AngelList snags $24M, ups assault on traditional tech funding
As the SEC lifts its ban on general solicitation, online investment network AngelList announces it's raising $24 million to build a product for a new era of raising capital.
Venture capital, in its relatively short history, has been a small world.
Many times, a company gets funded because a venture capitalist knew where to look, or a company knew how to reach a VC. While there are some cold-call success stories, many would say there is a sense of exclusivity that exists in the industry.
AngelList, a 3-year-old network that matches investors with tech startups, has sought to change that. On Monday, the company announced it's raised $24 million to help it do so.
Originally started as a blog called Venture Hacks, the goal was to teach startups how to negotiate terms with investors. Its founders, Naval Ravikant and Babak Nivi, soon realized that the challenge was even more basic than that: Before even negotiating the terms, how do you get the offer for funding?
"The goal was to make fundraising easier for startups, especially ones with merit but without connections," said Ravikant, the company's CEO. He said it tries to make the process more democratic.
That democratic mission just got more pronounced today, as startups' options for reaching possible investors just got broader. Thanks to the JOBS Act, the Securities and Exchange Commission is putting the kibosh on "general solicitation" restrictions. That means that companies can now publicly talk about raising money -- on Twitter, Facebook, YouTube, TV, blogs, and any other way they can imagine.
But the new policy also puts the onus on the startups in verifying that each of their investors are accredited -- meaning that, for individual investors, they have a net worth of at least $1 million, or they make at least $200,000 annually. Without general solicitation, an investor simply had to check a box on a form that declared he or she was accredited. Now, a company has to take "reasonable steps," as the SEC vaguely puts it, to vet each investor.
That's where AngelList comes in. Today the company is also introducing new tools that will help investors prove their accredited status. They can do this in a couple of ways, including uploading relevant tax forms or letters or other documents that will do the trick. Other features include a "syndicate" program, which lets investors pool their investments in a startup into a larger fund.
The company's $24 million in funding comes from more than 100 different sources. It's a veritable who's who of Silicon Valley, from big shot firms like Google Ventures and Kleiner Perkins Caufield & Byers, to individuals like veteran tech investor Yuri Milner, Twitter co-founder Evan Williams, PayPal co-founder Max Levchin, and Yelp CEO Jeremy Stoppleman. None of the venture investors will be given a seat on the company's board -- something AngelList insisted on as a way to avoid conflicts.
There have already been some notable AngelList alumni. The company said 1,300 companies have already raised funds on the site, including the black car ride-sharing company Uber, which raised $1.25 million in seed money on the site. Leap Motion, which makes a motion-sensing gaming controller, raised $1.3 million. AngelList also says more than 3,000 hires at tech companies have been made through connections made on the site.