AngelList is a pioneer in online startup investing, and remains an attractive choice for low-cost access to early-stage startups, especially for those who prefer the “syndicate” model of following particular lead investors.
In part because it was one of the first of its kind, AngelList has now had several $1B+ exits among its investments, including Dollar Shave Club (sold to Unilever) and Twilio (IPO).
- Website: https://angel.co
- Investment Types: Startups/Business Financing
- Security Types: Convertible and Equity
- Sectors: B2B and Technology
- Minimum Investment: 1000
- Must be accredited
- Long track record (was among the first online startup investing platforms)
- Syndicate model to follow specific lead investors
- High volume of potential investments
- Experienced investors can apply to become syndicate leads, increasing potential returns
- Open only to accredited investors
- Startup investments are inherently risky and highly illiquid
- Must be approved by syndicate leads to access certain investments
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).
AngelList fee structure
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.
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.
AngelList in the news
AngelList Raised $163M For Startups in 2015, Up 56% Year-Over-Year ‚Äì TechCrunch
AngelList, the online platform that had made itself indispensable to¬†early-stage startups¬†for fundraising and recruiting, said it closed out last year having raised $163 million online on behalf of 441 companies.¬†That‚Äôs about 56 percent higher than the year before in 2014. About 40 percent of‚Ä¶Read More
One Crowdfunding Platform Is Behind 3 Billion-Dollar Startup Exits This Year
The crowdfunding platform paid out returns to nearly 200 investors.Read More