Feb 20, 2020 - Economy & Business

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

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.

Go deeper

Felicis Ventures raises $510 million for seventh fund

Source: Felicis Ventures

Felicis Ventures, an early-stage VC firm that's riding high with the recent sales of Plaid (to Visa for $5 billion) and Credit Karma (to Intuit for $7 billion), has raised $510 million for its seventh fund.

The bottom line: Most of the fund was raised before coronavirus sent the markets into chaos, but Felicis founder Aydin Senkut has been through enough cycles to avoid sudden investment strategy shifts.

Venture capital open for business on record amounts of dry powder

Illustration: Sarah Grillo/Axios

Venture capitalists are almost all working from home, but they have not stopped investing in startups.

The big picture: Axios yesterday spoke or emailed with 40 different U.S. firms, and every single one of them reports that they are still actively doing deals — several signing term sheets within the past week.

2019 saw record number of female-founded startups raise venture capital

Illustration: Rebecca Zisser/Axios

A record number of female-founded startups raised venture capital in 2019, representing more than a 500% increase from 2010, based on new data from PitchBook and All Raise. Median valuations also hit all-time highs.

Background: The bump in global deal numbers comes amidst a (slow) increase in female venture capitalists, including those with actual checkbooks, and against the backdrop of increased exits for mixed-gender founding teams (+7% in 2019, compared to a 4% year-over-year decrease for all-male founding teams).