Started in 2010, AngelList was among the first online platforms for raising venture funding, and perhaps in part because they began before the Reg D changes that opened up general solicitation, there’s still a notable air of secrecy about the platform. Unlike other Reg D platforms, deals are done through investor-led syndicates, and investors are encouraged to follow syndicate leads as much or more than reviewing individual investments. Syndicate leads share in the investment’s “carry” (carried interest), offering the potential for significant upside on successful exits.
In recent years they’ve expanded beyond just syndicating investments to provide a job-market for startups.
Types of investments AngelList offers
AngelList offers investments in individual early-stage startups, and also offers funds providing attractive diversification, though most have minimums of $25K or more
What do you get when investing with AngelList?
The specific security offered by the company can vary by investment. As with many other Reg D investment crowdfunding platforms, investors are actually investing in a special-purpose vehicle (SPV), usually an LLC, which in turn holds the actual underlying securities (and simplifying the raising company’s cap table).
How does AngelList make money?
Each syndicate investment has a one-time cost of ~$8000, prorated across all investors in the syndicate by their investment amount. These costs are paid to third parties such as state regulatory agencies, payment processors, and accountants.
Syndicates also charge carried interest - usually 20% in total, which is shared between the syndicate lead and AngelList.
Potential returns and cashflow
Investments via AngelList are high-risk investments in startups. Most of the investments have no explicit expectation of payments, dividends, or other cash flow. Most startup investments lose some or all of their value. While some investors achieve excellent returns from startup investing, that is a rare outcome and requires substantial diversification over time combined with very careful investment selection.
Breadth of offerings on AngelList
AngelList is a very active investor community, and once accepted into several syndicates, investors can expect frequent opportunities (you have option to pass on any particular investment).
Regulatory framework and due diligence expectations
AngelList itself is what’s known as an “Exempt Reporting Advisor” which is variant of a Registered Investment Advisor. Investments are offered under SEC Reg D, and are only available to accredited investors.
For curation purposes, investors are relying heavily on the syndicate leads.