SuperAngel.Fund x Q2 2023 Recap 🔥
Happy Friday!
Last week, as I have done for the past ten quarters, I sent the limited partners (LPs) in my fund a quarterly update. It should not come as a surprise that when I invest in a company, even if I am already in constant communications with founders via other channels/formats, I expect them to send written updates. Similarly, for General Partners (GPs) like me who manage venture capital funds, we are no different and I believe in practicing what you preach.
Some founders prefer to send monthly updates, others quarterly, with a rare few sending them weekly, oftentimes only for a short while coinciding with a fundraising cycle or until they settle into a more manageable monthly/quarterly schedule. (I generally suggest quarterly FWIW). In any case, the benefits of sending regularly timed stakeholder communications are vast and hard to dispute.
For one, they are an extremely efficient and effective way to manage information flow with your most incentivized constituents. These are the people that stand to benefit most from your success. While many folks will not respond, you can be sure that nearly everyone reads it and you never know when a circumstance might present itself that enables an investor to be extraordinarily helpful. The best way to summarize what investors want founders to know regarding updates is: “help us, help you!”
If done properly, investor updates should provide sufficient information for 90% of your cap table. In addition to keeping investors up-to-speed, writing is one of the most valuable ways to organize your thoughts, and gives you the chance to step back from the day-to-day grind, revisit your strategy, think through successes, failures, challenges, wins, and losses, and hopefully uncover learnings to avoid or lean into in the future. They also act as a fantastic marketing tool for prospective new investors (whether you are a founder or fund manager), and as a matter of fact, are the #1 diligence item I seek when considering a new investment.
If you decide to take money from other people to fund your business, sending consistent investor updates is the very least that you can do and one thing that you have 100% control over.
See below for the SuperAngel.Fund quarterly investor update (with minor redactions to respect confidentiality requirements).
Dear Partners,
I am pleased to share the Q2 2023 update for SuperAngel.Fund.
During the quarter we made 16 investments with a median check size of $50k and post-money valuation of $11.75m. Our investments were spread across Consumer (4), eCommerce SaaS (9), and PropTech (3).
As I wrote in a LinkedIn post last week, valuations over the past quarter have felt like they were at near decade lows which prompted us to capitalize on the opportunity and place a few more ‘bets’ than typical. Eight investments were at or below an $11m post-money valuation, five of which were at or below a $7m valuation.
As the amount of venture capital deployed into early stage companies has dropped by ~50% over the same period last year, and with many investors forced to sit on the sidelines due to insufficient capital or fear/uncertainty caused by macroeconomic conditions, we have maintained a disciplined, thoughtful, and consistent strategy.
Over the past ten quarters, we have been intentionally conservative with our investable capital and maintained reserves that are allowing us to benefit from, and take advantage of, the lower-entry-valuation environment that we are in right now. This approach has enabled LPs to benefit from even more diversification. One that increases coverage over a wider timeframe and exposes you to a larger quantity of investments across market cycles. This is a recipe I believe is crucial to achieving long term success and maximizing gains.
Since SuperAngel.Fund started in January 2021 we have deployed $7.6m across 134 investments into 97 companies. I estimate the current value to be $9.5 million which represents a 18.6% unrealized IRR and 1.25x gross multiple. So far, 47 investments have seen a markup, 82 are active without yet a change in price, and 6 are no longer active. Click here to view a detailed performance summary.
In addition to the fund, which is our primary investment vehicle, Super Angel Syndicate has deployed $7.9m across 22 investments. I estimate the current value to be $19.6m which represents a 42.4% IRR and 2.49x gross multiple. So far, 14 investments have seen a markup or distribution event, and eight are active without yet a change in price. All are still operating. Click here to view a detailed performance summary.
Q2 2023 Investments
Create: The first modern creatine brand
Otis: Pet care products and televet services
Krava: Modular backyard spaces
Siena AI: Empathetic AI customer service platform
CoLife: Peer-to-peer co-living marketplace
Lalo: Modern baby & toddler brand
Brij: QR code experience platform
Split: Affiliate link-sharing & optimization
Closing Theory: Video game studio integrating real world data
into hyper-casual play
Big Sur AI: Democratizing access to AI for commerce
Factored Quality: Quality control & analytics for brands
Inveterate: Premium loyalty & membership platform
Big Company AI: Intelligent communications for brands
Showday: All-in-one video commerce solution
Confidential: Secondary transaction (x 2)
Market Commentary
As I wrote in my Q4 2022 Year-End Update, I expected entry valuations to decline throughout this year. Unsurprisingly, this has come to pass and allows us - and other investors with similar mental fortitude - to benefit from extremely favorable valuations relative to the past few years. As a result of these lower prices/valuations, we are buying more ownership in the companies that we choose to invest in, for the same dollars than we would have been able to previously.
In addition, there are a few cases where we have been able to invest in our top performing, or most promising companies, at the nearly the same or discounted prices to their last rounds of funding via Secondary transactions (e.g. buying shares from a company employee or another investor instead of from the company directly). These transactions can be harder to pull off given their complexity and oftentimes involve a distressed seller in need of short term liquidity willing to forgo longer term upside. If executed properly, Secondaries can be an extremely effective and lucrative way to acquire stakes in high-growth companies that are not actively raising capital. Based on my experience and prior success with these types of transactions, we will continue pursuing this strategy.
In Venture Capital, funds are often characterized by their “Vintage Year” which refers to the year in which fund capital is invested. Given the state of today’s valuations, there are many PE and VC investors that believe investments made in the next year or two are set to produce some of the strongest vintages of the decade. Below is an excerpt from one such investor who explains this rationale via a post titled “2023 and 2024 are set to become strong vintage venture years: here is why”:
“There is strong evidence to support the view that both 2023 and 2024 will be years remembered for exciting startups and landmark VC deals…Is this surprising? It shouldn’t be, understanding two simple axioms. Firstly, buy low. Investors seek out lower prices. Secondly, as noted above, innovation is driven by challenging environments. The need for genuinely inventive solutions only increases during a downturn. The Dot Com boom created the internet. The sharing economy was born from the global financial crisis of 2008. What will 2023 and 2024 bring?...In 2023 and 2024 we’re likely to see opportunities arrive at the right time and at the right price, meaning both this year and next are set to become very strong vintage years.”
I also encourage reading these two supporting materials: “Why Should You Invest In All Vintages?” and “Why 2023 Could Be a Good Vintage for Private Equity”.
Performance
See chart below for an overview of SuperAngel.Fund’s performance to date.
Below are links to more performance details across our (i) primary fund vehicle which started in 2021, (ii) SPVs I have led since 2017, and (iii) a summary that incorporates both along with the angel investments I made prior to launching the fund.
*Note, if you would like specific updates on one or more individual portfolio companies please reach out to me directly.
Our Approach
As I have said before, there are exceptional entrepreneurs everywhere building exceptional companies, and I spend much of my time trying to find them, and buy a ticket on their rocket ship. I maintain deep conviction in our fund’s strategy, and believe the market turbulence will continue to work in our favor as we sit on a healthy cash position, ready to take advantage of opportunities. To rearticulate our approach:
Invest as close to the first check as possible
Focus on categories we know best
Leverage our massive network on behalf of portfolio companies
Provide operational, sales & team support to deliver unfair competitive advantage
Champion our companies religiously to drive incremental exposure, customers, and business opportunities
Position ourselves as each founder's favorite and most helpful investor
Many of these attributes result in higher quality and larger quantities of deal flow, one of the most pivotal aspects of any type of investment firm. We also believe that the earlier the stage that one invests (and we invest very early), the more diversification is needed to weather the zeros and optimize the chances of hitting home runs. As you know, it is a tremendous amount of work to source, diligence, evaluate and support these businesses. This is work I love, and what I feel is needed to deliver above market returns over an extended period of time.
Blog & Other Updates
Please see below for other personal and professional updates that occurred throughout the second quarter:
Featured 3 companies in our ‘Founder Friday’ newsletter series
Had breakfast with Ben Wunderman, Founder of Packsmith, in Petaluma, CA
Had IRL meetings with other founders from our portfolio, VCs & co-investors
Had breakfast with Alek Koenig, Founder of Settle, one of our best performing companies
Attended industry events hosted by Bain Capital Ventures, Headline, Vanterra & others
Walked along the Hudson River with Raymond Qin, Founder of Toppings & Dylan Whitman, Founder of Inveterate
As always, the fund has a strong pipeline for new investments and will continue to monitor follow-on or secondary opportunities into existing portfolio companies that show breakout success/growth metrics. If you come across impressive founders looking to raise capital within our areas of focus, I greatly appreciate you sharing those opportunities with me.
Thank you for your ongoing support and confidence. I look forward to updating you again after Q3.
Sincerely,
Ben Zises
SuperAngel.Fund
PS. You can access all prior quarterly fund updates at the link here.
Want to invest with SuperAngel?
Join SuperAngelSyndicate.com. Once accepted, syndicate members are invited to review deal memos whenever I have a new investment to share and can choose to invest or pass based on their own discretion. Minimums generally start at $2,500 and priority allocations are given to SuperAngel.Fund LPs on a first-come, first-served basis. Click here to request an invitation to the syndicate.
Join SuperAngel.Fund. Unlike the syndicate, the fund is my primary investment vehicle and provides diversified exposure to every company SuperAngel invests in, one of the most important attributes of a successful early stage portfolio. LPs also receive priority access to co-investments. Click here to request more information on the fund.
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SuperAngel.Fund is an early stage fund led by Ben Zises that invests in Consumer (CPG, eCommerce SaaS), PropTech, & Future of Work. Click here to view our deck.
