Angel investing in Silicon Valley is huge right now.
In 2014, there were 2,960 angels who participated in a funding round (and by comparison, there were 822 in 2010).
It’s so popular, in fact, that there’s a four-hour class in Mountain View, California, that will teach you how to be an angel investor, the
In March, Y Combinator president Sam Altman held a four-hour, invite-only crash course at the seed fund’s headquarters to teach new angel investors how to “evaluate founders and their ideas and how angels can be helpful to companies they invest in,” Isaac reports. “The event also stressed that angel investing was difficult to do well, and that newcomers should expect to lose money.”
Of course, the idea that you can learn all there is to know about angel investing in startups in a mere four hours is literally unbelievable.
In the past several years, big tech companies like Facebook and Twitter have gone public, creating lots of millionaires with money to invest back into small startups. “The total angel scene back when I started in 2006 was 30 or 50 angels, maybe with three to five very active ones,” Aydin Senkut, founder and managing director of VC firm Felicis Ventures, told the Times. “Now everybody and their family and their pets who have some money want to get into angel investing.”
The influx of angel investor interest in startups can be a blessing and a curse for founders: having a bunch of notable angel investors provides much-needed credibility for young startups. But when a lot of angels invest in a company that’s in trouble and there’s no lead investor, there’s less responsibility on any one investor to help out.
Some founders also say angel investors today are so eager to put their money into startups that they don’t do their due diligence by thoroughly reading over deal terms.
This fits into Mark Cuban’s theory about what he considers to be a tech bubble forming today about private investments. In a blog post earlier this year, Cuban asserted that today’s tech bubble is worse than the dot-com bubble 15 years ago because today’s investments in private tech startups lack the liquidity of public market investments.
“I have absolutely no doubt in my mind that most of these individual Angels and crowdfunders are underwater in their investments. Absolutely none. I say most. The percentage could be higher.
Because there is ZERO liquidity for any of those investments. None. Zero. Zip.
All those Angel investments in all those apps and startups. All that crowdfunded equity. All in search of their unicorn because the only real salvation right now is an exit or cash payout from operations. The SEC made sure that there is no market for any of these companies to go public and create liquidity for their Angels. The market for sub 25mm dollar raises is effectively dead. DOA. Gone. Thanks SEC. And with the new Equity CrowdFunding rules yet to be finalised, there is no reason to believe that the SEC will be smart enough to create some form of liquidity for all those widows and orphans who will put their $US5k into the dream only to realise they can’t get any cash back when they need money to fix their car.”