I'm now part of the VC blog over at Berkeley.

http://vc.berkeleylawblogs.org/, Here is my latest (and first) post:

Does Angel Participation Matter? An Analysis of Early Venture Financing

In our paper, Does Angel Participation Matter? An Analysis of Early Venture Financing, Jerry Hoberg, David Kirsch, Alex Triantis and I investigate how Angels and VCs investment terms and outcomes differ. As expected, we find that angels typically invest on more founder-friendly terms than do VCs. It might be good to give founders greater autonomy if they have a very good understanding of their business or are if a lot of patience is required. In contrast, we more investor-friendly terms when VCs invest together with angels, and even more investor-friendly terms when VCs invest without angels. Giving the investor greater control over the venture may make sense when investor expertise can add significant value. If private equity markets function well, we should expect that, on average, investors and entrepreneurs match according to their relative skills.

We test this premise using a unique sample of Series A private equity deals in which we observe angel-only deals, VC-only deals and mixed deals. We find that when deals are relatively small (less than $3.5M), angels and VCs compete on equal footing. Consistent with the idea that there is efficient matching in the small-deal market, we find no difference in the likelihood of liquidity events for angel-backed deals, VC-backed deals or mixed deals. However, when deals are large (greater than $3.5M), we find that angel-only deals are rare, and this suggests that angels can not really compete for larger deals - even if they might be the best suited investors. Consistent with this premise we find that large VC-only deals out perform large mixed deals, and this difference becomes even starker when comparing VC only deals to those mixed deals with the most founder-friendly terms, i.e., those most similar to angel-only deals. Our findings suggest that entrepreneurs who would best be suited to match with angels alone turn to the next best alternative - VC funding while including some angels in the round. However, these entrepreneurs would fare better if they could match with only angels.

Our findings are not necessarily critical of VCs, in fact just the opposite! Without VCs, some of these large “angely” deals would never get funded. And even if their outcomes are inferior to those who experience really good matches with VCs, they are still good. However, our findings also suggest that VCs are not necessarily the best financiers for all entrepreneurs and that due to capital constraints of angels, the private equity market may work sub-optimally.