The "overvaluation" argument is sooooooo old. Like 1999 old. I'd imagine that smart GP's could come up with a new argument at least every 5 years why we're so clueless.

In my experience, overvaluation happens to "new" angel groups that either do not yet know the market or take the entrepreneurs valuation at face value.

Look, there are good VC's and bad VC's. And, there are good angel groups and clueless angels groups. It's up to either side to find the good ones to work with.

We've worked hard for the last 8 years to find the good syndicate partners. And, oh yes, we've worked with the bad ones that do the dilutecramdownpaytoplayforgetyourpreferences game. In the end, we've learned to stop whining and moping about the "mean ole VC's" and just get to work funding AND creating new companies.

Oh, and by the way, do you mind if I send these panel comments to the 140 angel groups in the Angel Capital Association network?

The VCs who sat on an IBF panel grousing about unsophisticated angels (who overprice deals or fail to support ventures post-funding) is reminiscent of guys yakking about the dumb things they’ve done when they had too much to drink. Nobody puts a gun to a VC’s head and forces them to invest. What they complain about is more a reflection of inadequate due diligence by VCs than a comment on unsophisticated angels – as my high school principal used to tell us “sleep with babies and you wake up wet”.

BTW it would be easy to convene a panel of angels and carp about unsophisticated VCs who overpay for deals, invest in the 273rd social network, sit on way too many boards, or won’t step up in follow-on rounds so the venture becomes un-fundable – but to what end. You can always find dysfunctional angels and VCs.

Angels need not worry about being squeezed out in later-stage funding rounds; at least not by sophisticated VCs. Of course, when a venture has not performed, the original investors get cut back or squeezed out in subsequent rounds; but that is true whether the initial investors were early-stage VCs or angels.

VC firms and angels in professional groups get along very nicely – and sophisticated VCs do not force pay-to-play provisions on angels – I can provide a list of the top-tier VCs for references. Moreover, angel groups like the one I started (Tech Coast Angels) and the Band of Angels have professional investing processes and fully support their ventures after funding – and the PWC Moneytree includes these angel groups in their VC stats – these IBF VCs should check out the Angel Capital Association, which has over 100 professional angel groups as members.

Lastly, the great companies do not bypass angels – they bypass the early-stage VC funds – great ventures get their seed funding from angels and then go straight to the A-List VCs; eg Google, Yahoo, Facebook, etc.

Interesting comments, especially the "sleep with a baby saying."
I think they underscore that, indeed, there is a tension between these two investor groups.

Because not all angels, angel groups, and even VCs are what they can be, education, shared experience and development, and working together will help us all deal with the funding gaps...a major challenge...and create great outcomes.

We must do what we expect of our portfolio company CEOs...understand roadblocks to success, changes in the market, and take action to overcome them or adjust.

With respect to knowledge transfer, angel and angel groups have an opportunity to be more proactive and benefit from seeking out the Angel Capital Education Foundation's seminars (angelcapitaleducation.org). The Kauffman Foundation funded their national program content development and launch. Seminars include The Power of Angel Investing - An Overview as well as more drill down modules on due diligence, valuation, term sheets, and post investment relationships. The sister organization, Angel Capital Association is a terrific resource for emerging issues and best practices. Of course, to meet market needs, we need not and should not be all alike.

Regarding the ACEF seminars, even highly experienced investors find them very interesting and relevant. And the cross ruffing of the range of attendee experience makes them very valuable for attendees and well worth the time taken. We are encouraging all new members of our growing IMAF Family of Funds in NC to benefit from these seminars, just like the highly experienced Tech Coast Angels do. And experience shows that these seminars have been valuable catalysts for new angel group activity over the years.

To help both the investor side and the entrepreneur side, we provide similar information to both sides of the fence, helping to tear down that fence, by also providing Becoming An Investor-Ready Entrepreneur seminars (www.sbtdc.org/investorready) in NC. The fundamental theme is the treatment of investors as "customers of equity sm"...dealing with investor expectations (angels and seed and early stage VCs) and even market overreaching in a variety of areas.

Through a better understanding of the issues of valuation and all kinds of other issues, in advance of discussions during the investment process, we have a better chance of a more productive process and better longer-term outcomes. After all, our work is challenging enough. All the more reason to deal with the knowledge transfer as soon as we can in the process.

Even our highly experienced cadre of volunteer entrepreneurs, angels, and VCs, serving on the faculty, tell the NC SBTDC that they learn from the process. I know I do despite 35 years in the trenches. Maybe I am a slow learner. Let's face it, we all need to keep an open mind and learn as we go...changing as markets and relationships change.

We all need each other informed and working together to achieve the critical mass of capital required for deals and for successful execution, including the primary goal of ROI. With significant ROI outcomes, more capital is raised and we can then see the other kinds of outcomes...like economic development and the resulting satisfaction that comes with it.

Even when shots draw blood, let's think about what is behind the pulling of the trigger and come up with solutions that work. Not everyone is going to approach funding the same way (thank goodness), so we don't all need each other all of the time, but some combination of working together will always be in force to make things work for our country's success in innovation and global competitiveness...and of course ROI.

Quoted from CBF Enterprises, copyright 2007