Angel groups and online platforms can give people outside the venture-capital world access to tech deals
In the Wall Street Journal article, How Individual Investors Can Get a Piece of Startups, the San Francisco based tech reporter Tomio Geron outlines how individual investors can access venture-capital like investments into private tech companies.
According to Geron, the days of physically needing to be in Silicon Valley to access venture capital investments in new technology companies are over. Individuals who want access to startup investment opportunities can now invest through online platforms like Propel(x). Or they can access later-stage but still emerging companies through publicly traded funds that themselves are invested in young tech companies.
Private markets, broadly categorized as “Alternative Assets,” can bring returns that would otherwise be difficult to find in publicly traded companies. And, investing in emergent technology can be fun, even “thrilling.” Semil Shah, a venture capitalist at Haystack Fund and Lightspeed Ventures, told Geron that his experience as an angel investing through online platforms was “an exciting thing to be around people doing new things.”*
But with the potential for above public market returns comes the potential for above public market risks. Investments in private securities are not suitable for all investors. According to Geron, experts warn that angel investors shouldn’t invest money they can’t afford to lose.
The article goes on to explain that Angel Groups, and more recently online platforms, provide a means for new investors to learn from more experienced Angels about the caveats of investing and how to spot trends and make better investing decisions. The Angel Capital Association, a non-profit dedicated to providing resources for Angel Investors, maintains a list of groups who specialize in local, regional markets such as the Bluegrass Angels from Lexington, KY.
In the last few years the rise of online platforms, like Propel(x), fill a potentially much-needed gap in the funding ecosystem by aggregating opportunities from across the US from Silicon Valley and Boston to emerging tech hubs like Atlanta, Austin, and Pittsburgh, among others. Platforms like Propel(x) source deals from all over the country (and sometimes internationally) and bring together investors who may be looking for more variety than what is available in their local markets.
|Stage||Early Stage Startups||Late Stage Startups|
|Investing Focus||“Deep-tech”||Late-stage startups|
|Accredited Investors Only?||Yes||No|
|Investment Minimum||$3,000||No Minimum|
|Exposure||Direct||Publicly traded mutual fund|
|Did you know?||Offers expert panels to provide insights on companies||Founded by a former Wall St. analyst|
|Primary Location||San Francisco||New York|
Propel(x) is unique in terms of its deal-flow. The company focuses on “deeptech” science and technology companies and often sources deals from close relationships with national research labs like the National Renewable Energy Lab or government grant programs like those sponsored by the Department of Defense.
Examples of “deeptech” companies featured on Propel(x) include SafeTraces, a company that builds edible, invisible DNA barcodes for food traceability and authenticity. They worked with Propel(x) in their early rounds and then raised a $10M Series A in 2018. Similarly, Neurogastrx, a private biotech company focused on discovering and developing neuro gastroenterology related therapies (the “gut-brain axis”), received funding through Propel(x) for its seed round. The company later raised a $45 Million Series A in 2018 from a group of venture capital investors.**
Geron suggests that non-accredited investors and investors with low risk/reward appetites can still gain exposure to tech through publicly traded funds like GSV Capital. GSV is an investment fund that trades on the Nasdaq. It held Spotify, Dropbox, and Lyft before their respective IPOs.
For investors who are looking to diversify their holdings, gain exposure to “alternatives,” or who merely want to learn more about emerging technology, online platforms and publicly traded funds can provide access to deals that were previously unavailable to “main street” investors. Whichever path an investor takes, it should be noted that while tech companies can be “thrilling,” they are also inherently risky and mostly illiquid.
Marianne Hudson, the Executive Director of the Angel Capital Association who is quoted in the article, advises that people investing in individual companies should build a portfolio of at least 10 to 12 investments because of the high failure rate of startups. It is important that individuals plan their investment process to have sufficient capital to invest over a longer holding period, such as five to seven years, instead of blowing through their investible capital in six months.
Source: June 13, 2018 Wall Street Journal How Individual Investors Can Get a Piece of Startups, by Tomio Geron.
*This testimonial may not be representative of the experience of other investors and is no guarantee of future performance or success.
**Prior company performance may not be indicative of future results. Private early-stage investing is risky and is not suitable for all investors. Historical fundraising success is not an indication of potential investor returns. Sources: https://www.prnewswire.com/news-releases/neurogastrx-inc-raises-45m-series-a-to-bring-lead-gi-candidate-through-proof-of-concept-300577352.html, https://www.prnewswire.com/news-releases/safetraces-raises-10m-in-equity-financing-300732839.html
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