Angel Investor David S. Rose Can Recognize a Bubble

And This Isn't One

David S. Rose (Illustration by Paul Kisselev)

David S. Rose (Illustration by Paul Kisselev)

Financier David S. Rose is one of the earliest investors in the New York tech scene. He is the managing partner of Rose Tech Ventures and the founder and CEO of Gust, an international collaboration platform for start-up financing. He recently published Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups.

A lot of people say we’re in our second tech bubble. The first tech bubble happened because all the stuff was brand new. People knew the Internet would have an amazing effect, but they didn’t know how or why. The idea was eyeballs first and figure out how to monetize it later. Now, as opposed to tech for tech’s sake, you’re seeing technology in service of other things, whether it’s transportation, food, hotels, finance or fashion.

You think anyone who makes six figures should consider becoming an angel investor. My first angel deal, at a time when there were maybe a dozen angel investors in New York, took $200,000. Today, you can get an app started and have someone code it for you for $2,000. The universe of people who can invest is much broader, and it has become a standard way for companies to get going. Angel investors invest more than all venture capital funds put together—over $25 billion every year.

But isn’t becoming an angel investor a little more resource-intensive than just letting somebody manage your capital? I have over 90 companies in my portfolio, some I’m engaged with on a weekly or daily basis. But most angels are relatively passive—they’re as engaged as if they had a close relative working for the company. Is it more resource intensive than investing in a mutual fund? Yes. Is it as resource intensive as running your own business? Absolutely not.

Does that make it harder for start-ups to find “smart money”? Well, what’s “smart money?” Historically, it was people who understood the business, how the economics worked. But the other part of smart money is people who have domain expertise, who have contacts with bigger industries, who can bring advice and connections. There are 7-and-a-half million accredited investors in the United States who are legally able to do full-on investing today, yet there are only a few hundred-thousand angel investors and only a tiny percentage of companies that are getting invested in. We’re at the very beginning of an extremely big growing market.

Which sectors are most exciting to you right now? The sharing economy. You’re seeing people share things, whether it’s apartments, bicycles or cars, and platforms that can connect buyers and sellers and, therefore, add value to everybody.

But some of those platforms are running into legislative troubles. The law will always lag behind the market; it’s designed to change slowly. It might take some dislocation, but the bottom line about technology is that if something can happen, it will. If it’s technically possible and the market wants it, it’s going to happen.