Feb 20, 2020 - Economy

Established VCs turn to "super angels" to grow their network

An illustration of a man sitting on a jar of money.

Illustration: Eniola Odetunde/Axios

Thanks to companies like AngelList and Carta that make it easier than ever to set up small VC funds, a new generation of so-called “super angels” is cropping up — and established venture funds are backing them.

Why it matters: Just like the boom in scout programs a number of years ago, it’s all about the deal flow.

Between the lines: “A founder will go to other operators first before they go to South Park or Sand Hill Road,” one industry insider tells me of larger venture funds' desire to get these entrepreneurs and execs into their networks, either as scouts or by backing their funds.

  • A number of established VC firms are backing other tiny funds, including Sequoia Capital Ventures, Bain Capital Ventures, Menlo Ventures, Lightspeed Venture Partners, Felicis Ventures, and Index Ventures.
  • While some like Bain have more established programs, others invest more ad hoc.

What they’re saying: “We’ve talked about doing a scout program … ultimately this feels more efficient as a process,” Felicis Ventures’ Katie Riester tells me.

  • Felicis has backed about a dozen other funds over the years and has backed four startups it met through them.
  • A partner at another major VC firm says about a fifth to a quarter of new deals come through either the firm’s scout program or the funds it’s backed.

For the super angels themselves, the upside to being a traditional scout for a VC fund is their independence and the ability to make their own name.

  • At the same time, these established firms often act as mentors and even invite them to co-invest in certain deals.

Yes, but: This approach is not new — rather, wider industry trends plus the availability of new tools appear to be allowing this new take on the scout model to flourish.

  • Plus, even some firms that do invest in these small funds caution that they’re not interested in becoming funds-of-funds, suggesting this will remain a niche part of their investments.
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