Thursday, March 20, 2014

How To Become A Super Angel, Part One: Seven Steps To Lift Off

Historically, angel investors have been retired high net worth executives and entrepreneurs. But as of late, super angels and micro VCs have emerged as a new type of new angel investor.

The archetype of the super angel is Ron Conway who got his start in 1995. Since then, others such as Jeff Clavier, Aydin Senkut, and Chris Sacca have emerged, some of which have leveraged their early successes into building partnerships akin to the venture capital firms of the early days.

Even without a formal definition of a super angel, one can identify remarkable similarities by inspecting the early days of these investors. Without further ado, here then are seven steps to achieve super angel lift-off:

  1. Have an immigrant mind set. This can encompass anyone from outside of Silicon Valley. Jeff Clavier grew up in France, Aydin Senkut hails from Turkey, Manu Kumar came to the U.S. at the age of 17. Chris Sacca grew up in Buffalo, New York, and carefully cultivates the image of a small town kid. What matters is the mind set.

  1. Build your skills in adjacent roles. No one is born a super angel. The more prominent super angels had operating experience at a start-up. Launching your own company or being a member of a founding team is the best place to start; business development and product management roles can come pretty close. But realize that training wheels have to come off at some point.

  2. Quit your day job. Spending more hours on due diligence and interacting with portfolio companies at least a couple of times per month correlates with greater returns. With a large size investment portfolio, there isn’t enough time to be a super angel while holding a day job.The price is high: You must be ready to spend years without receiving a paycheck. And the next step makes the financial picture even worse.

  3. Spend your own money. Most super angels spent the first three years investing their own money in 10-20 startups. Chris Sacca’s story is the exception: He had just enough cash to invest in Photobucket, and had to immediately move on to steps #5 and #6.  

  1. Hustle. Hustle. And then, hustle. Ron Conway is the consummate networker, and was able to invest in Google by getting both Sequoia and Kleiner Perkins to sign up for the Series A . Chris Sacca bootstrapped himself into Twitter by charging $25,000 to his credit card. Aydin Senkut got into Helsinki based Rovio - not exactly a drive-by Silicon Valley location. Reminder: This step is closely connected to step #1.

  2. Get lucky. Jeff Clavier had a massive return after 18 months when AOL acquired Truveo, and had many other early exits in his first portfolio. Chris Sacca’s investment in Photobucket more than returned its money in less than a year. Three angels - Jeff Clavier, Aydin Senkut and Dave McClure  - have claimed Mint’s sale to Intuit as a significant early exit. Note: End customer related internet start-ups rule when it comes to quick exits.

  3. Raise first outside money from High Net Worth acquaintances. Investment portfolios take time to generate returns even when there are some early successes, and eventually angel investors run out of money. The initial check sizes tend to be small, and hence this hobby is not likely to pay for the daily expenses. But early successful exits allow super angels to raise money from high worth individuals in their networks. In Chris Sacca’s words: He was able to raise money from people he had traveled with and who he had relationships with.

Stay tuned for Part Two: How To Spend It.