Let the good times roll again! Convertible debt for angels

Fred WilsonImage via Wikipedia

Fred Wilson write a great blog and not much needs to be added to it except that he is one person who got in early and will make a ton of money out of spotting the social network space.  Amazing to have the simple vision to use the tools and then be able to relate to entrepreneurs.  All so simple but he does hide away..  Ooops no he does not as one of his companies, Zemanta, has just popped his photo up!

In his post on convertible debt for angels in the first round, he puts the other case that he prefers agreeing a price and investing.  But he understates the great increase in value he brings to the new company when he says “I can negotiate a fair price with an entrepreneur in five minutes and have done that for a seed/angel round many times.”  We can all agree a price but most entrepreneurs do not bite off our hands!

Fred Wilson operates in a very different environment than Cambridge Enterprise, the arm of the University of Cambridge which “exists to help University of Cambridge inventors, innovators and entrepreneurs make their ideas and concepts more commercially successful for the benefit of society, UK economy, the inventors and the University“.   Their recent News and Events Bulletin states that “Sixteen Cambridge Enterprise portfolio companies are included in Business Weekly’s “Killer 50” list of the most disruptive technology companies in the East of England”.  Amazing companies that will change our lives in the years to come.

But in the mission statement of Cambridge Enterprise there is no mention of angel investors.  Are angels the best investors to start disruptive technology companies?  Do they have deep enough pockets?

Perhaps angels in Cambridge need to entice the entrepreneurs in Cambridge to follow the path of Fred Wilson as demonstrated so well by Rahul Vohra and Rapportive.  A very different business plan resource approach is required.  Perhaps Cambridge Enterprise should establish a new division to support the likes of Rahul Vohra – after all the experience, skills and opportunities given to Rahul Vohra served him well until he upped and offed to Silicon Valley.

The only worry to me as a low-grade angel is that the convertible debt stacks the cards too much in the favour of the entrepreneur and the second round investors.  The first round investors need a great big uplift to justify the huge risk we take.  We might not fund a company to revenue but we fund social network companies to their first major step of customer engagement with hundreds of thousands of users.

Will all this help The Entrepreneurs Graphic Novel when it is is published as an app?

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