American Angel: The Surge of Seed Stage Investing in the Big Apple

The talent feels its chances getting as stale as pre-sliced bagels. The agony of the wait and of eyeballing the sizable audience are enough to offset the frigid air conditioning. Team by team, one by one, they’re shuffled on-stage, then off, just as quickly as they can showcase their company’s capabilities. Right after, they’re complimented or questioned, and then it’s out the door.

Simon Cowell’s latest game show experiment?

Nope: it’s angel investing. And it’s thriving in New York City.

In a conference room overlooking the Manhattan skyline, the New York Angels welcome on an early June day about a half-dozen entrepreneurial teams—peHUB attended the off-record meeting under the expectation we would not publish the companies’ names.

As the packed conference room watches, companies ranging from social media startups to healthcare marketing businesses deliver pitches, noshing down the obligatory mini-Danish, fruit and coffee breakfast spread in a meeting that carries into the early afternoon. To varying degrees, entrepreneurs field questions, receive accolades and then make elevator pitches in the hallway to potential investors looking to get a little more beyond what the presentation had to offer.

David S. Rose, chairman of the Angels’ board, manages to keep a meeting that could run deep into the afternoon from extending past lunch.

Gesticulating, often wildly, he both ushers presenters to the stage that is little more than a pull-down screen and then shoos them off.  In between he offers quick summations of their tech and products to the audience to bring the crowd up to speed, and provides fellow Angels updates on past deals.

It’s a lengthy list to track. Among the Angels are those who invested in uKnow, Viddler, Magnify Networks, Pond5, SetJam, Challenge Post and BioScale. Angels executive director Paul Sciabica points out that the group invested $40 million in more than 70 companies.

Some of their investments have already been realized, a triumph for a group that historically sees average exit times of up to nine years (“Certainly, our spouses do not want to hear that,” he says). But with big-name VCs like Alan Patricof among his network—as well as one of the title-name partners of a New York private equity firm, whose ID we can’t reveal yet—the Angels are fast becoming the in-crowd of the NYC seed investing scene.

The current incarnation of the angels grew from the New York New Media Association, which shuttered most of its various branches during the onset of the first dot-com boom and subsequent bust. NYNMA’s angel investor program wasn’t shut down. Instead, it set out on its own and grew into the angels’ 75-member team.

‘When we started, we were pretty close to the only functional angel game in town,” Rose tells peHUB.

No more. The angel network now counts plenty of New York and nearby angel and seed funding groups among its team, including Golden Seeds, Tevel, ArchAngels, Keiretsu, Life Science.

Because the investment rounds are not publicized, and because the definition of a seed investor seems to defy characterization, blending into the larger base of VC shareholders, it is virtually impossible to peg specific figures to the early-stage investors as an asset class. Still, the momentum of the New York Angels reflects an increased shift toward seed stage investing by a growing number of players that are diversifying the NYC scene beyond just Internet companies, says Canaan Partners’ newest general partner and East Coaster, Warren Lee.

“There has been a clear surge in seed and early stage startup fundings in the New York area over the past 18 months,” he said to peHUB. “That’s a big thing for New York.”