Where Sophisticated Angels Are Focusing - Themes from the ACA Summit

Following our recent 2013 ACA Summit, we decided it’s a good time to take a step back and consider the accomplishment: This year boasted the largest worldwide gathering ever of accredited angel investors. With over 660 attendees from 27 countries, the event was buzzing with talk of deal flow, innovation, and job growth. Takeaways from ACA Chairman David Verrill are captured in this brief video.

From this three-day event, four key themes emerged that are evolving the angel investing landscape:

1. Leading angels share ideas and better practices with each other.
One of my favorite things about ACA members is how interested and willing they are to share their ideas and experiences with one another. In my mind, this has been going on since 2002, when the first meeting was held that eventually led to ACA’s formation. But it seems like true sharing increases every year, and the sounds from the networking reception gets louder and louder, as old friends renew acquaintances but are excited to meet new friends, too. Several of our sponsors told me how unique the “spirit of sharing” was among our attendees. My sense is that angels recognize that our whole industry improves as more and more angel investors learn from their more experienced colleagues.

2. As angel groups mature, angels are paying more attention to what happens post-investment.
While for years (and for good reason) angel best (or maybe “better”) practice sharing focused on pre-investment practices such as due diligence and valuations, some of this year’s most popular sessions were focused on post-investment practices. Two of the most attended and highly regarded sessions were John Huston’s “8 Steps to Successful Exits” and a panel “Sitting on Portfolio Company Boards: Tacks Under Your Chair?” as part of the tracks on Exits and Board Best Practices. As angels and angel groups mature and become increasingly keen investors, most experienced angels already have a proven arsenal of pre-investment best practices under our belts, and they have shifted their attention to post-investment practices that drive the success of our portfolio companies.

Intuitively, we all know that staying close to our investments helps guide them to successful growth and eventually, successful exits. We’ve also seen research to back this up, with a Kauffman Foundation financed study by Rob Wiltbank showing that providing mentorship, board participation, or financial monitoring to portfolio companies at least 1 or 2 times per month makes those companies almost twice as likely to have an exit multiple of 5 to 30X+. Many of us understand that we are mentor-capitalists first and foremost.

As John Huston expressively put it, “we don’t know if we’re investors until the exit occurs…until then we’re merely donors!” All quipping aside, that reason alone sums up the importance of providing fledgling portfolio companies with the guidance and support they need to succeed far beyond just writing a check.

3. Angels are more globally minded than ever.
With representation from every continent on the globe, the attendance roster alone demonstrates a growing appetite for cross-border collaboration and idea sharing. As ACA Chairman David Verrill stated during an international workshop session, “I get most new ideas from people who are the furthest away. I know my market and local region very well, and I tend to get my best out-of-the-box thinking from those who live across the world.”

An interesting globally-minded session, “Governments & Angel Investors: Will Politicians Ever Get It?” provided perspectives by leading angels from the US, UK, France, and Hong Kong. Panelists shared struggles and successes in nurturing relationships with their governments and driving policy changes in support of early stage investing. We learned of the strong collaborating between UK angels and their government, resulting in a significant increase in new venture investment. We also learned of the diverse environments across Asia to hear which governments are most—and least—supportive of capital formation-friendly legislation.

And while significant cross-border investment is a ways away, we do see long-term interest by several angels in this idea. Many are building the kinds of relationships with investors in other countries that will one day lead to syndication. And others may have heeded the recommendations of keynoters Dave McClure and Aydin Senkut to look to great ideas in many other parts of the world (with or without colorful language).

4. Angels paying ever greater attention to public policy.
In a panel on the JOBS Act, panelist Congressman Schweikert of Arizona asked by a show of hands how many angels have met with their local Congressman. A surprising (and encouraging) 50% plus of the hands went up. The days are long gone when angel investors sit back and hope that legislation will move in their favor. Today’s leading angels understand that building relationships with local government and educating them on angel investing’s role in stimulating their local economies—is vital to both our personal success as investors and to the regions we support.

Angels flocked to the public policy sessions to educate themselves on the key issues and to better understand the work that ACA has been doing to impact public policy. A few years ago, I don’t think so many angels would have attended such sessions. We talked about reducing the capital gains tax for at least another year to working with Congress and the SEC to ensure the JOBS Act achieves its intended benefit of enabling startup growth.

For those of readers who want to better stay in the loop yourselves, you might want to read ACA’s recent Congressional testimony on the JOBS Act or our success from earlier this year to extend the 100% exemption on gains from Qualified Small Business Stock through the end of this year.

The Summit closed with one of the highest rated sessions—a keynote with data driven insights by newly appointed winner of the 2013 Hans Severiens Award winner Rob Wiltbank (congratulations again, Rob!). Sharing the findings from the freshly released 2012 HALO Report, Rob shared data including a continuing spread of investment dollars outside of California, an increasing share in mobile investment, and a slight slip in the media angel round deal size. The full HALO Report, also released the week of the Summit, is available here.

Finally I want to thank the 34 partners and sponsors who joined us at the Summit. So many of them added a lot of value to the program and to discussions and I look forward to working with them in future events and throughout the year with our annual partners. Click here for full descriptions of each of them, and a special thanks to our Annual Partners – Foley Hoag LLP, APCO Worldwide, Gust, Dell, Silicon Valley Bank, and OTC Markets – as well as lead Summit sponsors MDB Capital Group, BNY Mellon and LeClairRyan.