A big part of Silicon Valley’s success as a startup ecosystem can be linked to a continuous recycling of capital: entrepreneurs who made made money selling their company become angels, angel investors and VCs take profits from one deal and invest those in more deals. With tech ecosystems getting more and more important in places outside of the Valley, one can observe the same trends around the “recycyling of capital“: NYC now has a very strong base of entrepreneurs-turned-angels, an increasing amount of early-stage investors out of Seattle have made their money at Amazon, and you see Ryan Holmes (Hootsuite), Jason Bailey or Markus Frind (Plentyoffish) in many of the Vancouver angel deals.
The same trend happens on an institutional investor basis. Founders’ Collective and Social+Capital were both started and financed by groups of successful entrepreneurs and my own Version One Ventures is backed by over a dozen successful Canadian and US entrepreneurs, including some of the above mentioned.
Tech entrepreneurs are often in the best position to invest in other startups as they understand startup life, the product and the market. This was the investment thesis I started my angel investor career with after the exit to Amazon and I think I have done much better by investing in startups than putting my money in real estate, bonds or stocks.
Re-investing capital into startups is what keeps ecosystems going and I hope that we will see even more of this outside of the Valley and NYC.