The Power of Angels in the Startup Ecosystem

Angel investors are the linchpin of startup ecosystems. Many of them made their money by starting and running their own companies. They’ve been there. Done that. And now they are putting their time, money, and energy back into the entrepreneurial ecosystem that helped them succeed.

That’s power of angels—driving the virtuous cycle, when angels invest, that’s the self-fulfillment of entrepreneurial ecosystem in action.

Earlier this month, Ohio TechAngel Funds (OTAF), a Rev1 Ventures managed fund, launched OTAF V, its OTAF fifth fund with $5.1 million in commitments. This is a milestone for Ohio TechAngels and Rev1 Ventures, and, by extension, a moment of reflection for me.

Rev1 currently has more than $80MM under management, but like all seed stage funds, it’s been a climb.

My own trek began back in 1999. Organized angel investing was in its infancy. I was working with a group of folks building a commercialization enterprise to help launch new start-ups. We didn’t have a fund; we were advising entrepreneurs. We did that for a few months and realized that every startup we talked to had one thing in common—they all needed money.

This was in the midst of the dot-com craze; there were venture funds roaming around, but there was little early stage capital outside of Silicon Valley. There was no trade association for angel investors; the Angel Capital Association was just an idea.

Several of us pulled together a group of about 10 individuals who were willing to put in about $100K each. We created a very structured way to look at deals and invested about $100K per deal. The angels invested the $1MM quickly, in about a year. That fund returned capital within two years, which is a very fast in the seed industry. That was my start at early stage investing and my first exposure to an angel fund.

In 2002, we formed our first seed fund. Since that time, I’ve been a founder of several investment funds and angel groups. I’m also an investor in Frontier Angel Fund 2 in Whitefish, MT. These experiences have been in diverse parts of the U.S.

Over the last decade, whether angel funds like the Frontier Fund in Montana or the new OTAF V fund in Ohio, or seed funds like the Rev1 Fund, we are starting to see the growth of organized funds in most places in America.

Today 10,000+ entrepreneurial companies are in ACA member portfolios.

The bust set angel investing back, but we kept building; the ACA was a master force, keeping the momentum going. The ACA has more than 13,000+ member accredited angel investors in 240 angel groups and accredited platforms.

AT Rev1 Ventures, we are proving the impact of venture acceleration services, early stage capital, and great entrepreneurs. We made 29 investments last year and were recently named among the Most Active Tech Venture Capital Firms in the US by CB Insights and the #1 VC Investor in the Great Lakes Region in 2012 by PitchBook.

The American Angel Campaign

One of the most exciting angel initiatives underway is The American Angel Campaign, the first-ever comprehensive and confidential study seeking to understand who angel investors are, how they became angels, and what factors influence their investing activity.

This initiative is led by the Angel Capital Association (ACA) and Wharton Entrepreneurship with the support of Rev1 Ventures and The John Huston Fund for Angel Professionalism.

Some things we already know from working alongside angels for 20 years.

For angel investors, it’s not just the money or the return. Angels are motivated by helping other entrepreneurs succeed as well as by making a financial return.

Many investors in the OTAF fund are directly involved with our companies.  They mentor, serve on Boards, and help entrepreneurs make connections from strategic partners to first customers.

The DNA of angels is vital to the DNA of entrepreneurial success.

What’s been your experience?