With shrunken deal dollars, the worlds of angel investing and venture capital have recently seen the ascension of a hybrid investing format.
“While the aggregate amount of dollars invested in venture capital has recovered from the lows of 2009, venture capital funds have largely migrated towards backing fewer companies while investing more dollars in each round,” said Bill Podd, executive director of Landmark Angels, Inc. in Greenwich.
Podd said the situation has created a scenario where many promising companies that need investment are increasingly considered to be too early for venture capital funds, but have capital requirements beyond the scope of traditional angel groups.
“This dynamic has created ”˜a funding gap,”™” said Podd. He said through the gap a new model of angel investor groups have emerged. Podd said his group Landmark is among those which responded to market conditions by both growing its membership and partnering with other angel groups and additional sources of capital.
Landmark over the last years has evolved from a small group of investors based in Greenwich into a group of more than 200 investors with a national presence, meeting regularly in Greenwich, Palm Beach and Naples FL, San Francisco and Southern California and most recently Chicago and Dallas.
Podd said Landmark has also partnered with other leading angel groups, family offices and private equity groups to syndicate investments tapping into additional interest and sources of capital for individual deals.
“The combined effect of an expanded membership, and the ability to syndicate investments with other angel groups and alternative sources of capital provides Landmark”™s members the ability to make larger equity investments and provide for follow on funds, filling the gap that exists in the wake of many traditional venture capital firms migrating towards focusing on a smaller number of late-stage deals,” Podd said.
According to CB Insights a New York-based data company focused on venture capital and angel investing, the hybrid model of investing is gaining steam throughout the country. In June the company cited the emerging segment as a top performer among 2011 deal makers.
Podd said through the new developing model Landmark has been able to draw on expanded sources of capital to invest in quality deals. Due to a national membership and expanded network the company is also able to provide members with potential investments in geographic locations that they would not have otherwise had the opportunity to consider for investment.
“We believe that this approach to angel investing will gain further traction in the near term and that investment outcomes will improve as a result,” said Podd.
According to CB Insights in the second quarter of this year their $7.6 billion of venture capital funding invested in 768 deals, representing a nine-quarter high on both dimensions.
Podd said the recent improvement in the IPO market highlighted by the success of LinkedIn and the hotly anticipated public debuts of Zynga, Groupon, LivingSocial and the eventual Facebook offering, serve to remind investors of the opportunities and potential rewards for angel investors.
“The evolution of angel groups with a national scope and the ability to syndicate deals will contribute to the entrepreneurial ecology and capital formation critical to the success of tomorrow’s leading companies,” said Podd.
