I think AngelList is awesome and I’m a huge fan of what they’ve done. Nivi wrote a great post celebrating their 1.5 year anniversary today: 1.5 Years Of AngelList: 8000 Intros, 400 Investments And That’s Just The Data We Can Tell You About.

One of the powerful constructs of AngelList is social proof. It’s become an important part of the seed / early stage venture process as very early stage investors pile into companies that their friends, or people they respect, are investing in. AngelList does a nice job of exposing and promoting social proof during the fundraising process in a way that is both legal and non-offensive.

However, as one would expect, entrepreneurs focus on taking advantage of every opportunity they have. As a result, I’ve been getting a request on a daily basis to either “follow” or be listed as an “endorser” for various companies. These requests fall into two categories: (a) people I know and am trying to be helpful to and (b) random people.

I’ve decided to say no to both categories unless I’m investing in the company. And I encourage everyone involved in AngelList to do the same. I think the concept of social proof is super important for something like AngelList to have sustainable long term value. I don’t ever want to be on the end of a conversation with someone who invested in a company on AngelList, runs into me, and says “things are sucking at company X – why did you ever endorse them” and for me to say “I have no idea who you are talking about.”

As with many things in life, the key lesson is to do your research. It’ll be interesting to see how AngelList copes with things like this over time – I expect Nivi and Naval will stay one step ahead of the problem. However, if you are an investor or entrepreneur – help by having some discipline on your end – it makes things better for everyone.

I received an email from an entrepreneur today asking me about something that made my stomach turn. It’s a first time entrepreneur who is raising a modest (< $750k) seed round). There are two founders and they’ve been talking to a VC they met several months ago. Recently, the VC told them he was leaving his firm and wanted to help them out. This was obviously appealing until he dropped the bomb that prompted their question to me.

This soon to be ex-VC said something to the effect of “I can easily raise you money with a couple of phone calls, but I want to be a co-founder of the company and have an equal share of the business.”

In my email exchange with the entrepreneur, I asked two questions. The first was “is he going to be full time with the company” and the other was “do you want him as a third full time partner.” The answer was no and no. More specifically, the VC was positioning himself as “the founder that would help raise the money.”

I dug a little deeper to find out who the person was in case it was just a random dude looking for gig flow. David Cohen, the CEO of TechStars, has written extensively about this in our book Do More Faster – for example, see the chapter Beware of Angel Investors Who Aren’t. I was shocked when I saw the name of the person and the firm he has been with (and is leaving) – it’s someone who has been in the VC business for a while and should know better.

I find this kind of behavior disgusting. If the person was offering to put in $25k – $100k in the round and then asking for an additional 1% or 2% as an “active advisor” (beyond whatever the investment bought) to help out with the company, I’d still be skeptical of the equity ask at this stage and encourage the founders to (a) vest it over time and (b) make sure there was a tangible commitment associated with it that was different from other investors. Instead, given the facts I was given, my feedback was to run far away, fast.

Entrepreneurs – beware. This is the kind of behavior that gives investors a bad name. Unfortunately, my impression of this particular person is that he’s not a constructive early stage investor but rather someone who is trying to prey on naive entrepreneurs. Whenever the markets heat up, this kind of thing starts happening. Just be careful out there.

Following is a post on super angels I wrote yesterday for PEHub.

In the beginning, there were angel investors. And it was good. As individual angel investors made more and more investments, they became super angels. One day a super angel woke up and thought to himself, “Gosh, I could do a lot more investments if I had a fund.” And so the super angels became micro-VCs (or “institutionalized super angels”). Everyone was excited and on the seventh day they did another deal instead of resting.

I’m a huge fan of the super angel movement. Some of my best friends are super angels and I’ve put my own money where my mouth is in funds like Chris Sacca’s, Dave McClure’s, Jeff Clavier’s, Roger Ehrenberg’s, and David Cohen’s. Not only am I an investor in these super angels, I love to have them on board with our investments at Foundry Group. And whenever they bring me something they’ve been working on, I always pay attention–as I know they know what I like to invest in.

But recently the super angel mantra of “traditional VCs suck” has reached a fevered pitch. What started out in Silicon Valley as a new wave of angel investors has evolved into a belief that “VCs are lousy seed investors” and “no one needs a VC–just raise your money from super angels and go to town.”

Fred Wilson from Union Square Ventures recently wrote an excellent blog post titled “The Expanding Birthrate of Web Startups.” As with many of Fred’s posts, the comment section was as useful as the post, and early-stage investors such as Mark Suster, Charlie O’Donnell, Roger Ehrenberg, and Anonymous Coward weighed in. The comments ranged from the now cliche-ish “VCs suck” to “What happens when super angel-backed companies need a new round” to “Companies will never need more capital. It’s a new world out there.” As I read through the comments, I kept pondering the same thought: “What happens in five years?”

Let’s consider a few situations. Take a typical super angel. Assume success. Investors (LPs and individuals like me) want to invest money with the super angel. The super angel probably creates a fund and raises a lot more money. Now the super angel is a micro-VC. Continue to assume success. More money is able to be raised. Now the micro-VC is a mini-VC. Does this keep scaling, or does the mini-VC succumb to the same challenges that $200 million funds ran into when they turned into $1 billion funds?

Now, take a super angel with a 20-company portfolio. The super angel is hyper-connected and works closely with the entrepreneurs he/she invests in. Suddenly he/she has 100 investments. Are the entrepreneurs getting the same attention from that angel–especially when they enter year three of their life, hit a bunch of speed bumps and need a lot of help? Or does this super angel just turn his/her back and say, “Well, that’s the breaks.”

Finally, take a super angel who is used to making $25,000 to $100,000 per investment. He/she becomes a micro-VC, raises a bigger fund, and now invests $500,000 per deal. Is there a difference in his/her behavior with regard to the $25,000 investments vs. the $500,000 investments?

I think the super angel movement is awesome, but the generalization that all VCs suck at seed investing doesn’t make sense to me. Correspondingly, the idea that entrepreneurs only need super angels doesn’t make sense either. There’s a renewed focus and interest in early-stage investing going on in the United States, and it’s being stimulated by a lot of factors. It’s a powerful thing that will continue to evolve, change and challenge all of the participants.

I attended the second Open Angel Forum in Boulder tonight.  Simply put, it was dynamite.

This is an intense week for seed stage stuff in Boulder as TechStars Demo Day is tomorrow where 11 new companies are having their coming out party. The Boulder New Tech Meetup had a special double header (Tuesday and Wednesday) where six teams practiced their pitches to a room of 300+ people on Tuesday followed up by the other five on Wednesday.  The streets are crawling with angel and early stage investors – local and from other parts of the country – and the vibe feels great as tomorrow is the big day.

I had high expectations for Open Angel Forum after the first one in Boulder in the spring.  Jason Calacanis came up with a great format when he created Open Angel Forum and David Cohen has done an awesome job of hosting and coordinating the two Boulder events.

The format is ideal.  20 qualified angel investors – to qualify you must be active making angel investments (at least three in the past year).  Six companies all raising seed rounds ($1m or less).  Dinner and drinks paid for by sponsors.  No fee to either the entrepreneurs or the angels.  Casual setting (we did it in the TechStars Bunker) – some mingling before it got started, followed by five minute pitches + five minutes of Q&A for each company.  The whole thing took an hour – just the right amount of time.

All six companies – Pavlov Games, Rapid.io, Adapt.ly, Awesomebox, PlaceIQ, and BrowseAndPay did excellent jobs.  They were each high quality and totally fundable and I heard several commitments happen during the evening.  I left about 45 minutes after the pitches ended – the event was still in high gear and with Jason leading a table full of angels and entrepreneurs in a game of Texas Hold’em while the beer drinking and discussions continued.

The thing that is so cool to me about this is that it’s a super high signal to noise ratio – all the companies had clear, tight, and relevant pitches and the entire audience was accessible angel investors.  No BS, no posturing, no fees for anything – just entrepreneurs and angels doing their thing.

Over two days, 17 early stage software / Internet companies are having high quality exposure to angel and seed investors in Boulder.  And on Saturday, we have TEDx Boulder.  It’s good to be back in town.

Ah – well – another day passed and there was once again a ton of chatter around angel investing.  A lot of it was prompted by AngelConf 2010 which you can watch recordings of on Justin.tv (AngelConf 2010 Part 1 and AngelConf 2010 Part 2).  While there continues to be plenty of negative VC tone and “disruptive change is here” (ala traditional VC is over), there were also some great nuggets, including my favorite line from Joshua Schachter of typical VC behavior of SHITS (Show High Interest Then Stall).

But I think the two best posts to come out of yesterday are Lead Investors, Dipshit Companies, and Funding Every Entrepreneur by Fred Wilson and MoneyBall for Startups by Dave McClure.  While they come at things from very different angles, they are both very insightful and important.  Importantly, they are willing to use words in their posts that Goldman Sachs has apparently banned in email as of yesterday.

We are packing up the Homer house today and I’m looking forward to diving back into the fray next week in Boulder.

I got a note from Nivi, the creator of AngelList, over the weekend saying that he’d put up a special page for angel investors in Boulder.  He’s looking for the local Boulder angels to add their names to the list.  Gang – let’s get ‘em up – if you are an angel investor and based in the Boulder area, sign up!

There’s been an enormous about of blog and news chatter about angel investors, especially seed investors and the emergence of super angel / micro VCs, in the past few months.  I’m a huge fan and supporter of the super angel / micro VC phenomenon and have watched with delight as it has built momentum.

However, in the past few weeks I’ve started to see a rant start to emerge that I’ll simplify as “VCs suck as seed investors – the only path to happiness are angels or super angels or micro VCs.” This rant bugs me as I think it’s incorrect and isn’t very helpful to entrepreneurs. While I know many VCs that I would categorize as terrible seed investors, I know plenty that are excellent seed investors.  And while I know many angels who are terrific seed investors, I also know some who are abysmal.

The thing that started to bug me last week wasn’t the discussions about the characteristics of what makes a VC a bad seed investor, but that the comments, including some from super angels, were becoming generalizations that all VCs were bad seed investors.  As I read through them, they started feeling like statements of “hey entrepreneur, trust me, I’m just trying to save you from Mr. Evil VC and here’s the answer, the answer is me.”

As a VC who has been a very active angel investor (I’ve made over 75 angel investments), an active seed investor as a VC (I just counted and 7 of the 25 investments we’ve made out of Foundry Group since we started our fund in Q4 2007 are seed investments), a co-founder of a “mentorship-driven seed stage investment program” (TechStars), and an investor in several super angel / micro VC funds, I believe both angels and VCs can be excellent seed investors.

There is a lot more transparency than there ever has been, the structural dynamics of early stage investing are moving around a lot, and entrepreneurs have more clarity on their choices, ways to figure out who is good and who is bad, and ways to get access to great choices than ever before.  Fred Wilson wrote two excellent posts on this over the weekend titled Angel vs. VC and The AngelList as well as an earlier post titled Some Thoughts On The Seed Fund Phenomenon.  Until last week I didn’t feel like I had a ton to add to the discussion, but I felt like it was time to weigh in as I saw the tone shifting to “VCs are bad seed investors.”

While I completely agree with the phrase “many VCs are bad seed investors” especially around VCs simply trying to create option value for themselves or the issues around signaling risk, I felt like there wasn’t enough discussion about why and when VCs were effective seed investors.  So I thought I’d take some of this on over the next few weeks. Hopefully my perspective and examples will be additive to the conversation and helpful to early stage entrepreneurs, especially first time ones.

In the mean time, if you are a Boulder angel (or seed) investor and you are still reading, sign up on AngelList already!

The second Boulder Open Angel Forum event is happening on August 4th at 7pm.  In case you aren’t familiar with the Open Angel Forum, the organization is dedicated to providing entrepreneurs with access to the angel investor community based solely on merit and without any fees.

The first Open Angel Forum in Boulder was dynamite.  David Cohen, the founder/CEO of TechStars drove the event and is also hosting this one. He has scheduled it the night before the TechStars Boulder 2010 Demo Day with the hope of having some out of town angels that are here for Demo Day attend.

Apply here to attend as an angel investor.

Apply here if you are a company that wants to present.

Finally, if you want to come to the TechStars Demo Day, please contact David or email me and I’ll get you plugged in.

I’m on an Acela train between Boston and New York (listening to Boston’s More Than A Feeling – how recursive) on my way to the TechStars Boston 2010 Investor / Demo day.  I wasn’t able to make it to Boston yesterday for the Angel Boot Camp as I was running around NYC with the CEO of a company I invested in last week introducing him to a bunch of potential customers and partners. 

It sounds like Angel Boot Camp rocked.  My long time friend and co-angel investor Will Herman wrote a post titled Angel Investing that summarized some of his advice.  Will is finishing up his 31st angel investment (we’ve done a bunch together – including my very first one – NetGenesis in 1994) and he walks through what he’s learned from 16 years of angel investing.  Don Dodge also has a great post up titled How to be an Angel Investor…and make money.

On the eve of the graduation of the TechStars Boston 2010 class, I thought I’d weigh in with some additional advice to anyone who either is or wants to be an angel investor.  Some of this repeats what Will and Don said, but I’ll try to be additive (and specific).  For context, I’ve made over 75 direct angel investments primarily in two time periods – 1994-1996 and 2006-2007.  I’m out of the angel business as all of my investments go through Foundry Group (the VC fund I’m a partner in) but I’m an investor in a number of “super angel funds” as well as a co-founder of TechStars and I continue to regularly make seed investments from Foundry Group alongside of angel investors.

So – here’s the advice:

1. Be promiscuous: To be a successful angel investor, you have to make a lot of investments.  I generally made about one investment a month when I was active as an angel.  While this pace may not be right for everyone, if you are doing less than four investments a year, I don’t think you are making enough.  Play the field – it increases your chance of hitting a monster and it’s a lot more fun.

2. Have a long term financial strategy: Early on I decided that I was going to write the same size initial check in every angel investment.  In the first phase (1994-1996) this was $25k.  In the 2006-2007 phase this was $50k (although I broke this rule by occasionally doing $25k or $100k and in several cases, even more.)  I always assumed I’d double down on each investment before the company either raised a VC round or was acquired (so – when I put $25k in, I was really allocating $50k to the company.)  Then, I decided how much I was going to invest over a particular time period.  In the 1994-1996 time period I decided to invest $1m in angel investments.  So – that gave me capacity for 20 investments (I did more – oops.)  In 2006-2007 I allocated more (and did more).  However, since I had a time frame and an amount per company, I had a baseline pace that I could go at before I got uncomfortable with how much I was investing.

3. Understand the difference between 0x and 100x: I’ve had two of my angel investments return over 100x each.  Since I had a strategy of investing the same amount in each company, all I needed was one 100x to allow me to have 99 companies completely flame out and return 0 and I’d still break even.  With two investments at over 100x, I now have a built in gain of significantly over 3x across all of my investments since I’m made about 75 of them and I’m now deliciously “playing with house money” on all of the rest.

4. Choose people over ideas: I have never regretted making new friends through an angel investment that failed.  I have always hated working with people I didn’t like, or didn’t think were A+.  It’s an easy filter – use it.

5. Decide quickly: My best investments as an angel were made after one meeting and I’ve often committed in the meeting.  Sometimes it has taken me longer – usually a second meeting or a long meal.  But there’s no reason for an angel investor – especially an individual one – to drag the entrepreneur through a long, protracted due diligence process. 

6. Don’t torture entrepreneurs: Remember, you are supposed to be an “angel investor”, not a “devil investor.”  If you really want to be a great angel investor, decide quickly and then help the entrepreneur get their financing done!  Be a force for good in the universe.

7. Run in a pack: The best angels run in packs.  They share deals.  They love to work together.  They don’t feel obligated to invest in each others stuff, but they often do.  And they communicate with each other.  If you run in a pack, different people will take the lead role in different cases – sometimes I’d be the lead investor in an angel deal and – with a $25k check pull together a $500k round.  Other times I’d just be one of the $25k checks in the $500k round and pawn off the work on one of my friends.  Either way, I have a lot more fun playing with others – especially when the companies win!

I’m sure some of these don’t work for everyone so I’d love to hear any criticism from other angels out there.  And – feel free to add your own tips, especially about – ahem – working with VCs. 

Jon Pierce of BetaHouse has decided to organize an Angel Boot Camp in Boston on June 1st. The idea is that anyone interested in learning more about how to get started with angel investing can attend and learn from some people who’ve been there and done that.

David Cohen at TechStars wrote about why he thinks it’s important.  Jon Pierce also wrote about why he’s doing Angel Boot Camp as well as listing some of Boston’s Best Angel Investors.

While June 1 is still several months away, sign up and put Angel Boot Camp on your calendar now.

I know I owe everyone a follow up to my post from last week titled The Proliferation of Standardized Seed Financing Documents.  To the many of you out there that emailed me in response, thanks for all of the thought, ideas, suggestions, and offers of help.  More on that soon.

In the mean time, I noticed today that Dow Jones is running a seminar titled Negotiating an Angel Deal: What Angels, Entrepreneurs & VCs Need to Know.  My partner Jason Mendelson is one of the panelists, along with several other notable lawyers and angel investors.  If you are interested in this particular topic, I expect there will be a “robust” discussion as I know that the opinions between a few of the folks on the panel vary pretty widely.  If you are interested, sign up here.