SuperAngel.Fund x Q3 2023 Recap 🔥
Happy Friday!
As always, I am excited to share the quarterly update for SuperAngel.Fund.
In Q3 we made 12 investments with a median check size of $50k and post-money valuation of $13m. Our investments were spread across Consumer (5), eCommerce SaaS (6), and Future of Work (1).
Since the fund started in January 2021 we have deployed $8.1m across 146 investments into 101 companies. I estimate the current value to be $10.0m, which represents a 15.1% unrealized IRR and 1.23x gross multiple. So far, 55 investments have seen a markup, 82 are active without yet a change in price, and 9 are no longer active. Click here to view a detailed performance summary and see below for a quarterly overview.
In addition to the fund which is my primary vehicle, Super Angel Syndicate provides an opportunity for investors to contribute more, from time to time, into individual companies via special purpose vehicles (SPVs). Since 2017, the syndicate has deployed $8.4m across 25 investments into 16 companies. I estimate the current value to be $16.1m which represents a 29% partially realized IRR and 1.92x gross multiple. So far, 14 investments have seen a markup or distribution event and 11 are active without yet a change in price. All are still operating. Click here to view a detailed performance summary.
Q3 2023 Investments
Mandrel: Operations data platform for consumer brands
Minoan: Shop the world around you
Create: The first modern creatine brand
Flagship: Creator shops made easy
DayZero: AI financial operating system for eCommerce brands
Biom: Sustainable wipes brand
Mayple: Global commerce infrastructure for eCommerce brands
candidate.fyi: The missing candidate experience layer
Grocers List: Social commerce tools
Rorra: Tap into clean water
Confidential: Secondary share purchase
Market Commentary
As I wrote in the last quarterly update, valuations for early stage companies have felt like they were at or near decade lows and continue to remain attractive. This is a direct result of major changes to the capital markets which have reduced the supply of ‘risk capital’ and appetite for early stage ventures. These changes have been driven by higher interest rates that offer the ability for investors to earn greater yields today than at any other time over the past 15 years via “risk-free” assets like U.S. Treasury Bills.
However harsh these macroeconomic shifts are for startups seeking capital, for investors like us with a long term approach, patience and dry powder, it presents the opportunity to capitalize on extremely favorable valuations. And, as a result of these lower prices, we are able to buy more ownership in the companies that we choose to invest in for the same dollars that we would have been able to previously. For companies that prove successful, these dynamics will greatly enhance our distributions and return profile.
See chart below showing global VC deal activity since 2015 (Source: Pitchbook & National Venture Capital Association Q3 2023 Venture Monitor First Look Report)
Over the past 11 quarters SuperAngel.Fund has maintained a disciplined, thoughtful and consistent strategy. We have been intentionally conservative with our investable capital and held reserves that are allowing us to benefit from, and take advantage of, the lower-entry-valuation environment that we are in right now. This has enabled our Limited Partners (LPs) to benefit from even more diversification, which increases coverage over a wider timeframe and exposes them to a larger quantity of investments across market cycles. This is a recipe that I believe is crucial to achieving long term success and maximizing gains.
In addition, over the past few quarters we have invested in some of our most promising companies at nearly the same or discounted prices to their last rounds of funding via Secondary transactions (i.e. buying shares from an 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. We will continue pursuing this strategy.
Also as shared last quarter, in Venture Capital, funds are often characterized by their “Vintage Year” which refers to the period in which fund capital is invested. Given the state of the market there are many investors that believe the next year is set to produce some of the strongest vintages of the decade. Below is an excerpt from one such investor who wrote “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. 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.”
Below is another excerpt from VC Lab, a venture capital accelerator, referencing the importance of market timing and vintage years:
“The vintage year is often the single most vital factor affecting the success rate of a venture capital fund. As an example, a favorable vintage year can yield up to a 5x return for a top performing fund, whereas an unfavorable one might deliver only a 2x return.
The year 2023 is predicted to be a top vintage year for venture capital firms because many of the ideal market conditions are met. This prediction stems from a unique confluence of factors:
Pandemic Aftermath: The world is emerging from the COVID-19 pandemic, giving rise to new opportunities across various sectors. In addition, humanity is coming back to work with higher productivity levels.
Market Downturn: Historically, market corrections have coincided with substantial vintage years. The recent correction in the market is creating a favorable environment for venture capitalists.
Lower Valuations: Accompanying the market correction, lower valuations of startups present an opportunity to invest at reduced costs. Lower investment costs increase the potential for higher returns.
The Great Resignation: An influx of skilled professionals, due to pandemic-related job disruptions, has created a talent-rich environment. This situation enhances the chances of venture firm success.
Remote Work: The surge in remote work has broadened the geographical reach for venture capitalists. With this, they can tap into startups and talent worldwide, thus increasing investment prospects.
Artificial Intelligence: The steady rise of Artificial Intelligence presents a new frontier for investment. High returns are likely for venture capitalists investing in this transformative technology.
It is well known that venture capital is countercyclical, as of Q3, 2023, the recovery in the wider economy and in venture capital are well underway.”
Also worth reading: “Why Should You Invest In All Vintages?” and “Why 2023 Could Be a Good Vintage for Private Equity”.
Our Approach
As a solo General Partner (GP) that is responsible for all aspects of SuperAngel.Fund’s operations, marketing, deal flow pipeline, decision-making, due diligence, investment performance, and portfolio support, I relate much more closely to the founders that we invest in rather than my peer group of professional investors/VCs, or part time angels. As you might imagine, this breeds an extremely unique connection with founders that is hard to quantify. There is a mutual appreciation for building a business from the ground up, having to do more with less, and wearing multiple hats at once. This connection creates a deep trust, loyalty, empathy and friendship which is among our biggest differentiators compared to other capital allocators. I care about the success of my business (e.g. our fund), in a way that only a founder can care about her or his business. Founders feel that I live and breathe, win and lose, celebrate and in certain cases fail, right alongside them. It is what drives our deal flow, information advantage, ability to support our network, and more.
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 the categories we know best
Leverage massive network to provide an unfair competitive advantage
Champion our founders and their companies religiously to drive incremental exposure, customers, and business opportunities
Position ourselves as each founder's favorite and most helpful investor
These dynamics 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.
Blog & Other Updates
Featured portfolio company, Settle, in our ‘Founder Friday’ newsletter
Celebrated 3 portfolio companies listed in the Inc. 5000 (Branch, Confetti, & PostPilot)
Participated in a VC/Founders Office Hours live spaces on Twitter/X
Attended a launch event for portfolio company, Cadence, at The Container Store in NYC to support Steph Hon, Founder & CEO. Also met TCS execs since they also work with more than FIVE other SuperAngel portfolio companies including Character, Cleancult, Caraway, Biom
Attended an investor Demo Day hosted by Jason Calacanis in Chinatown, NYC
Had lunch with Austin Gardner-Smith, Founder & CEO of portfolio company Drivepoint
Met up with Otis and Lalo founders for lunch, walking meetings and coffee
Twitter Highlights (Click here to follow me on Twitter)
-Lessons of venture - https://twitter.com/bzises/status/1702078298279330264
-Investing strategy - https://twitter.com/jasonlk/status/1701738386997063690
-Deal flow - https://twitter.com/HarryStebbings/status/1711001397833973889
-Capital efficiency - https://twitter.com/KivaDickinson/status/1709636886971687335
-Pitch decks - https://twitter.com/homerfolmer/status/1709612344781717665
-Still early days of eCommerce - https://twitter.com/bzises/status/1706388547027054974
-Scott Belsky on investing - https://twitter.com/bzises/status/1704226816490188861
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 Q4.
Sincerely,
Ben Zises
PS. You can access all prior quarterly 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.
