Entrepreneur, Explorer, Angel.

Sometimes all at Once.

18TH January 2012

Business Tricks - Entrepreneur - Explorer - Leadership - Portfolio - Timeless - Timely - Uncategorized - Venture Capital - Vision

Angel Series #1: If you were capable of inventing Facebook, you would have invented Facebook


This excerpt is serialized from a whitepaper titled  Angel Investing for Single Family Offices by The Family Office Association and Vaux les Ventures.  For a complete copy, visit the FOA website.

Word to today’s angel: you won’t likely create it in house, so Network or Die.

The dot.com mantra still applies today, and even more so. Being able to access timely and quality deal flow before it is over-exposed is a crucial skill. It is one thing to take a flier on the next young faced entrepreneur who will take on Facebook. It is quite another to take a flier on Zuckerberg on the next Facebook! But the networking doesn’t end there: being able to access additional capital to fund the growth stages of a business requires excellent relation with the VC’s mentioned above. A successful round of $1,000,000 of angel will still likely require $10,000,000 or more of capital to get to exit.

“You know, you really don’t need a forensic team to get to the bottom of this… If you were the inventors of Facebook, you would have invented Facebook.” So said Mark Zuckerberg’s character in the movie The Social Network.

 As funny as that comment was, it contains a stark truth: Doing it yourself poses incredibly long odds. There are many Entrepreneurs who are incredibly creative people, driven by ideas they think will change the world. Few of them actually do so. Most SFO’s have accessed these opportunities through venture. But now is the time to seriously consider how that’s panned out. Take a look at the returns- they’re probably negative. Calculate the fees you’ve paid for the privilege of those returns. Then take a look at what you as an SFO have actually learned about entrepreneurship in this case. Are there relationships you’ve benefited from or will benefit from in the future?

Conversely, did you do any direct investing in that period? Even if you washed out there, you saved fees, you take away real direct relationships with entrepreneurs who then go on to start Linkedin out of the ashes, and you’ve had a direct line the CEO and built experience with the next generation. If you’ve continued to allocate, you are set up for huge returns on the way back up.

No doubt, an SFO looking to adjust their strategy in venture to include angel investing will be placing bets on these mercurial persons and their visions. The majority of them will flame out, and the slim numbers that do build viable business still present the SFO with a host of risks that will affect the investment outcome, no matter the business’ fate.

For a complete copy of the whitepaper, visit the FOA website.

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