AngelList Review

angelist-review

AngelList is one of the most popular equity crowdfunding platforms. For a company seeking investment, then AngelList provides a big opportunity because the investor base on the platform is very experienced. In fact, some professional investors only invest through AngelList. One reason investors like AngelList is simplification. AngelList can handle administrative tasks related to the fundraising process (such as contractual agreements and capital collection) so entrepreneurs can receive their capital more efficiently. For investors and entrepreneurs, AngelList is a great platform.

Overview

AngelList has developed into a wide-ranging platform that supports the startup ecosystem by facilitating funding and talent for startups. Naval Ravikant and Babak Nivi founded AngelList in 2010 based on their own difficulty finding angel investors to fund previous ventures.

In 2014, AngelList published platform activity. Among the highlights:

  • AngelList facilitated $104 million in fundraising.
  • AngelList was used to fund 243 startups.
  • AngelList enabled 2,673 investors to participate in funding.

In general, AngelList provides more auxiliary services than other equity crowdfunding sites. As the platform gains popularity, then the AngelList management team continues to make adjustments that help democratize the funding process.

For example, AngelList introduced “syndicates” to enable investors to follow and support fellow investors that have access to better deal flow.

Along those lines, for entrepreneurs, then AngelList introduced recruiting services that enable startups to find job seekers interested in working for growth companies.

The AngelList home page includes trending syndicates and startups, which help promote the popular investors and startups. Actions to support the startup ecosystem are some reasons why AngelList continues to grow in popularity.

For Investors

AngelList provides many advantages for serious and sophisticated investors. For starters, due to the popularity of the platform, individuals that want to actively become a private market investor should create and maintain their AngelList profile. The investment community is very connected. In order to find and invest in the most promising companies, then investors must know about the deals. This is called “deal flow” and AngelList facilitates exceptional deal flow.

As AngelList evolved, many investors look to validate peers based on their investments. AngelList provides the platform for new investors to develop a reputation over time. An active AngelList member can leverage their profile to help build a following and demonstrate their investment knowledge.

The ability to syndicate funds is the main attraction of AngelList for seasoned investors. As AngelList notes:

Syndicates allow backers to co-invest with angels and VC funds, in exchange for carry.

Carry is short for “carried interest” and is basically the profit startups pay to their investors after a liquidity event (usually when they are bought or go public). In the traditional equity investment world, the carry provides the huge returns that make venture capitalists wealthy.

As AngelList notes:
In syndicates, investors pay carry to the lead for any profitable investment. This is called deal carry.

To learn more about carry and how the economics of syndicates work, then AngelList provides detailed information.

As the chart indicates, the AngelList syndicates option removes some of the fee structure so investors can retain more of the profits. Both professional and emerging investors can leverage syndicates to earn more and learn the investment business. For emerging investors, then they can choose to invest in all of none of the syndicate deals. This is a big advantage over typical VC funds, where investors must lock up their money for 7-10 years and have no choice in which startups to support.

For Entrepreneurs

A huge advantage for entrepreneurs looking to raise capital for their startups is the quality of investors on the platform. Investors act as more than simply a capital source, they also act as advisors and supporters.

As a startup grows, then there will be many challenges and the more resources an entrepreneur has to help overcome those challenges the better. In general, equity crowdfunding platforms match capital with businesses. This matchmaking involves real money and real people, so the higher quality investor marks a huge advantage for an entrepreneur.

AngelList provides the ability to attract talent. In addition to the investor base, then AngelList helps startups by providing recruitment tools.
In addition to the number of startups looking for potential employees, then AngelList helps founders through making this service 100% free. Also, the platform was designed to allow one-click connections. Therefore, when a founder finds a potential hire, AngelList facilitates the communication. Founders can manage the fundraising and recruitment process through the same platform, which is a huge time saver.

Some other quick stats about the recruitment tool and quality of talent:

  • Over 200,000 active candidates.
  • Over 60,000 developers.
  • Over 10,000 designers.

Finally, for entrepreneurs, AngelList enables communication between parties. User profiles help community members understand preferences and expertise. This is a great time saver for entrepreneurs because they can concentrate on investors that have expertise in their industry.

Other Notes

AngelList is a true platform that helps match investors to startups. Serial entrepreneurs turned investors founded it. Therefore, AngelList has a unique business model. AngelList focuses on investors because they are investors.

The founders are angel investors, so they leverage the platform to increase their deal flow. The founders operate the Venture Hacks syndicate. AngelList aims to increase deal flow and provide services to help startups succeed because that is how the platform provides a return to their investors.

In a typical syndicate model, the lead investor will take up to 15% carry and AngelList takes a 5% carry. AngelList will make a percentage of all returns, but no party (investor or entrepreneur) must pay upfront.

AngelList is well regarded and a solid reputation because the platform attempts to align interests between all parties. Only when startups succeed will any constituents (founders, investors and AngelList) make any money.