Scott Adams is wrong. There are angel investors who invest in unproven companies, even at the concept stage. I'm one of them, and I prefer to invest in people. There are people who I'd invest in before even knowing what their companies plan to do.
Is this post about angle investing, or about misperceptions of sexism?
There are probably as many definitions of angel investor as there are angel investment deals. I think he was trying to make a point about modern gender relations.
I'm still not sure Scott Adams knows what an angel investor is. That, or I don't!
As I understand it, the real difference between angels and VCs is that angels invest without locking down a valuation, and angels invest without demanding control. A VC round comes with a firm valuation and with a board seat.
Angels sometimes invest in priced rounds. Convertible notes are a newer thing, and not yet 100% universal.
The biggest difference, traditionally, is that angels invest their own money or that of buddies, and that VCs invest the money of LPs. This is a little weirder these days, as there are super-angels/micro-VCs/whatever-their-business-card-says where that starts to become a distinction without a difference.
The best way I've found to separate out Angels from VCs, given the extreme variety of definitions, is: an Angel is an individual doing the investing, in broad terms they're acting as their own vehicle even if they're incorporated; VCs operate as a firm, a company or unit of multiple venture capitalists that represent a brand and many of those individuals may come and go while the brand continues on without them. The Angel represents their own specific interests. The VC represents the interests of their firm.
There's a few points which sound right in this essay, but I'm surprised he didn't discuss the more technical definition and its impact on the ecosystem:
1) an angel investor is someone who invests their own money
2) a venture capitalist invests out of a fund, which is mostly other peoples' money (OPM!) while taking a fee + economics from the fund (the famous "2 and 20" model)
But that's not too useful, because what's important are the behaviors that come out of the situation.
Because most angels are investing their own money, they usually don't have crazy amounts of capital to work with. Thus, they usually invest early so they can get a better percentage at a lower valuation.
Many VCs also invest early, sometimes exclusively so with smaller funds, but they are often called "seed funds" to make that distinction. A fund which invests OPM is never called an "angel" regardless of what stage they invest at.
And finally, big funds (managing 100s of millions of dollars) are what we think of usually as venture capital.
(Funds that invest even larger amounts at higher valuations are often referred to as "late stage venture capital" or "growth capital." And there's more specialized terminology later stage since more specialized financial instruments can be brought into play - SPVs/debt/mezzanine/etc)
Where Scott's essay rings true is that idea that investors of all classes are more risk averse these days- they prefer to see traction since the cost of building an app/website is rapidly decreasing. Thus, they are all behaviorally acting like "traction investors" rather than "idea investors" whereas in the past, traction investors purely consisted of the growth capital guys.
This might be worse for the ecosystem since people want you to have everything built before taking in our first dollar of investment, but you could argue it means the ecosystem's $s are being allocated more efficiently also.
"I have a degree in economics, an MBA from Berkeley, and over 30 years of business experience. Do you know what question I hear in Silicon Valley nearly every time I meet with potential investors for CalendarTree?"
I would have supposed that Scott Adams has become quite wealthy from the Dilbert strip, his many books and all the spin-off merchandise (calendars, toys, etc.). Why would he need to look for outside investors to fund his app rather than just investing his own money? And if he's not willing to risk his own money to start his new business, what message does that send to potential investors?
Investors understand risk management. It is possible he knows he needs 15MM to go for the home run, but doesn't want put in the 15MM himself and go bankrupt in the process. Investors allow him to shoot for the moon.
Also, investors help with accountability, pushing through tough spots, connections, advice, etc. Investors also add credibility that 'rich white guy throws money at project' doesn't give.
"If I had to guess, I'd say Silicon Valley would be among the easiest for women to penetrate"
This is not an opinion grounded in any sort of reality. Attrition for women in technical roles is nearly double that of other industries. In finance, women make up around 20% of corporate boards. Not so in tech. Not by a long shot.
This is Scott Adams saying "hey guys, here's some stuff I think but haven't really tested even a little bit."
> This is Scott Adams saying "hey guys, here's some stuff I think but haven't really tested even a little bit."
For non-regular readers: that's exactly what Scott Adams' blog is about - throwing ideas into the wild and discussing them in the comments. It's a feature, not a bug.
The problems come when people read it without knowing that, and assuming he's advocating for <issue>, while he's more of a "what do you think about this crazy thought?" kind of writer. Check this post[1] (specially the disclaimer) for an example.
I assume that he can't get interest in his idea because folks are dubious about the idea, but are willing to be disproven ("come back when you have some traction")
If I had to guess, I'd say Silicon Valley would be among the easiest for women to penetrate
In the average relationship, the male is 4 years older than the female. That means that women (as a group, even if their individual dating patterns differ) have a "look-ahead" insight into which careers turn out well (medicine, law) and which promise the moon but fall flat (startups, academia).
Among a group of 21-22 year-old college-senior women, at least a few have dated 24-27 year-old guys, so they know a lot more about the career landscape than the 21-year-old men, who've been dating 18- to 20-year-old women.
That's why there are no women (except for hand-picked pretty tokens) playing the VC-funded game. They have the look-ahead information, and they're smart enough to see the VC-funded "tech world" as a fraud and not get involved. It's clueless men who get in, wreck their careers, and find themselves with no other options.
Law is a terrible career these days. Talk to folks just getting out of law school about what their career prospects are like, don't talk to folks who are lawyers. The latter have already cleared numerous weed-out processes (getting into law school, getting through law school, getting a job after law school) that chew people up and spit them out. About 20-25% of T14 law students (and virtually none from lower-tier law schools) make it to BigLaw positions paying $160K/year. The rest become small-town attorneys, public defenders, assistants in the DA's office, or go to work for boutique law firms. These positions pay about $40-75K/year, barely more than a public schoolteacher, and yet they have law school loans to pay off. Even if you do get a BigLaw position, it involves being some partner's bitch for 7-10 years until (if) you make partner yourself.
Medicine is a decent career if you get through it and can deal with the hours, but it also has a massive weed-out funnel. At my (top liberal-arts college) alma mater, the admissions department had a joke: "95% of you are pre-med. By graduation, about 2% of you will be pre-med."
This is also why your main thesis, about women having an information advantage about the career world because of their relationship partners being older, doesn't hold. There is a strong selection bias in relationship partners. Lawyers find it much easier to find girlfriends than unemployed law-school graduates who went back to live with their parents. Anyone who uses their personal relationship choices as data on how the employed population as a whole functions is getting seriously biased data.
This is the goofiest theory. By and large women are bad at career planning. Hordes of 23 year old women march off every year to get graduate degrees with zero payoff potential.
[+] [-] diego|11 years ago|reply
[+] [-] AndrewKemendo|11 years ago|reply
[+] [-] WalterSear|11 years ago|reply
There are probably as many definitions of angel investor as there are angel investment deals. I think he was trying to make a point about modern gender relations.
[+] [-] jw2013|11 years ago|reply
Is it convenient to ask if you invest in some decent proportion of first-time founders?
[+] [-] dllthomas|11 years ago|reply
Couldn't that arguably put you in the "friends and family" category?
[+] [-] austengary|11 years ago|reply
[+] [-] danielweber|11 years ago|reply
[+] [-] tptacek|11 years ago|reply
As I understand it, the real difference between angels and VCs is that angels invest without locking down a valuation, and angels invest without demanding control. A VC round comes with a firm valuation and with a board seat.
[+] [-] patio11|11 years ago|reply
The biggest difference, traditionally, is that angels invest their own money or that of buddies, and that VCs invest the money of LPs. This is a little weirder these days, as there are super-angels/micro-VCs/whatever-their-business-card-says where that starts to become a distinction without a difference.
[+] [-] adventured|11 years ago|reply
[+] [-] skizm|11 years ago|reply
I mean, if you purchase a percentage of a company at a certain price, you have implicitly "locked down a valuation". Right?
[+] [-] andrew_null|11 years ago|reply
1) an angel investor is someone who invests their own money 2) a venture capitalist invests out of a fund, which is mostly other peoples' money (OPM!) while taking a fee + economics from the fund (the famous "2 and 20" model)
But that's not too useful, because what's important are the behaviors that come out of the situation.
Because most angels are investing their own money, they usually don't have crazy amounts of capital to work with. Thus, they usually invest early so they can get a better percentage at a lower valuation.
Many VCs also invest early, sometimes exclusively so with smaller funds, but they are often called "seed funds" to make that distinction. A fund which invests OPM is never called an "angel" regardless of what stage they invest at.
And finally, big funds (managing 100s of millions of dollars) are what we think of usually as venture capital.
(Funds that invest even larger amounts at higher valuations are often referred to as "late stage venture capital" or "growth capital." And there's more specialized terminology later stage since more specialized financial instruments can be brought into play - SPVs/debt/mezzanine/etc)
Where Scott's essay rings true is that idea that investors of all classes are more risk averse these days- they prefer to see traction since the cost of building an app/website is rapidly decreasing. Thus, they are all behaviorally acting like "traction investors" rather than "idea investors" whereas in the past, traction investors purely consisted of the growth capital guys.
This might be worse for the ecosystem since people want you to have everything built before taking in our first dollar of investment, but you could argue it means the ecosystem's $s are being allocated more efficiently also.
[+] [-] greenyoda|11 years ago|reply
I would have supposed that Scott Adams has become quite wealthy from the Dilbert strip, his many books and all the spin-off merchandise (calendars, toys, etc.). Why would he need to look for outside investors to fund his app rather than just investing his own money? And if he's not willing to risk his own money to start his new business, what message does that send to potential investors?
[+] [-] noahc|11 years ago|reply
Also, investors help with accountability, pushing through tough spots, connections, advice, etc. Investors also add credibility that 'rich white guy throws money at project' doesn't give.
[+] [-] danilocampos|11 years ago|reply
This is not an opinion grounded in any sort of reality. Attrition for women in technical roles is nearly double that of other industries. In finance, women make up around 20% of corporate boards. Not so in tech. Not by a long shot.
This is Scott Adams saying "hey guys, here's some stuff I think but haven't really tested even a little bit."
[+] [-] probably_wrong|11 years ago|reply
For non-regular readers: that's exactly what Scott Adams' blog is about - throwing ideas into the wild and discussing them in the comments. It's a feature, not a bug.
The problems come when people read it without knowing that, and assuming he's advocating for <issue>, while he's more of a "what do you think about this crazy thought?" kind of writer. Check this post[1] (specially the disclaimer) for an example.
[1] http://dilbert.com/blog/entry/proof_almost_of_intelligent_de...
[+] [-] GFK_of_xmaspast|11 years ago|reply
Since when has that stopped him?
[+] [-] joshu|11 years ago|reply
I assume that he can't get interest in his idea because folks are dubious about the idea, but are willing to be disproven ("come back when you have some traction")
[+] [-] _ix|11 years ago|reply
[+] [-] loisaidasam|11 years ago|reply
[+] [-] edoceo|11 years ago|reply
[+] [-] michaelochurch|11 years ago|reply
In the average relationship, the male is 4 years older than the female. That means that women (as a group, even if their individual dating patterns differ) have a "look-ahead" insight into which careers turn out well (medicine, law) and which promise the moon but fall flat (startups, academia).
Among a group of 21-22 year-old college-senior women, at least a few have dated 24-27 year-old guys, so they know a lot more about the career landscape than the 21-year-old men, who've been dating 18- to 20-year-old women.
That's why there are no women (except for hand-picked pretty tokens) playing the VC-funded game. They have the look-ahead information, and they're smart enough to see the VC-funded "tech world" as a fraud and not get involved. It's clueless men who get in, wreck their careers, and find themselves with no other options.
[+] [-] nostrademons|11 years ago|reply
Medicine is a decent career if you get through it and can deal with the hours, but it also has a massive weed-out funnel. At my (top liberal-arts college) alma mater, the admissions department had a joke: "95% of you are pre-med. By graduation, about 2% of you will be pre-med."
This is also why your main thesis, about women having an information advantage about the career world because of their relationship partners being older, doesn't hold. There is a strong selection bias in relationship partners. Lawyers find it much easier to find girlfriends than unemployed law-school graduates who went back to live with their parents. Anyone who uses their personal relationship choices as data on how the employed population as a whole functions is getting seriously biased data.
[+] [-] a8da6b0c91d|11 years ago|reply
[+] [-] _lce0|11 years ago|reply
[+] [-] alexeisadeski3|11 years ago|reply