light. We'll all be more successful if it does.
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Are we looking for the BEST opportunities; or just the best regional/industry opps?
How do new or innovative and alternative investment opportunities gain traction? It would seem you have the criteria and evaluation framework to identify ANY and ALL qualified opportunities. Or to identify “best of breed” of multiple opportunities. These can then be ‘filtered’ by each individual investor.
Regarding the “sharing of information” : the goal should be the same for all of us (investors / entrepreneurs / networks / groups); and that is TO GROW THE PIE so that each our slices grow bigger. Instead of approaching this as separate factions, perhaps we should be approaching this as a CONSORTIUM; each having separate objectives but all COMMON interests.
Adding and sharing information is ADDING VALUE ! Putting it bluntly, I want to be of value to you .. and I hope you want to be of value to me !!
Tom@art-investing-group.com
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I hope I find you in good health and happy. I am Gary, a visual artist and independent producer, and posted a request for start up Capital, that was a while back and thankfully thus far, with all the financial turmoil, I have managed to keep my head above the choppy waters and continue doing what I do.
I established a Community Based Organization in 2005 after spending the previous 25 years in the Transportation Industry. "Art a part of life" was the motto and ARTAPART the gallery and performance venue became a reality. Our country has a vivid history and the yearning to remove the restrictions of the existing "art appreciation endeavors" led us to rightly conclude that the general public required a non pretentious facility to enjoy the best local and international exhibitions that we could host. Following on the success of the brand we opened in an area closer to a larger cross section of the population, our opening unfortunately tied in exactly with the credit crash in late 2008 and has now seen me revert back to our original concept and fulfill the mandate in other manners. My business model is unique and engages over two hundred people per annum, the turnover has increased by 33% year on year thus far and all the opportunities that abound are self made and action-ed by my creative team.
Next year 2010 sees my country hosting the FIFA World cup and the upsurge in positivity has led to numerous opportunities available to various enterprises especially within the Tourism and Entertainment industries, and it is within this cycle that I seek to modify my request for an investor. My core business revolves around Corporate Social Responsibility and assistance from formal banking avenues does not really apply and the required investment from an "Angel Investor" will see returns that are competitive in any financial manner. My business is run very informal and complete transparency is a core issue of the ongoing success, we have received the mandate for the third year in a row to host a community festival from the 22nd to the 27th February 2010, and on the 1st and 2nd of September 2009 we are producing Live Rage (See attachment) at our national State Theater, I have obtained a television contract for a local music show and I am developing a project to fix all of the children's play parks in my community. With the correct investor these projects will be realized in a sustainable manner with large growth potential.
The immediate reply from all possible avenues, has thus far amounted to "We do not have money" and my reply can only be "Its not about the money" and then go on a tangent about the lack of social responsibility and end up just doing it anyway, pure survivalist mode as an Artist creating art that everyone enjoys. I do not envisage an investor who places money in a bank account and then want nothing further to do, I would expect the investor to visit and spend at least a week in my company before making a final decision.
See you soon.
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I represent you my projects:
The project 1. Factory for manufacturing of new ecologically pure sources of electric energy.
For them it is not necessary fuel gramme.
They can be established under water in any reservoir (the river, lake, the sea, pool). From them it is possible to create power stations from 1 MW to 10000 MW.
The sum is necessary for project realisation 12000000 Euros.
Term of realisation of the project 2 years.
Term of return of investments 2 years (after the beginning of work of factory).
Profit not less than 20000000 Euros a year.
The project 2. Manufacture of energy sources (220В, 50 or 60 Hz) capacity of 1 kw.
Scope:
The electric энергия (for the private house, apartment)- Without pay: heating, cooking, illumination, hot water, the computer, the TV etc.
It is new electric transport (motor vehicles, buses, trolley buses).
These are absolutely new trains.
These are absolutely new planes
And all without fuel and without emissions of hotbed gases.
The necessary Sum for realisation of the project 10 000 000 Euros.
Term of realisation of the project of 18 months
Term of return of investments 2 years
Profit not less than 25 000 000Вро in a year.
3-5 kw are necessary for heating and cooking.
Misters investors it not a joke-it a reality.
I invite you to become our investors-partners.
It is many workplaces, it is a pure planet the Earth.
Mark Tarasov, director SIA DTSP, Riga, Latvia.
e-mail: mark_tarasov@inbox.lv
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Its pretty clear from everyone involved that this information is extremely valuable to all parties.
When executed appropriately, transparency can do a lot of amazing things for early stage investing:
1) establish and build an investment groups reputation/credibility
2) build trust with the entrepreneurs and set more realistic expectations
3) make investors more comfortable sharing deals and co-investing, which is something we're seeing a lot more through the economic crisis.
Am I missing any? Not only is it useful for entrepreneurs, but its crucial for trust building within the investment community.
So everyone finds the data valuable, everyone wants the data, but no one is willing to share it? Any ideas how we break the catch-22?
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I am simply not going to provide my companies details or spend valuable time and resources without such historical information, what is the investors track record, what is the average amount invested, length of time to invest, what like company's have they invested in.
Rather then casting a huge net and pursuing an endless group of fruitless opportunities I want to focus on real potential opportunities, I will work with those investor groups who can provide such information, the ones that dont I wont.
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Every group uses your tools in different ways. Trying to use your data does not paint an accurate story of one group versus another.
How many $100M or $200M VC funds are there? (yeah - but what size are they really)
Outside of pension funds - please show me VC, HF, PE that want to public show their data.
I would highly suggest you make the data piece optional
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These are all great points, and of course, anything we do will have controls to allow groups to protect their privacy. The real question was if enough groups would be willing to share this information to make it worth building the feature at all.
Cordially,
Ryan
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Angelsoft is your database! When you're using it for all your deals, you'd have all these stats automatically. Thats half the value in using our system, VCs and angel groups LOVE not having to manually track these stats anymore.
Best,
Evan
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I think transparency and metrics benefits everyone. The entrepreneur better understand the probablity of getting funded and can decide if the application effort is worthwhile. Groups are able to benchmark themselves against other groups. Metrics encourage groups to keep their deal flow organized and timely so their "grades" stay up.
I would like to see a metric that measures the group's feedback to entrepreneurs. One of the reason we are angels is to help startups. Yet we often drop the ball when it come to giving presenters honest feedback when we choose not to do a deal.
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Bill Payne