The following is a column that appears in today’s edition of Xconomy:
Over the past several years, and especially since this summer when CommonAngels (where I serve as managing director) became the first angel group to join the National Venture Capital Association (NVCA), I’ve frequently been asked in varying tones of voice from the curious to the cynical, “Is CommonAngels an angel group or a venture capital firm?” The definite answer is “yes,” which is less a statement about CommonAngels than it is about the substantial changes in the capital market affecting entrepreneurs.
Here’s some history and context. The Tech Bubble of 1999-2000 and subsequent Tech Wreck of 2001-2004 did a lot more than just flood the market with money and leave it dry. This boom-bust was part of a classic economic supply shock that has led to a restructuring of the capital for new ventures and changes in investment strategy that determine how that capital is deployed.
In a supply shock, the dynamic between price and availability of a good—in this case cash—changes significantly. Often, there follows a restructuring of the market as more efficient or more successful suppliers gain market share, buyers shift to more reliable or specialized suppliers, and both sides seek to alter their strategies to accommodate the changed market.
