Seed Capital From Angel Investors: David Rose, Founder and CEO of Gust (Part 5)

Sramana Mitra: Again, from a trend point of view, you’re sitting at an interesting vantage point. Where are the entrepreneurs? You gave me an idea about where the investors are. You said France is seeing a new angel investment surge, as are India and the U.S. Where are you seeing entrepreneurial activities?

David Rose: Countries like Canada are active, Australia, New Zealand. These are, what I would say, “traditionally” active. And then in places like Portugal, Ireland, some in Spain now, Turkey, we’re seeing globalization spreading its wings and enabling entrepreneurs. It’s often easy because entrepreneurs are leading edge. In many of these countries, the first things that you see are entrepreneurs, whereas the investors tend to be a bit slower moving. They come later.

SM: They come after there’s a critical mass of deal flow.

DR: No, it’s not that. It’s actually cultural. In the U.S., there is a culture of innovation and entrepreneurship. In many other countries around the world, there are cultural challenges around money. For example, there are many large personal fortunes in many places in Asia, but people who identify themselves as rich people willing to invest in your deal are few and far between. The idea of taking money outside of the family to somebody else is also unusual. It’s slower to develop, the angel economy that you have in the west, in a number of these countries. But it’s happening. The groups like Mumbai Angels and so on are doing phenomenally well, interesting returns, interesting companies. What you’re seeing, again, in places like France, even in the UK now, [things] are beginning to change. With entrepreneurs leading the way, angels are now becoming involved.

SM: Everything you said is correct. I have a slightly different analysis of what’s been happening and what has been driving these angel investment communities or startup entrepreneurship communities. Largely, I think what has happened is countries where there has been a solid outsourcing boom – India probably being one of the most notable of those – particularly the software outsourcing boom, that’s where the entrepreneurship activity picked up. They went from having large masses of software engineers being trained in the outsourcing mode. Some of them started to get ambitious and wanted to do product companies, and then started to seek angel capital. The angels on the other side saw lots of money being made in Silicon Valley. India definitely came out of the outsourcing boom. One of the regions I’m starting to see activity in is Latin America, in countries [such as] Brazil and Argentina. I’m seeing deals from those countries. I think for the past five years there has been some outsourcing industry developing there, and it is now starting to mature into something more.

DR: I actually led a deal in Peru. I’m the chairman of Por ti, Familia, which is a health care deal in Peru, serving the bottom of the pyramid population in Lima. I think outsourcing has played a very interesting role, although we’re not quite yet seeing the emergence of angel communities in places like Russia and Romania.

Sramana: I’m starting to see a bit of deals, but Eastern Europe doesn’t have an angel community, yet.

David: Yes. But, again, this is all very rapid. I would say that probably the U.S. is 10 years ahead of Europe, which is 10 years ahead of Eastern Europe and the Middle East, which is maybe 10 years behind the Far East.

SM: I think this decade is going to move a lot faster. It’s not going to take 10 years.

DR: The essence of Singularity University and the things that we do over there are all based on exponential technological change, where things are doubling every one, two, or three years. I think that’s certainly true of angel investing. There are now probably 300,000 angel investors in the United States and maybe that many in the rest of the world combined. If you look at things that are happening in the crowdsourcing world like Kickstarter, IndieGoGo, and the crowd funding, microfinance, all these things are coming together, and it’s a brave new world. I think it will not take the same several decades that it took the U.S. market to coalesce around angel investing before you see that happening in other places like Eastern Europe or Asia.

SM: Anything else you want to add?

DR: With Gust, we launched with an extraordinary number of people from our AngelSoft heritage. We’re now looking forward to expanding that truly globally. We’re in active expansion mode now. We’re seeing more than 2,000 companies a week setting up sites on Gust. Dozens of additional angel groups and venture capital funds are joining the platform. The goal that 15 years ago that seemed insane, now only seems crazy. Give us a few years and we think it will be ubiquitous. Again, being free to entrepreneurs and free to basic investors, but ultimately the benefits that can be generated from a global platform for everybody, for the system as a whole, are very large. We’re looking forward to helping create that value.

This segment is part 5 in the series : Seed Capital From Angel Investors: David Rose, Founder and CEO of Gust
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