AngelList heats up as angel investing sizzles

Bambi Francisco Roizen · February 18, 2011 · Short URL:

Service becomes the go-to matchmaker for entrepreneurs seeking angels

Having started Vator 3-1/2 years ago as a site to help all entrepreneurs get exposure, there have certainly been many people along the way who've asked us if we would try to match entrepreneurs with investors. While we've certainly had our share of startups get funded because of their presence and activity on Vator,  and while we also provide a venue for startups to be exposed and connected to investors, getting them funded is not our sole purpose.  Having watched this space closely, however, we've seen many other services created with this raison d'etre in mind, including Raise Capital, Funding Post, Go Big NetworkFunding Universe, and AngelSoft, to name a few.

But one company that seems to be doing this matchmaking just right is AngelList, which was founded by Naval Ravikant and Babak Nivi in February of last year. "I'd been co-authoring a blog called Venture Hacks," said Naval, in our interview, the second of our four-part series. Venture Hacks is a blog that teaches entrepreneurs how to navigate the venture capital world of fundraising. The idea of automating the process of venture fundraising was always part of the founders' goals. "AngelList is a productization of VentureHacks," said Naval, who was an active angel investor in some 50 startups.

Indeed, while AngelList is a year old, it actually started many years ago in its first iteration as Venture Hacks Deal Flow network. After four attempts at automating the matchmaking between startups and angels, AngelList was born. "There's no such thing as an overnight success," said Naval. "You just keep doing it over and over..." (Note: Stay tuned for the next segment, in which Naval talks about his lessons building the marketplace. This is a great lesson of enduranace and tenacity every startup entrepreneur needs.)

Today, AngelList has become one of the best places for entrepreneurs seeking funding, as there are now 1200 angels and venture capitalists on the service. In this video, Naval talks about how investment activity is picking up. While the founders don't track completed deals, because they only make introductions, Naval estimates that at least 200 rounds (*number has been updated since video was filmed) have been done already. And, from introductions to commitments, a startup can get funded in as little as two weeks, according to Naval.

And, it's not just for small amounts of cash either. Naval said that he's seen entrepreneurs raise anywhere between $25,000 to $6 million on his site. The average company raises about $500,000 to $1 million, he said. Since the beginning, Naval and his partner have always vetted every company, making sure they're good enough to get on the list, before they shared it with their wealthy individual friends. The qualities they look for are team, product, social proof and traction.

In the future, Naval hopes to crowd-source this vetting process.

We also talk about why AngelList is working today and why it didn't work so well years ago. The main reason is that there's a "more robust market for angel financing," said Naval.

The other reasons there can be a marketplace for angel investing is that companies need less money these days. So, traditionally, it would make more sense to find several million at one VC. Now, if a startup needs $250,000 to $500,000, there are angels who can come together and pool their money. AngelList hopes to make that process of aggregrating angels and invidivual investors a lot more efficient.

Most importantly, Naval explains how the system works, and how he started AngelList through an email list. But I can't share all the details of our interview. You'll have to watch the show! 

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Bambi Francisco Roizen

Founder and CEO of Vator, a media and research firm for entrepreneurs and investors; Managing Director of Vator Health Fund; Co-Founder of Invent Health; Author and award-winning journalist.

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