The Silicon Valley Undertaker of Angel Investments

Sherwood Partners in Palo Alto, long known to industry insiders as “the undertaker” because its primary role is to efficiently shutter companies, in this case start-up companies.

Some snippets:

"An ever-smaller group of companies is attracting all the financing, including through the IPO market, and once a company gets such a huge concentration of cash, those without as much begin drifting away."

"We’re starting to close down social networks, startups in video distribution, clean tech companies. We’re also closing down a retail site. For companies selling merchandise, it’s a pretty volatile market, and this company couldn’t get traction. Also, with retail sites, you have to hold inventory. You need a variety of sizes and widths and colors, because if you don’t have the right merchandise, you lose the customer, yet if you have too much merchandise, you have to discount it. Most people don’t understand retail. They understand the concept. But it’s a very complicated business."

http://www.pehub.com/115158/silicon-valley%e2%80%99s-undertaker-%e2%80%98we%e2%80%99re-anticipating-a-major-fallout%e2%80%99/

Grantepeneurs

I have been active in angel investing in both Malaysia and Singapore, both countries have several grant schemes for start-up companies. I actually think that in a perfect world there should be no grants, deserving founders of start-up companies will find money anyway, either from friends, family or angel investors. But we don't live in a perfect world, and other countries also have grant schemes so there might be a reason to have grants. It is quite beneficial for a country to create an eco-system where small start-up companies thrive.

The negative side of grant schemes:

• Applying for grants often cost a lot of effort, both by the founder and the regulator
• The process often takes a long time, slowing down the founder and creating uncertainty
• Some founders completely rely on grants, they turn into "grantepeneurs" (I have seen quite a few of them already)
• The money for the grants and to run the regulator could have been used for other useful purposes
• The success rate for applying is not known, but sometimes very small, just a few percent, creating frustration with all the founders that are rejected
• There is always subjectivity involved in the decision making process (for instance what is "innovative"?)
• Others might not get grants and are thus disadvantaged

Regarding the latter, we invest in a company in Singapore which received no grants, while its clear competitor in the same line of business received at least SGD 600,000 in grants. While our company has 2 full time staff, the competitor has 10 men, a pretty akward and unfair situation, to say the least.

In Singapore there is something like 100 grants schemes, it would take an enormous amount of time to go through them all. In my humble opinion, this is madness.

I mostly like the small grants of SGD 50K as seed capital, the Yes program from Spring and the iJam program from MDA (this last scheme will be revised and relaunched soon).

Spring: Yes

In Malaysia there are some decent grants from Cradle:

Cradle Investment Program

Any question or comment regarding angel investing or other subjects, please use the area below and I will react soonest.