What is AngelList?
Blog | February 17th, 2014
“If you’re working in tech and you’re trying to raise an angel round, you have to be on AngelList. You just have to be there.”
AngelList is a matchmaking service for early stage investors and entrepreneurs. It allows startups to find seed (and sometimes Series A) capital, and gives investors access to substantial dealflow. At time of writing, there are c.70,000 companies and 25,000 vetted investors on AngelList. The company also allows startups to hire talent, and enables jobseekers to find great employment opportunities.
So why is this relevant? Firstly, AngelList’s popularity has grown so significantly that your startup’s AngelList profile is frequently the first place an investor or candidate will look when trying to learn about your business. It’s like another version of your homepage. And once your profile is complete, the first ten Google search results for your company’s name will likely include your AngelList page. Hence it’s important that you understand the service and know how to manage the impression created by your profile. In fact, because the platform is now so heavily trafficked, you should take the time to create a stellar AngelList profile even if you are not fundraising.
Second, AngelList is the most powerful online resource available for reaching early stage investors. The investor group isn’t just limited to angels, as the name might suggest – you can also access VC’s, and now ‘syndicate’ leads (more on these later). There are a ton of angel investors around the world looking to put money to work in startups, but before AngelList it was challenging and time consuming to reach them, especially for entrepreneurs without extensive pre-existing networks. Kevin Gibbon’s story about the funding of Shyp is a shining example of how AngelList has leveled the playing field (albeit something of an outlier given that AngelList featured Shyp). AngelList allows you to search a huge investor database, filter as you please and reach out as desired. This hugely increases the competition between early stage investors, which is one of the reasons some early stage VC’s felt threatened when the platform first came out.
More importantly, AngelList allows investors to find you. Think of it as a free and heavily targeted fundraising marketing channel that you can turn on and off at will. This ‘inbound’ fundraising approach adds an entirely new source of highly qualified investor leads: we’ve had a close rate of c.30% on individuals sourced from inbound requests.
Another plus of AngelList is that it helps you amp Social Proof and Scarcity, two of the most powerful tools at your disposal for driving investment in your company (we discuss more about these tactics here). The interface is covered with Social Proof and Scarcity hooks. Below is a sample company profile as featured on the AngelList homepage. Scan through some company profiles and you will see many similar elements.
And the fun doesn’t stop there. AngelList has recently introduced two new features that significantly broaden your fundraising possibilities: Invest Online and Syndicates.
Invest Online is one of the lowest friction methods available for investors to put money into your company – funding is now just a couple clicks away. It’s akin shopping on Amazon, except instead of impulse buying furniture and books, you’re buying startup stock. We’ll go into detail about how best to use this feature later.
Syndicates allow one individual to pool capital from other investors, invest on the group’s behalf, and receive carried interest. That is, it enables an individual to behave like a VC fund, except they do not get to charge management fees.
What does that mean for your startup? It means that you will be able to raise VC-sized sums of seed money ($250K-$1m+) from individual investors. These individuals will typically be able to make decisions more quickly and likely have better networks than some of the more mediocre VC’s you might be talking to. And since the Syndicate invests under one entity in the cap table, you won’t have to deal with the overhead of tons of investors, just like you don’t have to deal with VC’s LPs. Given how recently they have been introduced, we need more time to draw full conclusions about Syndicates, but at first glance they seem to be a great new source of capital for entrepreneurs.
Now that you know what AngelList is, head over to our guide to making it rain on AngelList