When Angel Investors And Venture Capitalists Are On Same Team
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Being an angel investor is not an easy job. Angels put a lot of time and effort in searching for new investment opportunities, evaluating countless numbers of business plans, conducting timely due diligence, examining management teams, and validating novel technologies for the marketplace. Their role as an independent investor may often require some flexibility in order to meet the challenges of their demanding profession. Many angels would prefer to pool their money from different sources rather than be the sole financier of a given investment. They would also prefer to employ different people who can take on their tedious responsibilities and make many of their critical financial decisions.

High-risk mutual funds
An example of this new approach to angel investing is found in a form of a high-risk mutual fund in which a single angel investor can invest anywhere from $50,000 to $250,000 for a given early-stage venture. Fund managers simply select the different companies to invest and are responsible for conducting timely due diligence. This saves the investor much time and energy, while still being given the opportunity to participate in angel investing. Investment advisors, on the other hand, are able to see the benefits of this new approach as an excellent means of deploying a small percentage of one’s portfolio and reaching the upper end of the risk/reward spectrum.

Angels investing in VC funds
Champion Ventures is a group that was founded by ex-football stars Ronnie Lott and Harris Barton who witnessed their fellow athletes lose much of their hard-earned money in poor-advised ventures (including restaurant chains, real estate, etc.). They established this exclusive organization comprising of hundreds of celebrity athletes from all major sports areas with the intent of assisting and protecting their fellow athletes’ investments. Their solution was to take on the role of angel investors while investing in large, well-known venture capital funds. This organization has many benefits for its celebrity clients, including well-devised financial decisions made by experienced venture capitalists in addition to having the capability to back early-stage businesses. Champion Ventures has nearly $200 million in committed capital, where its patrons can invest in different venture funds of varying industries, greatly diversifying their portfolio.

Public venture funds that welcome small investments
The Draper Fisher Jurvetson Firm, one of the nation’s most respected venture capitalist organizations, recently proposed the Me VC/Draper Fisher Jurvetson Fund, a public venture fund that welcomes small investments, with the prospect of reaching $500 million in committed capital. Investors can purchase as little as one share, with diversification of choosing between 30 to 50 different companies of investment. Most angel investors do not have the experienced technical background to make sound VC decisions; therefore, associates of the Draper Fisher Jurvetson Firm will make the decisions for the investor concerning which companies they should invest in.

Stock exchange for private placement
In 2001, a group of former executives from the Bear, Stearns & Co, Inc. (a leading global investment banking, securities trading, and brokerage firm), launched the NYPPE, or New York Private Placement Exchange. This is a stock market that was created to allow wealthy individuals to trade shares in private companies (most of which are funded by angels and VC’s). Their primary goal in devising this exchange was to generate a secondary market for venture capital that is comparable to public stock exchanges. Being part of the NYPPE would allow angels who invest in private companies to obtain liquidity (sell shares) prior to their exit and for wealthy individuals to have easier access to VC-type investment opportunities.

New financial mediums have been devised for angel investors that greatly promote VC investments. High-risk mutual funds, ability to invest in VC funds, public venture funds, and private placement stock exchange are some examples in which angels can benefit from their venture capitalist counterparts while retaining their angel profile.

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