Last Friday I had a conversation with Tony Stanco from the Council on Entrepreneurial Tech Transfer and Commercialization at George Washington University. He called to chat about VC bloggers’ thoughts on the report that he published last week, Survey: The Relationship between Angels and Venture Capitalists in the Venture Industry. An article in Private Equity Week summarizes the findings:
“In the survey, more than 300 venture capitalists and angels overwhelmingly agree that angels are beneficial to the venture capital industry. In fact, a higher percentage of VCs than angels (94% to 72%) said that angel investors are beneficial…
While the survey notes the “general foundation of goodwill and respect” between angels and VCs, 100% of VCs and 94% of angel investors agreed that the two sides could do a better job working together…
The chief problem that persists between the two groups is deal pricing. In the survey, 78% of VCs cited “unrealistic company valuation” as a reason that a company with angel involvement would be unattractive. Half of the angels surveyed agreed with them. It was the most popular response from both groups.”
I agree with the above two points. First, that angels are indeed extremely beneficial to venture capitalists, as they are an integral source of seed capital and support for entrepreneurs seeking levels of financing that are still as-yet too small or risky for institutional involvement. And yes, the issue of valuation is a viable reason for the tension between the two groups. I personally have seen a number of deals where the previous angel round and future expectations were at valuations that didn’t match our own.
But I believe that there is a deeper issue at play here – perhaps the tension also arises from lack of communication, as Stanco has suggested. Could we have an opening of the dialog in the blogophere as a new public forum to address the issues between angels and venture capitalists? We now have a mechanism to air our thoughts openly in bridging the gap in perspective between the two groups that wasn’t available with this audience just a couple years ago.
And to that end, I am wondering where are all of the angel bloggers? I know there are a few dozen VC bloggers out there. And a number of people have cited why VCs do blog (Paul Kedrosky, Seth Levine, and Jeff Clavier). Don’t most of the positive reasons also apply to angels, too?