The other day, I generated a lot of buzz and feedback around my assertion that calling yourself an “angel investor” should require a little more than small syndicate investments:
You are not an angel investor if all your investments are less than $10k, made through @AngelList syndicates, and the founder doesn't even know who you are because you've never met.— Charlie O'Donnell (@ceonyc) February 21, 2019
Most people seemed to agree—some disagreed, but a few people were like “Why do you care? What does it matter as long as they’re out there writing checks?”
Some people thought it was a privileged way to enforce hierarchies and to equate money with value—and I understand where they’re coming from. The issue is that nomenclature creates a certain set of expectations that founders use to allocate the most precious of their resources—their time. They want to make sure that they can achieve fundraising goals as fast as possible and I am nothing if not a passionate defender of a founder’s time. That means deciding who to take 1:1 meetings with, who to travel for, or who to take 2nd or 3rd meetings with—and size of check has a major impact on that.
It used to be that the only people who could even get into angel rounds were high net worth individuals that could write at least $25,000 checks—so if someone said they were an angel investor, you could assume this was their minimum check size. With the advent of platforms like Angel List, now you could be investing with just $1000—which is great for the democratization of the asset class. Everyone should be able to access any investment—but it becomes confusing for founders to figure out where they should spend their time. It becomes even more confusing when they’re out going to conferences and reading articles that feature interviews with “angel investors” because they’re assuming these are folks with a certain type of experience that could be very different than reality. Crowd investing platforms allow anyone to be an investor even if they’ve never even interacted with the team—so you could have made two dozen investments and still have very little firsthand knowledge of what life is like at a startup or what early stage founders go through.
With new technology should come new terminology. I would propose that we call these types of investors “syndicate investors”—super useful folks who join with others to help rounds get raised on various crowd investing platforms. They could speak to this experience quite well if you were going that route and it would help differentiate from the kind of folks sought out for direct relationships and bigger checks. To me, an angel investor is someone who writes at least $10k checks (if not actually $25k) directly into company cap tables (as opposed to into syndicates or SPVs) and at least has some direct relationship with the founder. Other relationships can be very valuable and helpful, but I think we should call them something else.
A similar problem happens at venture firms—where no longer are you seeing clear cut terms like analyst, associate, and general partner. Now, everyone’s a partner, blurring the line around who can actually lead an investment and get a deal done. I was the first analyst at Union Square Ventures and so I get why this is done—because who wants to talk to the analyst? They don’t have pull and so founders try to go around them—defeating their purpose of screening for a partner.
Still, I think founders (and other VCs) who desire to make connections with investment professionals who have the “power of the purse” should be able to differentiate. When I was an analyst, I never took founder meetings on my own without either Fred Wilson or Brad Burnham because I didn’t feel experienced enough to vet the companies. When I wrote or spoke, I talked mostly about what I learned from the firm’s partners and what their actions were versus speaking authoritatively on my own. Today, the blurring of titles means that you have to go a few layers deeper in someone’s bio to understand what kind of experience they’re coming from and what kind of pull they might have in their firm—and I can’t see how this is better for founders trying to allocate their time and attention.
Partners, in my mind, should have carried interest (upside) in the fund and be able to lead deals and take board seats. They should be the kinds of key people that limited partners are basing their investment decisions on the fund itself on—not two to three year rotational employees. If you want to call someone else part of the “investment team”, that’s cool, let’s not try to make it seem like the person who just got their MBA has the same experience and pull as the person who started the firm. They’re an important teammate, but for founders, experience and influence is a meaningful signal on how to spend their time.
I feel the same way about someone who calls themselves a “VC”. You might work for a venture capital firm, but unless you’re an equity partner in that firm (and I would like to think a significant one) that writes checks, sits on boards, I wouldn’t consider you a “venture capitalist”. I believe the name creates a certain set of expectations and founders make assumptions about it enough that you should be a bit discerning about how you use it.
Call me old fashioned, but back in my day, I was happy working for a VC firm, but content to use my actual title of analyst so people didn’t think I was on the same level as the VCs who actually started the firm.