5 Ideas for Social Venture Angel Groups

Earlier this week in an email exchange, a social venture entrepreneur asked what tips and ideas he should share with a well-known forum of angel investors later this week. I thought it was a good starting point for a larger conversation about angel investment groups and their potential to grow the pool of funding for social ventures. Here are five ideas for angel groups:

1. Get the crowd right (i.e. no making entrepreneurs pay to pitch): This is not a common practice in social venture spaces, but in the for-profit startup world, pay-to-pitch had been pretty normal up until a few years ago, when events like TechCrunch50 began trying to shift the model. Most recently, Jason Calacanis' crusade to upend pay-for-pitch models has resulted in a national series of "Open Angel Forums." I would love to see this model replicated for investors interested in social ventures. The larger point is the need to get the right people together, rather than trying to extract every dollar of value by being the gatekeeper.

2. Peer-to-peer due diligence: This is a big trend I'm seeing. Investors used to dealing with a smaller number of companies at a later stage aren't sure how to keep the costs of due diligence low enough to dive into the seed game, even though that's where all the fun is. Now, though, there's something of a movement to outsource that process to peer networks. This is the model that the West Coast Village Capital folks are using, and I'm pushing a number of friends in the social venture incubation space to start keeping a list of the most fundable young social ventures and create some value for themselves and investors with it.

3. Long-term bets on 21st-century value: My bet is that while there's still always going to be room for short-termism, quick hits and exploitation capitalism, we're going to see more people held up as examples of 21st century deep-value creation. Products and services that get it and build great things in a great way. In fact, as part of the media class as well as the entrepreneur class, I'm noticing a growing number of publications and writers that are slowly pushing that message and turning the tide. These traditional angels may not be used to thinking in those terms yet, but if they're making 5 bets a year, maybe 1-2 of them should be deep-value companies.

4. Peer-to-peer investment networks: One of the other barriers I see for angels coming into the social venture space is that they're not sure they have a skill set that is really relevant for those companies and they like to invest their whole self -- money and mentorship -- into ventures. Some investors just pour themselves all the way in, learn everything and become experts, but for others there has to be some lower barrier. One of the ways to do that is more fluid communication across the investor class about who knows and cares about what.

For example, what if I'm incredibly pumped about a new tea company with what seems to me to be a differentiated product and great on-the-ground work, but I don't know anything about that industry in the states. How easy would it be for me to connect with a natural foods angel who could act as a partner? Maybe this is already easy and I just don't know, but I get the impression that better funder-to-funder information could make a big difference.

5. Pipeline Pipeline Pipeline: As the diversity of options for first-round seed funding grows for for-profit social ventures, there is still going to be a pretty big gap for growth capital before hitting profitability. I see this as a $100,000k-$1.5million gap. It seems to me that those with a growth edge among social venture investors are, at least initially, going to be people with their own wealth joining the market. I hope that as more people in my generation (particularly software guys) start to cash out and make money, this only increases. Given such a trend, finding ways to more easily assemble groups of investors to act as the next stage seems really promising to me.