I believe the rise in angel investing is here to stay and the professionalization of this class (aka “super angels” or “micro VC”) is a good thing for the VC industry and for entrepreneurs. It is basically a return to the type of VC that was done 20 years ago long before the craziness of the Internet boom that skewed things so greatly.

But with its growth and success it will encourage many people to enter the market who will lack 5 critical success criteria for earning positive returns.

Prism's goal is to build substantial businesses around disrupting the status quo. Prism VentureWorks has only been around since 1996 but has raised 5 funds and manages $1.25 billion currently. Each of the 10 partners focuses on different industry sectors within technology and life sciences. These industry sectors in technology include digital media and software & services In life sciences, Prism focuses on medical devices, therapeutics, and breakthrough diagnostics.

Don't miss part I of this interview with Woody on trends enabling start-ups right now, how these trends are affecting the VC market, and Woody's position on the angel market.

AlwaysOn: So what markets do you think are hot right now? 

Woody: Distressed European assets. No – that’s a good question. I think innovation markets are hot. Really innovative new ideas that take advantage of the consumer being in charge, time shifting, society trends, and that have a mobile element are hot. It’s really based on the ingenuity and creativity of the entrepreneurs.I think the things that are hot are bigger ideas. The thing to be careful about taking less capital to start something is that there are a lot of very thin ideas out there - too many small ideas that can actually get to the market place because of the lower capital requirements. The really innovative things happen when there’s a bigger idea at play.

There is a general consensus that web startups are being created at a faster rate than ever. The impact of accelerator programs like Y Combinator, Techstars, Seedcamp, and dozens more are one factor. The expanding pool of angel, seed, and super seed funds is another. And the most important factor is how cheap it is to build and launch a web service these days. You can bootstrap your way into existence.

Sounds like a great conversation yesterday at Y Combinator's AngelConf in Silicon Valley. Anthony Ha of Venturebeat had a couple posts on it that I just read, one on Paul Graham's comments, and another on Ron Conway and Mike Arrington's comments. I would have enjoyed being part of that discussion so I'll join in now.

Everyone has an opinion about them. Many love them. Some hate them. Regardless of your opinion, Super Angels have really become a force recently. Most focus on consumer internet because the start-up costs are low (compared to green energy, semiconductors, and healthcare), but when you want to scale a company, when you need millions of users, then you need big capital...Except when sometimes you don't.

So how do the early stage VCs feel? Well there's one key thing to keep in mind: Big funds need big exits. Small funds don't. Enjoy the video, and online discussion!