If you are a startup or small business seeking investment for your business, you’ve likely heard the term “Super Angel” as of late. If you’ve gone through our Funding Recommendation Engine, our algorithm may have suggested a few investors whose descriptions describe them as super angels. Because of this, we have received a few questions from entrepreneurs about what the term means and how these super angels differ from angel investors and venture capitalists.
Since the term is relatively new, and we couldn’t find a place offering a clear perspective on the question, we thought we’d address it here using the input of prominent people in the startup investment industry.
The definition to-date has been just a bit nebulous. There are two schools of thought as to what a super angel is.
A Super Angel is a Really Really Active Angel Investor
This is the nebulous definition of a super angel, but one that is quite popular. Super angels are angel investors who are really active when it comes to making angel investments in young, emerging companies. They’re so active, in fact, that they’re “super active” is how the logic goes (we think). It’s also worth noting that super angels in this definition are investing their own money in these companies.
The obvious challenge of this definition is that ‘really active’ is relative. Do you have to do 6 deals per year to be considered active? Or do you have to be in the top quartile or decile of angels in terms of deal activity to be a super angel? Layer on top of this that getting and measuring angel data has historically been difficult, and it becomes apparent that super as measured by activity is a messy proposition for angels. (Creating a list of super venture capitalists, although there is really not such a thing, is easier because data is available)
But putting aside measurement challenges, this definition of super angel requires 3 ingredients:
- A Person
- Investing Their Own Money
- A Lot
Super Angels Have Their Own Funds
This is the other definition that seems to be gaining some traction although it also suffers from “controversy” of its own (more on that below). Here’s a view on Super Angels courtesy of the Wall Street Journal.
Super angels have professionalized the practice and show some similarities to full-time venture capitalists.
Many super angels have begun adding to their own investments by raising funds from outside investors. Unlike traditional angels, they also take a hands-on role in helping their start-ups. Like most angels, however, they still deal in relatively small sums of money, often investing $25,000 to $250,000 in a start-up.
So per this definition, Super Angels invest like angel investors, i.e., smaller amounts, but do it with not just their money but via external funding they’ve raised.
Most “super angels” at this point typically have the following characteristics:
- Small institutional funds (this was not always the case, but is today). By “small” I mean fund sizes typically in the ~$15 million to ~$70 million range (these numbers are inexact).
- Investment size. They invest $x00,000 to a million or so in funding in a given round.
- Board seats. Many of them *may* take a board seat (and will step down with a “full” venture round where the VCs take over the investor seat)
- Value add. They often are very good at providing introductions, strategic advice, etc.
- Upstream of VCs or co-invest in Series A/seed. Super angels are not viewed as directly competitive with VCs (and may often co-invest), although they may sometimes compete with traditional VCs for a seed round.
- Lead rounds. The super angels often will help pull together a broader syndicate for the entrepreneur if useful.
- Started off investing their own money, then raised a fund to scale investments. Many super angels started off investing their own money and as their track record grew they raised funds
This definition suffers from fewer limitations than the first definition in that who is a super angel is easier to determine. If you raise a small fund after investing on your own, you’re a super angel, right?
Not so fast.
You’re Not a Super Angel, You’re a Micro Venture Capital Firm
There is no such thing as a super angel, only “micro VCs” - Ron Conway said what I had been preparing to say, “there’s no such thing as a super angel.” Either you’re an angel or you manage professional funds. Period. If you’re an angel you invest your own money and you have nobody to answer to except your spouse. And you can have ulterior motives like helping people or being involved with “cool stuff.” If you’re investing other people’s money you’re a professional money manager. If you invest it in startups you’re a VC professional money manager. Now we can call you a seed-stage VC or a micro VC. We can even acknowledge that you might work differently than traditional VCs. But you’re not an angel. So I wish this separate definition would go away. Stop to think about it, why would a super angel act more like an angel than a VC? A: Only because it’s a nicer branding for entrepreneurs. That’s all. You still have a fiduciary responsibility to your investors (LPs) to maximize returns.
In Mark’s view, the term super angel as applied to small funds is more about marketing. Ron Conway, founding partner of “super angel fund” SV Angel and the individual who many regard as the Godfather of Angel Investing, seems to agree with Suster in substance as he stated at TC Disrupt. Specifically, Conway commented, “I think Super Angels versus VCs is a bunch of confusion. Super Angels are just small VCs.”
So Now You’re Clear About What a Super Angel Is, Right?
Ok, so the reality is that super angel still doesn’t have a clear definition. Hopefully the entrepreneurial community will begin to coalesce on a definition that clearly identifies what a super angel is vs. what an “un-super” angel investor is vs. what a micro VC firm is. In the interim, if you are an entrepreneur going through our Funding Recommendation Engine and you see the term super angel come up in the recommendations, know that these angels are writing checks. And definitions aside, if you are an entrepreneur seeking funding, this is what you probably ultimately care about.
If you’ve read this far, you definitely should: