Blog: Entrepreneurship Is Not Dead!
Going through a bunch of old files, I never seem to throw away, I came across a blog called “Entrepreneurship not dead – revisited.” This was written a few years back, but there was one before that dated to 2003.
Venture capitalist funds start raising big money in the late 1960s and this was the foundation for the growth of the computer industry and in the early days of telecommunications.
Up to the mid-1990s, Angel investors, if existed, were not known to very many people. In my consulting practice, I watched over some investments for a couple Angel investors I worked for, but it was a very secretive culture and your best friend would not know you were an Angel investor.
In the late 1990s Angel investors came out of the closet, in fact an organization called the Tech Coast Angels was one of the first groups I made investments with. The beauty of this, was one of the members was bound to know details about the technology or the market, and that was my reason for joining a group like this. But investments went crazy a couple years up to that point, with the so-called dot-com bubble, where hysteria got to point where business plans were written on cocktail napkins and any investment that mention the word Internet was easily raising money. BUT IT BURST. The period was 1995 to 2000, peaking on March 10, 2000.
After the bubble burst venture capital went away completely and most Angel investors really backed off. But the Tech Coast Angels together started making investments again the in 2001. I made an investment in 2001, with a company that finally went public in February 2018.
Whereas venture capitalists early on, and for period made investments in the low hundred-thousand-dollar area, they backed away, realizing it took just as much effort for a $200,000 investment than for a $10 million investment. This move made the way for Angel investors to fill the void, therefore this opened the market for numerous Angel investors across the country. Today there is an organization called ACA with over 10,000 angel investor members.
As a result, the public Angel investors throughout the country filled the gap in the ‘hundreds of thousands of dollars’ investments, Venture Capitalists backed away from. The Tech Coast Angels have grown to over 300 members and make millions of dollar investments collectively every year. On top of that you can now find listed on the Internet, numerous Angel organizations.
One of the biggest changes in entrepreneurship that developed, was when the University system got interested enough in entrepreneurship to develop curriculums that would aid student entrepreneurs to benefit of a great education. In Southern California I worked with five different universities. Of course the big ones like USC and UCLA were way ahead and were able I last time I was involved with them there were over numerous classes in entrepreneurship.
Today, there are tons of money being invested in entrepreneurship startups, in including several funds. In my mind it puts the pre-bubble mentality of the investors to be small compared to what the investment sizes are now. The largest investment fund right now is halfway through its hundred billion dollars’ investment in less than two years. Companies called ‘unicorns’ got to be valued at $1 billion before they had any revenue and profit. Now there’s actually investments be in the with no company detail. As an example, some superstar decides to form a company and says “okay guys I want to raise $50 million, and after I get it I will figure out what to do with it.”
One thing that hasn’t changed, on average, a successful company with an Angel investment from the beginning for a major equity event could take 5-7 years. I have seen some investment groups consolidate, wherein, by bonding, they can race bigger money quicker in a hope to accelerate success.
Various reports it still shows that the majority of events for failure occur in the first couple years, and for the rare 20 times the investment takes 10 years or more to get it a 20 times or more return on the investment.
So for all investors, I recommend to keep their eye on the ‘new bubble.’