Angel investors spread their wings worldwide

The emergence of digital investing platforms is beginning to change the hyper-localized venture mindset

Angel investing, in common with other forms of venture capital, has traditionally been hyper local. We are now witnessing the growing globalization of angel venture capital.

When Sequoia Capital, based in Menlo Park, CA, opened a London office in 2020, Alex Konrad ?noted in Forbes ?that “through the 1980s, Sequoia was known for a rule established by its first partners:?if we can’t ride a bicycle to it, we won’t invest.”

Kyle Stanford, CAIA of PitchBook measured the average distance in 2020 between a lead angel investor and the target company at just 37 miles .

I know of one promising company that succeeded in attracting the attention of VCs from Boston, New York and California. But as soon as the CEO revealed that he was located in Cleveland, the call would quickly come to an end and no-one followed up. The company eventually raised tens of millions of dollars in funding, but a decade ago, no self-respecting VC based on the coast would fly to Cleveland to secure a deal, no matter how attractive.

Many thousands of angel investors around the world have adopted the same approach, relying on dealflow sourced in their immediate locality.

Friends’ networks

Groups of angels, often the products of school or other friends’ networks, will get together in a local club or other meeting place, and listen to local entrepreneurs pitch them deals. Once selected, a deal will be executed by local lawyers, bankers and other partners in the close vicinity.

The rise of these local angel-led ecosystems has many advantages. They enjoy specialist knowledge of local conditions, resources, education and business. Close-knit networks of families and friends can elevate a community into a powerful engine for innovation and entrepreneurship. In 2020, the SEC counted 334,000 active angel investors in the US alone.

“Traditionally venture capital was a local industry. Geographic proximity of an investor firm to its portfolio company was considered crucial for identifying investment opportunities, monitoring, adding value, and achieving higher performance,” Wendy Bradley and her colleagues observed in?a study ?for the Journal of Risk and Financial Management in 2019.

While this local approach may have sustained Californian venture investors in the past, a different future beckons. But these groups who are interested in helping startup founders, building the economy and changing the world rarely get the chance to invest in similar deals outside their immediate area. How would they even hear about these relatively modest private deals in other places, let alone have the opportunity to participate?

“Having worked in Silicon Valley for many years, I know all too well that the best opportunities will never be as simple as a stone’s throw away,”?writes Laura González-Estéfani , Founder and CEO at? TheVentureCity .

Far from home

The emergence of digital investing platforms is beginning to change the hyper-localized venture mindset, allowing angels from all geographies to spread their wings, diversify their portfolio, and bring their specialist experience and knowledge to bear on interesting deals far from home.

Platforms like?AngelList Venture ?and?Funders Club , along with?OurCrowd , have opened up what were once local opportunities to a global community of online investors. These investors, in turn, can help expose startups to new markets and new opportunities.

OurCrowd’s angel community is increasingly global. Our investors are drawn from 195 countries and more than 90 percent reside outside our home geography of Israel.

From recent meetings here in Israel and elsewhere, I can report that angel investors still gather in local groups, but they now have the opportunity to connect, as a group, to the wider startup world via the digital platform of their choice. They are exposed online to a more diverse dealflow, and they also get to be part of a broader global community.

In recent weeks, I have met either online or in person with numerous angel investor groups from around the world, including?Leapfrog Innovation Powerhouse /LIP Ventures Boutique ?based in Mexico, the?JITO Angel Network ?of Jain business professionals based in Mumbai, India, and the?Changer European Angel Investors Club ?based in Riga, Latvia. When these high-powered investors gather to look at deals, it no longer matters where in the world the startups are founded or operating.

These local groups with a global outlook are not just providing access to capital for entrepreneurs. They take an active role in nurturing their investments, providing the companies with introductions and business connections from their local network.

These group dynamics can be extremely powerful, creating bonds that go way beyond simple passive investing.

Through these connections, like-minded investors can build a global community where angel groups are not just investing in global companies and getting access to more deals, they can also help their local startups get access to a broader range of business opportunities in multiple geographies that smaller startups would find hard to penetrate.

There are thousands of such angel groups around the world. This is just the start of their international development.

About ‘Investors on the Frontlines’

I’m the CEO and Founder of?OurCrowd , the global equity investment platform that gives individual accredited investors access to pre-IPO startup deals alongside top-tier VCs. If you are an investor, private family office or financial advisor, subscribe?here ?for my biweekly commentary or follow me on?Twitter . I welcome your comments in the response section below.