When seeking sources of capital the first round of funding, we always encourage entrepreneurs to consider potential investors’ knowledge and expertise about the new company’s business first and foremost. Rarely will investors decide to back something they do not already understand. Size of capital and alignment of investment strategy come next. Simply put, big funds need to invest a lot of money and demand $250M+ exits even though they are in the upper few percent of transactions; smaller funds invest proportionally less money and can be satisfied with an average M&A that has relatively higher likelihood.
Equally important, however, is considering a potential investor’s ability to help syndicate the initial and subsequent rounds, their “Syndicate Power.” Having an investor with strong relationships and track record with other firms means an entrepreneur will have a much easier time raising the next round and will have an arms-length transaction that gives a fair market price for the company. It also means an entrepreneur will have a much better ability to tailor the network of investors to meet the company’s needs for capital, expertise and connections. In contrast, investors with little history of syndication, preference to keep deals to themselves or lack of capacity to help raise follow on rounds leave the entrepreneur back at square one for the next round, making subsequent round just as hard, and sometimes harder, than the first.
At CommonAngels, we make strong relationships with other investors a high priority, including other individuals, angel groups, venture capital firms and corporate investors that have complementary strategies and capabilities. For example, we made a half-dozen investments last quarter. A couple already have been announced; expect to hear more in the coming weeks. Here are few highlights from the past year and most recent quarter:
- CommonAngels has invested $5M in the past 12 months
- $45M came from co-investors over the same time period
- These monies came nearly 20 different sources, including venture firms, corporations, and angel groups
- Over the past three years, $1 from CommonAngels has been matched on average by $6.54 from other investors
- Last month, PermissionTV announced $9M in Series C financing with half from new investors Castile Ventures and Point Judith Ventures and the other half from CommonAngels, Cramer, Inflection Point Ventures, and the Massachusetts Technology Development Corporation.
- This week, Skyhook Wireless announced $8.5M in new investment from new investor RRE Ventures along with existing investors Bain Capital, CommonAngels, and Intel Capital.
Co-investors in our current portfolio include:3i, Angel Healthcare Investors, Atlas Venture, Bain Capital, Carlyle Group, Castile Ventures, Commonwealth Capital, Flagship Ventures, GrandBanks Capital, Golden Seeds, Hummer Winblad Venture Partners, Inflection Point Ventures, Intel Capital, Launchpad Venture Group, Longworth Venture Partners, Masthead Venture Partners, Menlo Ventures, MTDC, Navigator Technology Ventures, New York Angels, Point Judith Capital,RRE Ventures, SAS Investors, Sherbrooke Capital, Venture Capital Fund of New England, and Walnut Venture Associates.
