Wednesday, May 21, 2008

ACA Conference Summit 2008 – Angel Investment is Becoming an Asset Class

I attended the Angel Capital Association Summit held in San Diego this year. The number of attendees grew from 325 attendees to 370 this year. While it’s a nice growth it’s not quite as dramatic as last year’s which went from 150 to 325 in one year.

The ACA now has 163 member groups representing 6,760 investors. Over 50% of the groups forecast increased deals and dollars for 2008. Trends this year for angel investors include:

--University-connected angel groups rising
--CleanTech groups forming
--More women involvement in angel investing
--More co-investment by region
--More communication with angels on a worldwide basis
--Growing relationship with VCs

The ACA continues to develop as an organization. Their goals for this year include:

--Public policy committee development
--Regional collaboration committee
--Offering D&O insurance to member groups
--Partnership with the National Venture Capital Association
--More research into angel group investment returns through a partnership with Dow Jones VentureOne

From the conference it was surprising how many attendees came from outside the US. The other major trend was the growth in the number of sidecar funds. Over half the angel groups have one. A sidecar fund is one in which the members invest a set amount and the funds are applied as an add-on to the deals the members fund. This provides both diversification as well as a means for investors to join the investment without having to commit time and effort to the process.

Also, angel investments were referred to several times as an “asset class.” I haven’t heard that before but given the traction around startup investments which most VCs have left behind for later stage deals we may be seeing the rise of a new asset class for investment. During the conference one speaker noted the slowing growth of the Venture Capital community. VCs had $300B invested in 1995 and in 2008 only $380B. The speaker defined VCs as a “compensation scheme in search of a business model.”

If you are interested in angel investing from an historical point of view you may want to check out Georges Doriot who was one of the first angel investors. You can read more about him in his book called Creative Capital.

Best regards,
Hall T.

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