Looking back at my 2014 resolutions I pretty much stuck to what I had envisioned: I worked very closely with some startups in my portfolio and tried to get them on the path to cash flow neutral. I led the first deal with the Band of Angels. My network building activities were largely focused on Germany where I am increasingly getting clued into the venture capital and startup ecosystem.
How did the markets fare in 2015?
Public markets treaded water. The DJII started 2015 at 17823 and ended at 17425. The six year runup which started at the 7062 low point in February 2009 has come to a halt. The tech IPO pipeline bore very few exits in the first half of the year, and Square was the only better known company that was able to go public after the summer. Presumably, there still are 531 tech companies in the IPO pipeline, and 145 unicorn companies. Some unicorns may turn out be undercorns.
While the above trends are important when it comes to exits, angel investors play at the seed stage. Valuations were still high and seed money was still flushing around like it had been printed yesterday, although the investing pace may have cooled off just ever so slightly. It is worth pointing out three events and trends that may lead to future disruption in the seed investing space
- Angellist raised $400m from CSC to be invested with the top 50 Angellist syndicate leads, effectively doubling the amount that has been invested via the platform so far.
- A seed investment in Silicon Valley now means $1 to $1.5 million invested at a $6 million pre money valuation. Current seed capital firms have raised larger funds and have become the new Series A investors. New pre-seed investors are likely to fill the gap and make the first investments in the $200 to $500 thousand range.
- The quantification of startup signals is continuing and now extends to the earliest stages. Large VC firms have invested heavily in this, and third parties such as Mattermark and CBInsights are providing related products and services.
How is my angel investment portfolio performing?
According to CB Insights, 22% of all companies that raised a seed in 2009-2010 have had an exit. To gain a perspective, let’s look at the statistics based on 11 investments between 2009 and 2013: Three are dead, and the money is gone. Four exits have made some money or have the potential to make money. 7 of the 11 investments have raised follow on funding. In 2015, Readypulse raised $5 million Series A funding in March, only to be followed by Retailnext raising a whopping $125 million Series E in April.
I made two new investments. I led the Band of Angel’s investment in Savvy where Thomas Arend and Hamish Chandra are building a global platform where learners and teachers connect for live, one on one video learning sessions.
Where did all the time go?
I closely worked with the CEOs of two of my 2014 investments. We discussed fundraising strategies, hiring, M&A and a range of other strategy and management topics. I took many trips to Germany, and in particular to Berlin, and connected with VCs, angels and startup CEOs to understand the startup scene in Germany and in Europe. As in prior years, I was also heavily involved in deal screening, coaching and mentoring. I looked at more than 100 potential deals and talked with as many startups. My blogging activities centered around ‘how to invest’ and ‘how to manage’: Founders and markets, the elusive Minimum Viable Product, and the Business Model Canvas, just to mention a few.
What is ahead for 2016?
It is anyone’s guess what the markets will do in 2016, but 2015 ended on a jittery note. The economy in China is headed southwards. The IPO pipeline is bursting with unicorn candidates, although some of these will certainly be relegated from that list. And while Black Swan events by definition cannot be predicted, it is worth observing that there haven’t been any for many years now.
Venture funds need to deploy money in Q1, but that may be it.The pressure on startups to generate traction, a. k. a. revenues, will continue to increase and will separate the wheat from the chaff when it comes to raising the next round of funds. Not much new here, really.
Ideas will become more important again as ‘momentum’ investing and FOMO will die out. The quantification of early startup traction will further commoditize investing, and will force investors to engage in more due diligence.
