Sunday, January 5, 2014

2013 - For This Angel Investor, A Good Ending After Some Initial Detours

In 2012, a disappointing Facebook IPO cast a shadow on tech IPOs and angel investments. Success in 2013 seemed to be an uncertain proposition, and in fact, the year got off to a slow start. But for the stock market, start-ups, and my own portfolio of angel investments the year turned out to be much better than initially expected.

Facebook shares surpassed their IPO price in late July 2013, and the IPO pipeline reopened in a big way. Twitter launched a successful IPO in November and saw its share price triple. Enterprise SaaS company Veeva Systems successfully IPO’d in October and returned more than 300x of the $7 million invested. The Dow Jones Industrial Average gained over 3,000 points and 26% to end just north of 16,500. 

Total money flowing into early stage investing even exceeded 2012, and 2013 saw the highest amount of seed deals since 2009. To wit: the Band of Angels made a larger number of investments in 2013 compared to 2012. Start-up valuations continued to decline, but overall angel and seed investing activity continued to be strong, perhaps supporting the claim that many valuable companies have indeed been started in the past years. The introduction of so-called Angellist Syndicates and Backers to crowdsource investments has made participation in start-up fund raising accessible to a much larger set of investors.  Companies such as Crunchbase, CBInsights and eShares are making significant headway in providing more transparency for early stage investors.
My own portfolio of early stage enterprise focused software companies started off with six start-ups. Given the high valuations of 2011/12 and somewhat uncertain outlook at the beginning of 2013, I expected to see difficulties raising follow-on rounds. But while valuations largely went sideways, the companies that needed to raise more money were able to do so. I also met with more than 50 start-ups, and made investments in three new teams
  • Tylr Mobile turns the inbox into a platform for mobile work. CEO and co-founder Ryan Nichols is passionate about workplace productivity, has been an early team member of two successful start-ups. The company was part of the Alchemist accelerator,  and Ryan was with SAP before the last two start-ups.
  • Paystik captures impulse payments in an easy and intuitive way and was founded by James Ioannidis and Mary Minno. The deal was sourced through the Band of Angels.
  • A6 Corporation is mapping the Internet topology to build a superior advertising exchange. Founder and CEO Bill Urschel is a serial entrepreneur, and returned to the Band of Angels for financing.

At the beginning of 2014 the stock market is trading at historical highs and the IPO pipeline is stocked with high profile companies. Money is still pouring into angel and seed investments as evidenced by Angellist and the ever growing number of Superangels and MicroVCs. But the shadow Series A crunch still has to play out, and having to raise $5 million in the next round - whether it is called Series A or Series B - will be the time where the wheat separates from the chaff. For entrepreneurs not much has changed: Hit your milestones, and Always Be Raising!

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