For those who aren’t familiar with AngelList, it’s kind of like LinkedIn plus E-Trade for startups.
It’s a bit hard to explain to anyone who hasn’t experienced it. But it’s one of the more revolutionary online platforms I’ve come across. Anyone interested in startup investing should be familiar with it.
Here’s what the experience is like for “accredited” investors (the SEC sets income requirements on who can currently invest – but that’s changing, as covered more here).
Investors can browse various startups that are currently raising money. You get to see the following:
- Investment terms – how much the startup is valued at in this round (along with other deal details)
- Co-investors – which angel investors and/or venture capitalists are investing in the current fundraising round, which can be an excellent signal (based on the other investors’ track records)
- A “pitch deck” – a slideshow that quickly explains why the company’s founders think their product is the next big thing.
All this transparency is new to the world of early-stage investing.
The old way of doing things was… different, to say the least. Only a few years ago, investors were forced to rely on face-to-face meetings to find deals.
But, as with almost everything else, startup investing and fundraising have moved online.
Add in the fact that you can buy stakes in startups online through a growing list of sites such as FundersClub, Wefunder, MicroVentures and SeedInvest – as well as AngelList – and it’s quite the potent mix.
The process of buying equity in these companies online isn’t much different from buying a stock on E-Trade. It is riskier, of course. But as I covered here and here, there are many examples of startups that raised money online and went on to be huge successes. (It’s worth noting that Uber was one of the first companies to list its fundraise on AngelList back in 2009. That seed round valued the company at $5 million. Today it’s worth north of $50 billion…)
Minimum online investments start at $1,000. So it’s far easier to build a diversified portfolio of startups than ever before (offline minimums range from $10,000 to $50,000 at the seed stage).
Money transfers and documents are all completed online via ACH transfers and secure online docu-signing.
But AngelList is more than just a place you can invest in startups (and founders can raise money).
It’s also a social network for the startup ecosystem. You can follow notable investors and see what companies they’re backing. You can look for jobs at fast-growing companies.
The core of AngelList’s investment business is built around a marketplace where notable investors can lead their own independent “syndicate.” You can back these “syndicate leads” and invest alongside them. Notable examples of syndicate leads include Tim Ferriss, Jason Calacanis and Gil Penchina.
Like any other social network, you need to be involved to get the most out of it. By staying active and investing, you often get invited to invest in “private” deals. Startups that don’t want to share the details of their fundraise often use this route.
Private deals on AngelList offer some of the more interesting opportunities. I can’t talk about any specific ones I’ve participated in, but suffice it to say, there’s a lot of great deals going on behind the scenes. It’s one of the “easter eggs” not many people are familiar with.
There are dozens of sites out there today offering early-stage opportunities. But AngelList is emerging as something much more than just an investment portal. It’s become a key part of the entire startup ecosystem.
So if you’re interested in startups, my advice is to get familiar with AngelList. You can follow me here.
Founder, Early Investing