THE STORY OF ANGELLIST
*Note: This is a bonus section from the Navalmanack, which was edited out of the final published version. I have published it here online. Enjoy this section and join the email list for updates, new material, and more.
We didn't set out to build a product. We set out to solve a problem.
PRE-HISTORY
In 1999, Naval founded Epinions.com with Nirav Tolia, Ramanathan Guha, Mike Speiser, and Dion Lim. They received $8 million in seed funding from Benchmark Capital and August Capital. [0]
Epinions was a forum for users to ask questions and post opinions that blazed the trail for latter-day companies such as Yelp and Quora. [32]
The company had started to make a profit in 2002. By 2003, the company had 5.8 million users, and had raised $45 million in funding. All of the founders other than Nirav Tolia had left the company.
In 2003, Epinions was acquired by Dealtime in exchange for stock, with private deal terms. Nirav Tolia became the COO of the new company, Shopping.com. [0]
The combined company was re-branded as Shopping.com and went public in spectacular fashion; it was later acquired by eBay for more than $600 million. [32]
From the New York Times: [41]
“SAN FRANCISCO, Jan. 25 - Partners at two prominent Silicon Valley venture capital firms deceived four of the five founders of a start-up company, withholding critical information and thereby cheating them out of tens of millions of dollars, according to a lawsuit.
The suit, filed in Superior Court here last week, was brought on behalf of three of the five founders of Epinions, a consumer product review Website founded in 1999 that quickly became one of the dot-com era's more celebrated start-ups. The suit named J. William Gurley of Benchmark Capital and John R. Johnston of August Capital, both original investors in Epinions and directors of the company, and an Epinions co-founder, Nirav N. Tolia.
"It's rare for the founders of a company to sue their financial backers," said Paul T. Friedman, a partner at Morrison & Foerster in San Francisco. "Venture is a small world in which relationships are very important. Most people find a way to avoid disputes so they can live another day."
The basis for the suit is the proposal made in February 2003 to merge Epinions and DealTime, a comparison-pricing site. By then four of the company's five founders -- Naval Ravikant, Ramanathan Guha, Mike Speiser and Dion Lim, who did not join the suit -- had left the company but still owned a total of more than six million shares of Epinions common stock.
The four owned enough shares to scuttle the merger but gave their blessing, even though it meant valuing those shares at zero. At the time, investors holding preferred shares, including Benchmark and August Capital, had claim on the $45 million they had invested collectively.
The four founders, the suit says, were led to believe that the company was worth $23 million to $38 million, making common stock worthless.
The suit contends that Mr. Gurley, Mr. Johnston and Mr. Tolia failed to share "material facts concerning Epinions' financial affairs," including news of a deal with Google that the company knew would increase its 2003 profits by 1,400 percent.
The suit cites an e-mail message written by Mr. Tolia in January 2003 -- one month before the former partners approved the merger -- in which he writes about the Google deal. Mr. Tolia's shares were granted to him in the form of equity in the new company, which was named Shopping.com.
Shopping.com filed to go public in April 2004, a year after the Epinions-DealTime merger was completed. Its shares went on sale in October. Mr. Tolia's stake in Shopping.com was worth $38 million after its first day of trading. The two venture capital firms each owned shares worth more than $60 million.”
Suing your Venture Capital partners is uncommon, and Naval took a lot of heat for it. [0]
“[Ravikant] had better win this suit, and he better hope he makes enough for life, because he’ll never work as a VC again.” [34]
A San Francisco Superior Court judge threw out most of the claims against the venture capital firms, who (together with eBay) subsequently settled with the plaintiffs for an undisclosed sum. [32]
You are waiting for your moment when something emerges in the world, where they need that skill set, and you’re uniquely qualified. [1]
—
VENTUREHACKS
On April 2, 2007, Naval posted “Introducing: VentureHacks” on his Blog:
“Nivi and I are launching a new site called VentureHacks, an entrepreneur’s guide to hacking Venture Capital. It’s a “tell all” site that helps entrepreneurs get on an even footing with their better-informed counterparts when negotiating an investment.” [46]
To build a career, turn your ability into credibility.
How did your experience with Epinions lead to the creation of VentureHacks?
I became the go-to guy in understanding how to negotiate a term sheet, because I was very cognizant of what went into a term sheet and why. [42]
Founders kept coming to me and asking for advice. Like, “Hey, what is this term in the term sheet? Should I care about it or not?”
Keep in mind, a venture investor or a venture firm probably puts out 10-20 term sheets a year. They have institutional memory, because they are long-term players for decades in the industry. You're coming in negotiating your first term sheet which is the most important one. You don't know anything and you can easily get taken advantage of, especially with a less reputable firm.
You don't have anyone on your side. Even your lawyers -- the usual Silicon Valley lawyers get a lot more of their business from VCs than they do from you. There's just a standard way of doing things and you have to know what's negotiable, what's important, and where you have leverage. That's why VentureHacks was born. [42]
At VentureHacks, Nivi and I blogged the game theory of Venture Capital and how to negotiate a term sheet. These days the terms are standardized, and they've gotten more balanced and more entrepreneur-friendly, that's no longer an issue. But AngelList is probably wouldn't be here today if it weren’t for that history. [42]
What were some of the ways entrepreneurs were taken advantage of back then?
There are quite a few of them. One is the different kinds of liquidation preference. Liquidation preference means investors get paid back before you can make any money as a common shareholder. But it was common for term sheets to have cases where investors are getting paid back and then getting a piece of the upside.
Other examples are dilution, how down-rounds are handled, board control, and who can fire you.
It was very common (and it still happens, unfortunately) for an entrepreneur to be pushed out of their own company. The investor will bring in a friendly CEO, then the company runs out of cash and the investors recap it. It's a down round, and the investors end up owning all the equity. [42]
We’ve been doing VentureHacks for three years. It wasn’t a business but it’s built our brands. [34]
On Oct 5, 2010, VentureHacks announced the Kauffman Foundation’s supporting contribution:
A comment from Bo Fishback, about the partnership between Kauffman and VentureHacks:
“Thought it might be a little helpful to know how the guys at VH practice what they preach from my perspective.
Product: You already know it. Some of the best content for entrepreneurs on the web. Easy to understand. Original. Practical. Candid. Leveraging this community and credibility to launch AngelList was just plain smart.
Social Proof: The first time I met Drew Houston (Dropbox), he told me that VH was hugely helpful in getting up and running. Saved him time and mistakes – and it wasn’t his first startup… that’s great proof. The Twitter props are nice, the validation from guys who’ve already made it is nice. But at the end of the day, entrepreneurs talking about how VH helped them is what sealed the deal. Beyond Drew, I’ve probably heard from 50 others who found the content meaningfully helpful.
Traction: If you’re reading this, you’re part of it. The VH analytics are great. There are tons of advice sites out there for entrepreneurs, Nivi and Naval have been able to transcend being yet another one, and build something different and better, this community proves it.
Team: Great guys. Period. I think Nivi is one of the smartest guys out there talking candidly and practically about how to build something important or find dead ends quickly. He seems to have a special knack for consuming information in a million different forms and delivering digestible, practical, implementable recommendations. Both Nivi and Naval are surprisingly accessible to entrepreneurs and while they’re building their own thing with VH and AL, they are helping a lot of other people along the way.
Happy that Kauffman could be a part of this.” [54]
Another comment on the announcement:
“Glad you guys got together and congrats on things working out! You both are doing great things for entrepreneurs.”
- Drew Houston [54]
—
EARLY angellist
On February 20, 2010, AngelList was launched in a blog post on the VentureHacks Blog. Here is the announcement on TechCrunch:
Dubbed StartupList, Venture Hacks will start sending a weekly Email digest featuring three startup pitches that will get Emailed to some of Silicon Valley’s most respected angel investors.
The project is a followup to the VentureHacks’ AngelList, which launched yesterday. AngelList is a basic directory of over 80 established angel investors, including their all-important contact info (or, at least, the best people to get a reference through), what the investor looks for in a startup, and other key information. These members of the AngelList will all be receiving the weekly StartupList, which obviously makes it a huge boon to any startups that land a spot on the list. [36]
And a further description from TheNextWeb:
AngelList is a curated email distribution list of angel and seed stage investors. Nivi and Naval screen the companies/deals that get pushed out to this list, and they screen the investors for inclusion on the receiving end.
Deal summaries get distributed once or twice a week, and there is no pressure for investors to respond. If an investor is interested, they respond to the deal, and AngelList coordinates an intro. [33]
It’s called AngelList because it was an email list. We actually had two lists, AngelList and StartupList, and we ended up consolidating into the AngelList brand.
So you got some traction on those and then you went to a website?
That’s right. We started building out the website as the email volume became overwhelming and we realized we were on to something. There were a lot of intelligent things to be done with the data and the structuring, and to make it more community-based.
How were you adding users back then?
VentureHacks just became popular as a blog. For a while VentureHacks was the number two blog behind Fred Wilson’s AVC. We had a big readership, but we were going in circles, writing about the same things over and over. We basically just launched it on VentureHacks. We wrote a blog post, we explained to people this is what we’re doing, come sign up if you’re interested, and it just sort of took off from there. Emails are a great way to prototype a business. You can very quickly figure out if there is demand, you can stay in touch with your users very easily.
You started with the blog. The blog got a lot of traffic. You used that traffic and you advertised in a blog post for an email list. The email list got traction which led you to building out a proper site.
That’s right. That’s a good order of operations. [12]
People ask why we rarely post on Venture Hacks anymore. These days, we build solutions instead of write about them…
“Venture Hacks sucks now, all you talk about is AngelList” (Written by Nivi on the VentureHacks Blog)
Some people don’t like our posts about AngelList. I’ve heard this enough times now that I want to address it. But first, thanks for the feedback and for reading our stuff. Here we go…
AngelList is product-izing everything we’ve written on Venture Hacks. Would you rather do a search on Google or would you rather have Larry and Sergey tell you how to use the Dewey Decimal system?
Nothing would make me happier than making everything we’ve written on Venture Hacks irrelevant. Our motto at the office is “productize yourself.” And I think you can learn as much from our posts about AngelList as any of our posts on how to structure your Board of Directors.
That said, we’ll try to write more about non-AngelList topics. As always, thanks for the feedback and for reading our stuff. [35]
—
AngelList Circa 2010:
ANGELLIST TIMELINE
April 2007 - Start writing VentureHacks Blog
April 2010 - Launch AngelList as an Email List MVP
Oct 2010 - VentureHacks receives support of Kauffman Foundation
Oct 2010 - AngelList facilitated 50 investments in the first 7 months.
July 2011 - AngelList has facilitated 8000 intros and 400 investments in 18 months.
April 2012 - JOBS Act signed into Law by Barack Obama
Sept 2013 - Raised $24,000,000
Sept 2013 - Launched AngelList Syndicates
Sept 2013 - Launched AngelList Talent
May 2016 - Title III of the JOBS Act takes effect, allowing equity crowdfunding
July 2016 - Launched Republic, an equity crowdfunding platform
Dec 2016 - Acquired ProductHunt
Oct 2017 - Launched CoinList
April 2018 - CoinList raised Series A
Jan 2019 - AngelList is over $1 Billion in Assets Under Management, supported 2 million candidates in job search, and helped over 20,000 products launch. Over 75% of startups that announced seed funding from leading U.S. investors in the last 2 years have raised, recruited, or launched on AngelList or Product Hunt. 28% took money from a fund or syndicate run on AL. 59% used AL to hire. 36% launched a product on ProductHunt.
April 2021 - AngelList has over $2.5 Billion in AUM, 77 unicorns ($1B+ companies), 4,300 funds and syndicates, and participates in 51% of all top-tier U.S. VC deals.
—
ANGELLIST PLATFORM
It’s a work in progress. We’ve only been at it three years. It’s a ten year mission. It’s going to take us a long time to nail it. [12]
AngelList is still a little hard to describe because we’re doing so many things. Some work and some don’t. I would say we’re match.com for startups and entrepreneurs and investors and talent. We are definitely a force for transparency and meritocracy.
It doesn’t quite lead to commoditization, because just as companies now have more investors to choose from, investors have more companies to choose from. And generally, investors are scarcer than companies. So if anything, it might actually shift some of the power more in the investor’s favor for an experienced investor.
It really gives an opportunity for investors or entrepreneurs who are out of market, but have merit or money to contribute. Although we do a pretty good job connecting companies in Silicon Valley to other Silicon Valley investors, where we really shine is connecting out-of-market investors or out-of-market companies to in-market investors and companies. [12]
You seem to be ticking down the list of things that irritate entrepreneurs, trying to make them easier and more open. How much was the original vision, and how much of it is, “Well, this worked. Let’s try this”?
It's really hard to say -- you have a plan, you have a vision, but it evolves every day. It's very hard to draw a boundary and say, “this is what we meant to do” because you're always coming up with ideas. Some are better than others, and you try them out against the marketplace.
We started with fundraising. We wanted to make introducing startups to investors easier. And we did some of that.
And then we said, “okay, we're gonna go to series A!” That turned out a lot harder than we thought. We've definitely gotten dozens of series As done, but nowhere near as many as we would like, because it's a higher bar and more of a relationship business.
Then we thought, “okay, we'll go into all small business equity capital!” that sort of failed, there are just not enough Angels outside the tech industry.
Then, “we’re gonna go global!” Well, there's only a few places where it works, and we're big there now.
And then we thought, “Okay, what other verticals can we get involved in?” [42]
It is modeled very much after Craigslist. It’s not an accident that we’re called AngelList. The Craigslist model is to help people find connections for all the services they need, charge for very very few of them, make it seamless and quick and easy and no-hassle. [42]
(You might notice that the AngelList logo is a hand making the “peace” sign -- an homage to Craigslist’s logo.) [0]
So AngelList is starting streamline the execution of investments now as well?
In general, terms are much more standardized, which is one of the things that allowed us to launch AngelList Docs -- where we do the free Series Seed and Convertible Note closes online.
Terms sheets are supposedly this ‘black art,’ they’re supposed to be incredibly complicated. You need expensive lawyers to spend $20,000 per law firm, and they have to spend a month negotiating this document. But thousands of companies have done it and hundreds do it every month. So how hasn’t it been standardized by now?
The good news is, it is starting to get standardized. We took the Series Seed docs Ted Wang put together, which are used for a large portion of financings today (for example, Andreessen Horowitz has signed off on them and is willing to use them).
We basically built a workflow around those: checkboxes, electronic signatures, Dropboxes. Just fill out the form fields then we generate the legalese, put out the PDFs, file with Delaware and follow through all that. There’s no rocket science or magic to it, it’s just somebody had to tackle it.
And you think standardization is a permanent shift?
It’s a permanent shift and a good shift. When you buy shares from a company on the stock market, you don’t sweat the details about the papers underneath; you don't think about all the ways you can get taken advantage of. You do maybe with a pink sheet, or somewhere where there's strange stuff going on. Generally, you're sure if you buy Microsoft stock it has economic value associated with it. You’re not going to wake up tomorrow morning to find out Steve Ballmer had somehow taken your shares away from you. You shouldn’t have that fear in the private markets either, neither side should. It should be well-established contracts and contract law.
Midnight on Friday and nothing I'd rather be doing than working on @AngelList. #WhistleWhileYouWork
It’s the nature of successful companies that become iconic that they’re non-consensus.
Let’s talk about your experience with the JOBS Act. You went to Washington and changed the law? Is that how you would characterize that?
We definitely were very involved in it.
The securities laws were written in 1934, which is a long time ago. They probably referenced a telegraph in there somewhere.
A lot of what goes on at incubator demo days and conferences is technically illegal. When someone stands up at demo day and says “you should invest in this company” that's not completely kosher. If they say “Here is a standardized term sheet that we're using. This is the standard Angelpad or TechStars note.” that is not legal. You're supposed to be a Broker-dealer if you're doing those kinds of things.
All of this is operating very much in the gray area of securities laws. We bend over backwards to be securities laws compliant, we have a full legal opinion up and all that stuff. We never touch the money, and that’s part of the reason, but it's still pretty scary.
A bunch of products we wanted to offer (like AngelList Docs) we could not legally do. It was illegal for us to offer a Docs product without being a Broker-dealer, and being a Broker-dealer means you have all these regulations and requirements which make it impossible to work with startups.
So we wanted to get the law changed, and people told us it was impossible. It actually is basically impossible.
We hired a bunch of gumshoe lobbyists (who were awesome) and paid them purely on a contingency victory fee. And then we just pulled out all the stops.
What really made the difference was we were doing something we thought was good. We were spreading investment and investing around the country. And that's really what Congress wants to hear right now, which is “ok, you are helping companies in my jurisdiction get funded.”
We went to Congress said “this needs to exist.” All the lobbyist can do is open a door for you. You still have to make the pitch. We showed Congress how in every state, in almost every major city, we had a bunch of investors and startups who are willing to stand up for what we do.
There's just all this good karma that was paid back. I spent six months of my life just calling in favors left and right, and it turns out there were a lot of them to call in.
What are some of these favors that you requested?
For example: “Call up your congressman, tell them you're an impressive entrepreneur or investor, tell them you raised money or invested because of AngelList, tell them this is a good thing, tell them you want us to be able to offer Docs, tell them you want us to be able to do these new features and tell them they want to support this kind of activity.”
You know, the general solicitation law means if I were to stand up right here and say, “by the way, we're fundraising!” I’ve broken the law and I’ve invalidated my financing for the next six months, every time you write an article, and it says that “this company is raising money,” boom, you’ve destroyed their financing.
And normally you don't care, because we operate as a closed little environment here. But AngelList is online and global, so it is very visible. You become a target, you get sued, you get attacked by regulators state by state. So these are the kinds of things we had to make sure were taken care of, and the JOBS Act did it.
It was the only bipartisan act signed by that Congress. We went to the Rose Garden and Obama signed it into law. I have a copy sitting next to me signed by him, which is great. There's a story there and I’ll write a book someday. It was really fun and really crazy.
You call in literally 100 favors and each one of them takes a toll on you. I had Mitch Kapor call up Anna Eshoo, the Silicon Valley Representative. We had Steve Case work with us to get a piece in his recommendations to the council, and so on. At the end of the day, a random five magically come together to make it happen.
We had to put together this crazy thing to satisfy the investment banks, the regulators, and all the different constituencies. It ended up being a giant ‘dog's breakfast’ of different bills combined together. Then some genius -- I don't know who, but I can almost imagine some congressional staffer sitting around thinking...
“How do we get this thing passed? It doesn't make any sense!
Oh, let's call it something to do with jobs!
Hm… Jobs, jobs…
How about ‘Jumpstart Our Business Startups’?
Yes! JOBS Act!”
Then what congressperson can vote against something called the JOBS Act?
And it worked. It was a miracle right? It was literally a miracle.
And that wasn’t you? You don’t even know who did that?
No, I don’t even know who did that. There was a lot of stuff going on.
We would get phone calls from staffers, who tell us the politics:
“Well, he's gonna vote against this, because she voted against him on this bill. And they're actually horse-trading on this. But, if you can get Goldman Sachs to sign off on this, then we can trigger this whole trade and this other piece will go!”
So every day, there's a new puzzle to solve. There were tons of these little things, then you put them all together. I still can't believe it magically came together.
I went into this thinking there was a 10% chance it would work, and it will cost us x dollars worth of effort. So, multiply through the Expected Value... still worth it. We expected to fail, but we didn’t. We got lucky.
Are there any lessons from this experience that other groups in the Valley who want to see legislation passed could take? People are trying to get reform around immigration, right?
So the moment you say immigration, you're mixing skilled and unskilled and you're in trouble, so they need to rebrand. Branding is important, right?
The other thing is, we insisted the entire time on approaching the problem like a startup. And we were told “you cannot approach it like a startup.”
For example, anyone we had to pay, we paid them only success fees. We said “You don't get paid if we don't succeed.” They said “That's not the way it's done.” But, that's the way we did it.
Another example was at the last second, it looked like it wasn't going to pass the Senate. Our lobbyists said “you really have to show your support, you have to show that there are people out there who support this. Go get a petition, get a letter signed by a bunch of people.”
We said, “Okay, we're going to do it our way. We're going to do a little Twitter petition. And we're going to have login with Angellist or oAuth on Twitter. And we're going to have everyone's photos and their bios and all that stuff. “
The lobbyists said, “None of that stuff matters. They just want a Word document! You can get a bunch of signatures, stop acting Silicon Valley,” but we ignored them.
In one frenzied 36-hour period, we pulled an all-nighter. We put out this viral Twitter petition that got signed by 5,000 investors and entrepreneurs. Not 5,000 randoms, but these are investors and entrepreneurs. And we were able to slice and dice them by location, and how influential they were, what they invested in, what they look like, and who their senator was. We sent all that to Congress.
One of the unions who was afraid that the JOBS Act could be used to take advantage of older people or union workers somehow, opposed it. They ran their own petition, and these unions have mailing lists with millions of members. They got 3,600 signatures against, and we got 5,000 for.
But ours was beautiful and visual, and showed these people were powerful. And we were like, “Yeah, see that guy? He's one of your big campaign donors, we can do those kinds of links.” And we just crushed it.
I think Congress thought, “Oh, my God, this is SOPA/PIPA all over again.” A lot of people who were in opposition dropped it, and it got passed.
So we managed to use technology as a weapon in this cause. I don't think we should be afraid of acting like startups. [42]
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While you are tweeting, I am working on world domination.
—
ANGELLIST TALENT
“AngelList Has Transformed Seed Investing -- Are Recruiters and Job Boards Next?” - @PandoDaily
AngelList Talent we launched in 2012. It’s not widely advertised, but it’s actually quite a bit bigger than fundraising. To me, this is the less-told story of what’s working at AngelList.
Do you charge for AngelList Talent?
We do not charge for that. We have been using it, and it’s actually paying for itself that way. (laughs)
Why not charge yet?
Our model is to do the right thing for startups, and most startups don’t have much money. The truth is a lot of startups couldn’t afford it. [42]
We always try to connect Principals. On the fundraising side, we connect startups directly to investors; on the talent side we connect the founder or CEO directly with talent. We do not allow middlemen recruiters on AngelList Talent, which makes it very different from things like LinkedIn. You do not need a middleman, this is the Internet. [12]
We want the talent to see everything an investor would see. They almost see the company’s business plan. They see who the investors are, how much cash the company has raised, who the founders are, where they are from. We force the company to divulge how much equity and salary (at least a range) they’re offering. We’ve thrown companies off if they refuse to divulge it. They got really mad at us, but we said “Hey if I’m looking for a job I want to see this, and you should be transparent about it.” [42]
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ANGELLIST SYNDICATES
On September 23, 2013, AngelList Syndicates was launched (in part) on a Blog Post on Tim Ferriss’ Blog. Here is an excerpt from that announcement:
You'd Like to Be an Angel Investor? Here's How You Can Invest In My Deals…
On September 23, 2013 (that’s today), the world of startup financing changes forever. It’s a truly historic moment.
Previously, I couldn’t publicly share deals with you. Now, thanks to an unprecedented legal change, I can offer a portion of my start-up investments to any of you who qualify as “accredited investors.”
Previously, you had to be part of a small club to see such deals. Not anymore.
Previously, you might even need to be in Silicon Valley, drinking wine and having coffees around the clock, to see good deals before they filled up. No longer.
Starting today, I’ll share some of my favorite deals with you.
A syndicate is a single-deal fund created to invest in a startup. Syndicates pool capital from multiple investors into a single fund.
Syndicates are brought to the platform by Syndicate Leads -- experienced angel investors who have vetted the target investment. Syndicate Leads make personal investments in deals, demonstrating their confidence in the investment's potential.
Syndicate Leads share details on the opportunity with syndicate investors. Investors typically have 5 business days to decide whether they'd like to invest. Investors sign documents online and fund investments via ACH or wire. The minimum investment size is between $1K and $10K per deal. [48]
How do you describe the role of Syndicates in the startup ecosystem?
You have hundreds, maybe thousands of high quality Operator Angels, out there writing checks. And they have good judgment, good insight. These are not full-time Venture Capitalists or seed fund managers. They don't do a lot of investments. They usually invest in their friends, alumni, and entrepreneurs they've known for a long time. They are the true backbone of early stage investing.
Most venture capitalists will not invest in a company pre-product, pre-traction, or even pre-product-market fit. So the pre-seed and seed stages are heavily dominated by angel investors. The problem with a check from an angel investor is, it’s a small check. It's $10,000 - $25,000, which may not move the needle on a financing.
Syndicates are pop-up venture funds, on demand. We’re using the power of the Internet to aggregate capital -- to give angel investors a larger pool of capital to invest.
If you have a colleague starting a company, and you know the person is a great engineer or founder, you want to back them. Normally, you might write a $10,000 or $25,000 check. Now, using Syndicates you can pull in your friends, other angels, or institutional capital. We can make it happen very quickly, within a week to two weeks. Now, you can write a $250,000 check or $500,000 check.
We’re evolving toward favoring what we call Backers -- who are not just sophisticated, but also value-add. There's the Lead Angel who writes the initial check, sends the signal, does the diligence, and is responsible for the investment. Then there are a bunch of Backer Angels, several of whom can be called upon for their specific expertise.
Syndicates provide a very open marketplace for sophisticated investors and funds. So you talk to Dustin (of Maiden Lane Ventures) and Ming (of CSC Upshot), and they both run large funds exclusively investing through AngelList, backing Angel Syndicates, and working through this network of hundreds of Operator Angels who are doing deals.
For the founders, it allows them to choose the Angel they want to work with, rather than having to take capital from a person they may not want to work with as much.
I've called venture capital a bundle. It's a bundle of advice, control and money. Historically, founders had to purchase that bundle. Smart founders are becoming more picky about how they assemble their financing, as opposed to just taking it from one brand, one bundle.
So Syndicates are a tool for that unbundling?
Syndicates are pop-up venture funds today, but we're also using the infrastructure.
Larger VCs are using Syndicates to bring in a community of Angels or Scouts they want to work with. They also use the Syndicates infrastructure to bring their limited partners into very large deals.
If you're a small fund, and you get a large allocation in a company that's too big for you, you can use Syndicates to bring in your LPs or other partners into that deal on a one-off kind of basis.
On a technology level, what we have is a very flexible infrastructure for creating one-off venture funds. Tracking, reporting, accounting, collecting money, handling distributions, handling data, and all that. We're playing around with it, reassembling the parts of the venture business. We’re finding out what should be done on a one-off basis as opposed to this 10 year committed-fund basis.
What is the model for Syndicates?
It's an all-carry model. There's no management fees right now, so there's a lot of alignment. The average Syndicate Lead puts in 16% of the round themselves, which is much higher than any general partner commitment in a VC firm. Because there’s no management fee, there’s true skin in the game.
The bulk of the Syndicates capital comes from individuals, angels, friends, all of whom we vet for not just accreditation which is the legal threshold (they have to be rich), but also for sophistication. They have to understand how risky angel investing is, how opaque and illiquid these assets are, and what the timeline is.
Really, our job is to facilitate, for our platform to make things easy for Angels, for their backers, and for the institutions that want to do these investments. And of course, for founders. We'll get involved in mediating if there's a difficult situation. But mostly, our job is to build software, build operations, and keep our heads down. [43]
One nice thing about a Syndicate rather than a Fund is the easy discoverability - people I wouldn't have thought to ask are backing me.
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AngelList Circa 2014:
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REPUBLIC
Republic was announced in July 2016. An excerpt of coverage from Inc.:
Republic, an equity crowdfunding platform, announced its launch today. The company invites non-accredited investors (i.e., those with limited investment experience, who may earn a salary of less than $100,000 annually,) to give capital to dozens of startups for an equity stake. [57]
Kendrick Nguyen, Republic's co-founder and CEO, previously served as the head of legal counsel at AngelList.
New equity crowdfunding regulations, or Title III of the JOBS Act, took effect in May. They will allow average members of the public to invest in early-stage companies for the first time.
There are limitations, however: If an investor has an annual salary of less than $100,000, they're only permitted to invest up to $2,000, or five percent of their net worth (whichever is greater).
As part of the Title III rules, the onus is on Republic (as an online intermediary) to communicate the risk that investors would be taking.
"When an investor signs on to Republic, they must go through and answer a questionnaire correctly," said Nguyen. "This verifies their understanding that early stage investing is highly speculative -- and they're at risk of losing all the invested capital." [57]
We’re launching Republic today, an online platform where everyone can invest in innovative, mission-driven startups curated by our team.
It’s a big step forward in the third wave of democratizing startup financing. The first wave began with reward-based crowdfunding portals like Indiegogo and Kickstarter, where people everywhere could help fund product development with a donation.
The next wave, known as Title II crowdfunding, sparked a breakthrough change. Connecting angel investors with founders, the online fundraising platform AngelList has syndicated over $350M into more than 1,000 startups since 2013.
Yet that second wave harnesses only a fraction of equity crowdfunding’s potential. Available to wealthy “accredited investors” only, it leaves out 97% of the US population, limiting the opportunity for a fuller range of startups, founders and investors to engage with one another.
Republic addresses that limitation. On Republic, entrepreneurs can access a vast new source of capital: investments from the general public. And everyone — from Main Street to Wall Street — can share in the potential success of innovative startups they choose to back.
This is a big step and it hasn’t come easily. After years of lobbying effort, angel investing became legally accessible to main street for the first time this year thanks to the approval of Title III legislation in the JOBS Act. It will take partnership and perseverance to convert this policy shift into a market reality at scale.
From Main Street to Wall Street, now everyone can participate in the journey of a new startup. [58]
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PRODUCTHUNT ACQUISITION
On December 1, 2016, AngelList announced the Acquisition of Product Hunt. An excerpt from Quartz’ coverage:
Product Hunt had become somewhat of a Silicon Valley darling since 2014, even before it was accepted to prominent seed accelerator Y Combinator. Investors often use Product Hunt to see what apps and services are trending (and thus ripe for investment). Entrepreneurs use it to get the word out about about their new inventions.
The reported $20 million deal will give Product Hunt resources to expand beyond its Silicon Valley fans, and offer AngelList a channel to market its community’s products. [51]
Ravikant had previously invested in Product Hunt. [53]
Product Hunt is a perfect fit for us. We already help founders raise money and recruit talent. With Product Hunt, we can also help founders launch products and find early adopter customers. It dovetails very nicely into our mission of helping founders. With this acquisition, we become the network for technology companies. [50]
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COINLIST
Launched in October 2017, here is an excerpt of the announcement on CoinLists’s Blog:
Our decentralized future is coming at us fast.
Every day, new digital assets launch—from protocol tokens to securities—and are burdened with managing both their technological innovation and the logistical, compliance, and regulatory load that can come with creating a financial instrument.
It’s time for a company to provide those financial services so token creators can focus on what they do best: building world-changing products.
CoinList emerged as a independent company from AngelList and Protocol Labs’ collaboration running the Filecoin token sale. Based on that experience, and thanks to lots of help from both companies, we’re building the leading platform for token-based financial services, starting with being where the world’s best digital assets run their token sales. [55]
Coinlist is a legal, regulated, well-lit marketplace for ICOs. [45]
CoinList is similar to AngelList in that it connects ICO teams with investors, and the platform vets prospective token buyers to make sure they are accredited.
By limiting the audience to these (presumably) sophisticated investors, CoinList allows companies to market their tokens without having to worry about registering the offerings with the SEC - an expensive, time-consuming and generally burdensome process for fledgling businesses. [56]
Smaller issuers have even used the Coinlist compliance API without running their ICOs on the site. With the SEC starting to take enforcement actions, it's conceivable that CoinList, and platforms like it, will be increasingly important to getting sales done. [56]
CoinList helps bring ICO assets and protocol tokens into the same legal compliance that AngelList provides for startups. [56]
Joshua Slayton (founding CTO of AngelList), Graham Jenkin (former COO of AngelList), Brian Tubergen (former Director of Fundraising Product at AngelList), and Paul Menchov (former Head of Fundraising Infrastructure), are 4 of the 5 founders of CoinList. [55]
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OVERVIEW
The AngelList family has gotten pretty big now. We’ve got Republic, CoinList, ProductHunt, AngelList Talent and AngelList Fundraising. At this point, it looks more like Alphabet -- like a group of companies rather than a single company, and I am Executive Chairman of that group.
I have couple of good CEOs running business units, because AngelList has a few different businesses. I’m still day-to-day at the office, I just don’t have many direct reports anymore. [45]
Persistence beats timing. Execution beats luck. Not immediately, but eventually.
At AngelList, we care about:
Eliminating frictions so startups can change the world.
Connecting startups with their ideal partners, on the best terms, fast.
Building tools for investors to help startups.
Telling startups and investors what we would want to know in their shoes.
Building products that scale, instead of manual processes or throwing bodies at the problem.
Having team members work on things they’re excited about, rather than what we think is important. [40]
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Sometimes easier to change the world than to change people’s minds.
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