ANGELLIST REVIEW
◙ ANGELLIST REVIEW SUMMARY
√ Raising Funds for Startups
√ Startups don’t pay for syndicate investments
√ Investors pay 0-25% deal carry to the syndicate lead, and 5% deal carry to AngelList
√ Invest in 100 Startups with one Investment
◙ SUPPORTED PROJECTS
Project Categories:
The are tens of startup categories. Most popular categories include IT Startups, Consumer Electronics, Media, Healthcare, Education and Finance.
Public Fundraising
Adding your startup or funding round to AngelList doesn't affect whether you are raising publicly or privately. Fundraising activity on AngelList is only visible to logged in, accredited investors. If you announce your raise publicly (for example, by social media or to your company's newsletter), you will need to collect evidence from all investors to verify their accredited investor status.
Accredited investors
An individual in the U.S. is said to be accredited if he has $200k or more in income for the past 2 years (or $300k with a spouse), with the expectation of similar earnings this year; or $1m in net assets (assets minus debts).
How are the investors on AngelList verified
All the investors have stated that they are accredited. You should verify that every investor you raise money from is accredited, whether or not you use AngelList. And you should treat each investor you meet on AngelList as if you just met them on the street.
Limits on AngelList investor account
Newer investors who can’t claim several confirmed startup investments or fund partnerships already may be capped at $25K per investment (and $150K in total).
◙ SUPPORTED COUNTRIES FOR SYNDICATED STARTUPS
These are the terms for US and Non-US startups.
--How can a Startup be syndicated on AngelList
(1) First, you must have a syndicate lead
(2) You must also be a US S corporation, C corporation or LLC corporation
(3) UK corporations also qualify
--Non-US companies can raise money publicly
Non-U.S. startups can take advantage of public fundraising, as long as they comply with their local regulations and US regulations
◙ WHO IS ANGELLIST
AngelList is a platform helping startups raising money online. It was found in Jan 2010 by Babak Nivi and Naval Ravikant.
The Service is operated and provided by AngelList LLC based in the US, 16 Maiden Lane, San Francisco CA 94108.
Angellist has made more than 7,500 introductions {between 800 start-ups and 1,200 investors}.
◙ ANGELLIST COST OF SERVICES
Startups don’t pay for syndicate investments.
Investors pay 0-25% deal carry to the syndicate lead, and 5% deal carry to AngelList.
Investors also pay the out-of-pocket costs for each investment—currently $8K in the US and £8,300 in the UK. These costs are paid to third parties such as state regulatory agencies, payment processors and accountants—AngelList does not profit from these fees.
The lead and AngelList do not receive carry until the syndicate investors’ investments and out-of-pocket costs are returned.
◙ ANGELIST TRENDING PROJECTS
How AngelList Trending Work
Trending is based on indications of interest from candidates and investors. In other words, when a lot of high-quality candidates or investors say they want to meet the startup, in a short period of time, this startup trends. The “quality” of the person that is indicating interest matters. Quality is measured by track record—the valuation of the startups a person has invested in, founded, worked at, etc.
◙ ANGELIST SYNDICATES -HOW IT WORKS?
A syndicate allows investors to participate in a lead investor's deals. In exchange, investors pay the lead carry. Investors get access to deals, leads get carry and startups get more capital with fewer meetings.
- Investors get access to a lead's investments and benefit from her experience in picking and managing investments. Investors can also invest as little as $1K.
- Leads get carry for their investments. They can invest 5–10x their typical investment amount, which gives them access to more deals and allows them to lead more deals. They may also get major investor rights. Finally, leads get access to syndicate investors who are often experts in the startup’s market.
- Startups get more capital with fewer meetings. They get the attention of a lead who is making a large investment. They get access to the syndicate investors’ networks without putting each one on the cap table. And they can easily collect many small investments.
Legal structure of a syndicate
Syndicate investors don't invest directly in a company. They invest in a special purpose fund that is created specifically for each investment. This fund then invests in the company. The corporate form of the fund is an LLC.
The fund is managed by Assure Fund Management and advised by AngelList Advisors, a wholly-owned subsidiary of AngelList. The lead also serves as a contractor of AngelList Advisors.
The lead does not invest through the fund but is required to disclose to AngelList Advisors how she votes, or if she buys or sells shares.
If there is a lead, the fund will usually vote with the lead unless she has a conflict of interest or there are other unusual circumstances. If there is no lead, the fund will usually vote with the majority of other shareholders
99-investor limit
Due to securities regulations, syndicates can only accept 99 investors in a deal.
A small number of investments support qualified purchasers who are exempt from this requirement.
Qualified purchasers include individuals with $5M in investment assets and companies with $25M in investment assets. A syndicate deal can accept up to 2000 qualified purchasers at the same time as 99 accredited, but not qualified, investors.
◙ INVESTORS
Investors information rights
Syndicate investors receive less information than direct investors. An AngelList entity or the lead will distribute the following documents to investors when they invest in a syndicate deal:
- Documents related to the fund’s formation such as its operating agreement, PPM and subscription agreement.
- General terms of the investment, if the company permits. Templates of deal documents signed by the fund may also be made available to investors.
- Qualitative updates on the company status, if available. This is high-level information similar to the information VCs provide to their LPs. For example, it may include information about the company’s customers or financing. It will generally not include any figures.
- Any information investors need for taxes, such as K-1s, is distributed annually.
How Investors receive their profits
You will receive your profits, if any, when the company is acquired or has an IPO. There may also be other opportunities for the syndicate to sell its shares.
When there is an exit opportunity, AngelList Advisors, in consultation with the lead, will advise the syndicate fund regarding the best time to sell the syndicates’ shares. The decision to sell the shares is then made by Assure Fund Management. This will generally happen soon after the shares become liquid. If there are any profits, they are distributed to the syndicate investors.
The syndicate fund, like all investors, is bound by restrictions with the company and can only sell shares in certain situations.
How investing in a syndicate differ from investing in a VC fund
Syndicates are intended to complement, not replace VC funds. Differences include:
- Syndicate investors can opt out of any deal or stop investing any time
- Syndicates have much lower minimums
- Syndicates are available to the general (accredited) public
- Leads typically personally invest more per deal than GPs
- Syndicates use deal carry
- Syndicates do not charge management fees
◙ INVESTOR'S FUNDING ACCOUNTS
Investor's Funding Information
Investor accounts are free
Funds are stored at Silicon Valley Bank, funds are FDIC-insured
Investors can increase or decrease their investment in a particular deal. Any change is subject to approval by the lead. Investors can also opt out of any deal.
An investor account only requires a minimum balance in the case of a syndicate. The minimum balance is equal to the largest backing amount.
Withdraw funds from investor's account to bank account takes 3-7 days.
◙ CONTACT ANGELLIST
The Service is operated and provided by AngelList LLC, 16 Maiden Lane, San Francisco CA 94108.
General Questions email: This email address is being protected from spambots. You need JavaScript enabled to view it.
Questions about funds: This email address is being protected from spambots. You need JavaScript enabled to view it.
Jobs & Recruiting email Support: This email address is being protected from spambots. You need JavaScript enabled to view it.
Syndicate Projects: This email address is being protected from spambots. You need JavaScript enabled to view it.
WebSite: www.ANGEL.co
◙ AngelList Review
