Blue Angels fly over Seattle. (GeekWire Photo / Kevin Lisota)

Risk averse. Conservative. Hidden. Out of touch.

When I started angel investing while working full time in the ‘90s and ‘00s, these words described me to a T.

Kirby Winfield.

Now, 20 years later, these are the top four answers from Seattle-area startup founders when asked to characterize Seattle’s angel community.

Since beginning my full-time investment career as an angel in 2016, I had heard complaints about the Seattle angel scene from countless entrepreneurs. But I had never seen any real data on founder sentiment. Were the complaints outliers, or representative of the entrepreneurial zeitgeist? I decided to conduct a survey to find out.

In a February survey of 70 local technology startup founders who’ve raised capital from angels, the message was clear: angels need to be more visible, faster, and more willing to swing for the fences, or they risk losing the best opportunities in town to the increasingly active local and Bay Area seed and pre-seed funds.

As a pre-seed VC (read: glorified angel) focused entirely on the Pacific Northwest, I was pretty disappointed in the general tone of the feedback. The Seattle angel ecosystem has come a long way since the ‘90s, thanks to outfits like Techstars, Seattle Angel Conference, and Alliance of Angels, and a parade of minted founders and startup millionaires who have given back both time and treasure to the next waves of entrepreneurs.

And with a few billion-dollar companies seemingly funded every year in Seattle, one could argue that the criticisms levied in the survey are off the mark for many investors.

But the gripes of founders are not surprising when, in an era where Seattle-based startups become unicorns on a regular basis, many Seattle angels are still nervous about SAFE notes and Silicon Valley co-investors.

Said one founder: “I’ve quit trying to raise $$$ here. It’s the land of anti-risk and vision mediocrity.”

Not everyone was quite so blunt. And there were bright spots, especially when it came to value-added investors.

My methodology is admittedly spurious; this was simply a homegrown questionnaire built mostly to satisfy my own curiosity. But I tried to avoid leading the witness, so provided a balanced answer set between positive and negative. I also qualified respondents as having successfully raised capital from angels, to avoid sour grapes from failed entrepreneurs.

The survey was sent to my fund portfolio, ecosystem friends at labs and accelerators, and a number of individual founders. Responses were not incentivized and were anonymous.

Here’s a teardown of the most interesting results from the survey, with some responses from angels themselves.

Startup experience required

Broad criticisms of the angel scene aside, this group of founders put angels with startup backgrounds in a different category of value than those without startup experience.

Almost 100% of founders said they’d take money again from investors with startup experience.

More than 70% of founders called “strategic advice” a strength of those investors who’d been in the trenches before, with fundraising assistance, operational advice, and personal counsel/sympathetic ear scoring near 50%.

Haven’t been there or done that

The crowd truly turned ugly when rating the performance of angels who have not worked at or founded a startup themselves. More than a quarter of respondents said they’d never again take money from an angel who did not have startup experience.

The biggest reasons? They focused on the wrong things, were not helpful with fundraising, and gave advice without doing homework on the business.

Most tellingly, no more than 30% of respondents thought their non-startup angels were strong in any category offered.

Angels and angel groups no longer own the angel stage opportunity

Increasingly, the brightest angel-stage opportunities get snatched up by seed funds, leaving angels on the outside looking in. 60% of founders surveyed included institutional investors in their angel rounds, a realm traditionally left to individuals.

Shockingly, less than 20% took money from local angel groups. And sentiment towards those angel groups was surprisingly negative, given how much capital they deploy into the ecosystem: less than 15% of founders think these groups are perceived positively.

There’s still room for value-added angels

Investors looking for bright spots in the data will be pleased to see that while overall, less than half of angels were called “value added,” a whopping 2/3 of founders were referred to their investors by other founders. Doing good work with your portfolio companies is still rewarded with additional deal flow.

In the comments

Some of the most valuable insights were left in the answers to the final survey question: If you could change one thing about the Seattle angel ecosystem, what would it be?

  • “Be more open to higher risk/variance investments.”
  • “Visibility of who’s who.”
  • “Actually have engaging, visionary angels instead of the current predatory landscape.”
  • “More diverse, more risk tolerant, expectations aligned with investment.”
  • “Please be more supportive of founders who are people of color, immigrants.”
  • “More risk tolerant, less sheep like, need more lead angels who can organize a round, too many small checks.”

The sentiments in the comments kept coming back to a few main themes:

  • Risk aversion. This strikes me as a real problem for venture-path founders seeking capital in Seattle. It makes sense for individual investors to be risk averse if they’re investing as a private equity owner or a hard money lender, but venture scale returns require moonshots. And angel stage investing is by definition the highest risk on the board, so to make it pay, you need a moonshot to land! As venerable VC and angel Bill Bryant once told me, if you don’t have a substantial early failure rate in your angel portfolio, you aren’t taking big enough swings.
  • Visibility. This makes more sense, as many angels don’t actually enjoy meeting with founders at a high frequency, and avoid exposing themselves to cold inbound. I posted a list of active angels on my fund’s website for this reason.
  • Quality. Founders are hungry for “super-angels” who have exited their own companies successfully; are willing to take on venture scale risk; can catalyze a meaningful angel round; and can add significant value beyond the check.

I asked a few local angel ecosystem leaders for their takes on this feedback, and they had this to say:

Leslie Feinzaig, founder & CEO with Female Founders Alliance:

“Like many founders, I will always be grateful to those who took a chance on me before anyone else did. Angels are critical to our ecosystem, and I wish we had more of them, more super angels as well as more angels that don’t have startup experience themselves. I don’t think every angel on the cap table needs to be strategic (in fact you’d probably be overwhelmed with managing their input all the time). If the angel isn’t strategic or doesn’t have startup experience, they can still fuel startups and cheer from the sidelines, rather than take an active role with the founder.

I also agree that the average angel in Seattle is more risk-averse than their SIlicon Valley counterparts, due diligence is often disproportionate to check size, and angels’ professional experience tends to be on the corporate side. Our ecosystem lacks diversity among the angels, and in my experience this is reflected in the startups that get funded and the ones that don’t.”

Shelley Whelan, super angel investor with Keeler Investments:

“The majority of angels invest in local startups on a part-time basis and make only a few investments a year. They want to support and invest in startups, but they also have other interests and responsibilities that take up their time.

Those angels who are full-time investors have large networks of contacts who can add value in pre-seed and seed-stage companies, have experience working with private company boards, know the metrics these companies need to hit to raise a Series A, and can add value pulling together syndicates and advising on a company’s capital strategy.”

Dan Rosen, chair of Alliance of Angels:

“Alliance of Angels has had the privilege of working with hundreds of Seattle founders over the past two decades, who also make up the majority of the group. Fundraising can be a challenging task for entrepreneurs, and Alliance of Angels seeks to provide transparency and access to our angels through educational workshops and office hours.”

Isaac Kato, managing director at Techstars Seattle:

“Compared to the Bay Area, in Seattle there is a weaker embrace of the ‘founder as hero’ archetype, which contributes to the difficulty that many local founders face in raising that first slug of capital. As we mint more exited founders and local success stories, I expect this will improve, as founders like to back other founders.”

Certainly, this last point is already happening to a degree, with popular founders/ex-operators like Darrell Cavens and Mark Vadon (Zulily), Kevin Merritt (Socrata), Paul Stahura (Donuts), Forest Key (Buuteeq), Sarah Imbach (LinkedIn), Rudy Gadre (Facebook), Aaron Bird (Bizible), and Kelly Wright (Tableau) being some of the more sought-after checks in town.

Combine this with the current queue of growth- and late-stage startups in town, and there is cause to be optimistic.

But for now, and whatever we may think as investors, these founders have spoken. And it behooves all of us investing in the angel stage to listen to what they have to say.

For all 50+ founder comments, plus full survey results, visit Ascend.vc. Special thanks to FFA’s Leslie Feinzaig for her thoughtful feedback on earlier drafts.

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