I think Chris Dixon is one of the smartest investors around. I co-invested in him when he was an angel and I’ve co-invested with his early stage fund, Founder’s Collective. But while I generally agree with his recent post on venture investing segmentation, I need to call bull on this:
What we are witnessing now is a the VC industry segmenting as it matures. Mentorship and angel funding are performed more effectively by specialized firms.
It’s kind of surprising to me that someone who did such an excellent job as an angel would imply that he really wasn’t the best investor for those companies in the first place but, hey, he’s entitled to his opinion. But saying you’d be a better angel if you were a firm is like saying that you’d be a better amateur athlete if you went pro*. You can’t be an angel if you have a fund. And though this sounds like a semantic argument, it make a real-world difference to entrepreneurs.
What bothers me is the lumping of angel motivation and technique in with the “Super-Angel”/micro-VC motivations and techniques. The otherwise excellent David Lerner makes this mistake when he says he intends to explicate the angel investing world and then lists, as half his angels, people with funds. This is a fundamental analytical mistake: taking the average of a bimodal distribution tells you nothing very interesting at all.
There are reasons why angels existed in the first place. While the lower cost of getting a startup from A to B has changed the dynamics of early stage rounds, it hasn’t changed most of the fundamental advantages of having individuals investing their own money: a personal–rather than institutional–connection to entrepreneurs, the ability to make quick decisions, the ability to make decisions that may not seem fiduciarily responsible but are for the greater good, primary expertise in an industry and in company building rather than in money-management, etc. Most importantly–despite what the Supreme Court may think–firms are not people and they don’t, in the long run, act like people. Angels do.
* While this is the reasoning behind the modern Olympics and many college football programs, it flies in the face of the actual meaning of “amateur” and destroys what makes amateur athletics so appealing.