The Rise of Flight VC

Gil Penchina (in the middle) taking Flight

We are at an incredible moment in business history. Every industry is in the process of being disrupted including Venture Capital. Disruption generally doesn’t mean that the incumbents go away. ABC, NBC, and CBS didn’t go away as YouTube emerged as the dominant video platform in the world (although TV viewing among 18–24years old is off 32% in the last four years). Taxis in New York City haven’t gone away because of Uber, but prices of NYC taxi medallions have dropped 40% to $720,000. That decrease in value aggregates to over $7 billion in lost value for the 13,600 NYC taxi medallions in the past year.

Just like taxis aren’t going away, neither are VCs, but they are in the process of being disrupted by AngelList. That’s why, even though I’m a VC, I also became a partner at Gil Penchina’s Flight VC and launched The Israel Syndicate on AngelList in April (read about my enthusiasm for Israel in this post).

The Israel Syndicate is just one of a federation of 23 Syndicates that comprise Flight VC. Others Flight VC Syndicates include:

  • The Gil Penchina Syndicate: One of the first syndicates created on AngelList. This general purpose Syndicate, named after Flight VCs Founder, is the second largest syndicate (in terms of total dollars of backing) on AngelList with more than $6 million in backing
  • The Late Stage Syndicate: The largest syndicate on AngelList with more than $7 million in backing investing in pre IPO companies.
  • The SaaS Syndicate: For investors who prefer recurring revenues, this is currently the ninth largest syndicate with over $1.5 million in backing

One of the great things about being a disruptor is you get to rewrite the rules. While VCs have traditionally been pretty opaque about their business, AngelList has provided historic levels of transparency. Below, Flight VC, in concert with AngelList, offers an even greater level of transparency to help provide additional context in to the emerging VC disruption.

A Brief History of Flight

The first flight at Kitty Hawk, December 1903

Flight VC got it’s humble beginning when, in October of 2013, Naval Ravikant, the Founder of AngelList, launched the Syndicate model. The idea was to incentivize highly followed angels on AngelList to be more active by giving them carry in deals they “Syndicated” on AngelList. AngelList investors could “back” a Syndicate, and indicate an amount they would invest if they liked a deal. The backing wasn’t a commitment, just an indication of interest.

Naval asked Gil Penchina to be one of the first Syndicates. It was an inauspicious beginning for Gil, with just 20 investors, totaling $91,500 backing the Gil Penchina Syndicate in the first month in October 2013.

Undaunted, Gil launched his first syndicated deal on AngelList in November 2013, a $300,000 raise for UXPin, a design platform for product teams. With other backers of UXPin including Andreessen Horowitz, the Gil Penchina Syndicate closed on $257,910 from 69 backers for UXPin, in January of 2014, and the Syndicate model was on its way.

Gil’s second deal, launched in January 2014, was AltSchool (also with Andreessen Horowitz), which is reimagining education. After his third Syndicated deal, Orion, in May of 2014, Gil launched his second Syndicate, The SaaS Syndicate (in partnership with Nathan Creswell and Kyle York).

The analogy behind Flight VC is to be the Fidelity Investments of crowd funding. Started in 1946, Fidelity has an all star group of fund managers managing a diverse group of 576 mutual Funds for 24 million customers. We’re not there yet, but Flight is on its way.

Flight VC By The Numbers

Now, less than two years after our first Syndicate was launched, Flight VC is managing 23 Syndicates.

Syndicates are only as strong as the people backing them. With over 3,o00 backers across our 23 Syndicates we have experienced rapid backer adoption:

In an encouraging sign, as fast as the number of backers has grown, the total amount of dollars backing our Syndicates is growing even faster, with more than $21 million backing our 23 Syndicates:

While many backers invest only $1,000 per deal, we’ve seen investments as high as $250,000 by individual backers. Since hitting a low of $3,900 in January 0f 2014, our average investor has indicated they are interested in investing per deal has grown by 75%, and now stands at $6,800.

The significant increase in our Average Backing in April 2015 was due to growth in the number of backers of our Late Stage Syndicate, which averages over $40,000 per backer.

While Flight VC averaged 1.25 investments per month in 2014, in 2015, to-date, we’ve closed over 3 deals a month, completing our 40th investment since inception (in Cruise) on August 25th.

Flight VC deal size has ranged from $100,000 to over $2 million, with an average across our 40 deals of over $400,000. In total, we’ve invested over over $17 million .

Getting In To Great Deals

While this piece is not a sales pitch on Flight VC, it is meant to put us in to context for a world that is largely either unaware, or worse, misinformed, about how AngelList works, what Flight VC does, and the value we bring.

In most ways, we’re like any other VC. We have a growing inflow of deals, that is first screened by a team of five professionals. Sometimes, we’re able to surface a great company from that deal flow. But for the most part, like other VCs, we’re out there chasing the best companies. Now, the world is awash in VCs and capital, and great companies can pick and choose who gets on their cap table. So why have great companies like Beepi and AltSchool and Vouch Financial, and on, and on, and on chosen Flight?

To begin with, we have a stellar group of Syndicate Managers. In addition to Gil Penchina and his 15+ years as an active entrepreneur and angel investor, others Syndicate Managers like Zach Coelius (The Zach Coelius Syndicate focusing on AdTech); and Helen Zelman Bonisk, Jeremy Conrad and Renee DiResta (The iOT Syndicate), are world class domain experts that any company in their industry could benefit from.

But every VC, according to them, are domain experts and bring unique value add to their investments. How can entrepreneurs differentiate? So Flight VC created AngelMob.co as a tool that clearly differentiates us from other VCs by leveraging the thing about us that is truly unique, the large and growing crowd of investors backing us.

Through AngelMob, we ask our backers to help our companies. The ask can be as simple as please promote “ZIRX gets strategic investment from BMW, launches parking service for enterprises | VentureBeat | Business | by Ken Yeung” by tweeting or sharing a post on Facebook or LinkedIn. The asks can be more complicated like an introduction to a company or referrals for an open position. The obvious premise is that promotion by, and the wisdom and connections of the crowd, can be of immense value to a company.

Providing that help can also be of immense value to the member of our crowd that provides that help. As an example, in a current raise, we offered “As a thanks for helping us promote companies we’re all investors in, we’re sharing the still private link to Altschool’s syndicate, so you can sneak in early.” In a business that’s largely about access, being active on AngelMob can guarantee that coveted access. Even thought it’s early, there have been 370 asks to date on AngelMob, driving more than 40,000 page views to promoted pages. As Flight VC grows, and AngelMob improves, the opportunity for VC value add is truly unprecedented.

The Future of Flight VC

Disruption doesn’t happen overnight. We’re less than two years into this Syndicate thing. But a few things appear obvious. Below are three predictions about the future of Flight VC/AngelList

#1 The Lines Will Blur Between Syndicates and Traditional VCs

The analogy I use most to help put AngelList in to perspective is YouTube. It works well on many levels. Most notably, how, after ignoring and suing YouTube for years, virtually every major media company now has a significant presence on YouTube. Disney, arguably the most sophisticated major media company in the world, paid $500 million for Maker Studios, the largest multi-channel network on YouTube. When leaders see inevitable disruption coming, they eventually embrace it.

YouTube stars are also extending their brands in to traditional television. YouTube mega star Bethany Mota has been on Project Runway and Dancing With The Stars.

Similarly, successful Syndicates will extend their brands in to more traditional VC funds, and traditional VC funds will extend their brands in to AngelList. This is already happening. Michael Arrington’s Crunchfund has an AngelList Syndicate. Structure Capital has a Syndicate. Jim Scheinman’s Maven Ventures Growth Labs Syndicate is one of Flight VCs 23 Syndicates. Prolific angel Paige Craig raised $27 million for Arena Ventures and immediately paired it with the Arena Ventures Syndicate.

Combining a traditional fund with the Syndicate model is the future. Thus Flight VC is launching The Expansion Fund so investors can benefits from the pro-rata opportunities of Flight VCs 23 (and growing) syndicates.

#2 AngelMob will evolve into a powerful advocate for Flight VC companies

Even in its closed beta version, we’re seeing some glimmers of AngelMob’s potential. We’re already rewarding active AngelMob contributors with coveted spots in hot deals. When we launched the Syndication of Zirx, a parking service for enterprises, we initially just made it available to backers int the 10 cities in which Zirx operates, so we could get the most effective advocates for the fledgling brand. AngelMob has generated more than 40,000 page views for our companies. But that’s just the tip of the iceberg.

We’re tracking to surpass 10,00o backers in 2016. As we grow our investor base and improve the functionality of AngelMob, we will become a value add powerhouse. As a result of excelling at tapping in to the power of our growing crowd, Flight VC will elevate in to the upper echelon of VC firms that founders covet.

#3 AngelList will emerge as the largest VC in the world, in terms of # of companies backed and total dollars raised

Just as the network effects of YouTube enabled it to emerge as the dominant video platform, network effects will enable AngelList to emerge as the world’s dominant VC.

Flight VC has already Syndicated 25 deals this year, which means we’re tracking to fund 37 deals in 2015, up from 15 last year. If we maintain that growth we’ll approach 100 deals in 2016. And we’re just a small part of what’s happening on AngelList.

Innovation by AngelList will further enhance the network effects already at play. For instance, there should be an active secondary market. Syndicates are a new asset class, and as new asset classes emerge, they become more liquid over time (e.g. high yield bonds).

As stated at the beginning of this piece, we are at an incredible moment in business history. Every industry is in the process of being disrupted. I’m excited to be a partner at Flight VC and to have a front row seat at the disruption of Venture CapitalFlight.

Show your support

Clapping shows how much you appreciated Lou Kerner’s story.