In the land of innovation and envelope pushing, raising capital has remained mainly an exercise in networking and buttonholing. Obtaining venture funding is all about arranging countless meetings, making endless pitches, and lunch with guys-who-knew-a-guy-who-might-be-interested.
Bloomberg Businessweek’s Brad Stone writes that until four years ago, the innovation that characterized the culture and success of Silicon Valley never translated to raising money for a startup, where “forging a deal with the Valley’s small, well-heeled clique of angel investors was a little like trying to break into an exclusive club.”
Stone details how in 2009 Naval Ravikant set out to change that culture when he co-founded AngelList, “a social network for the kind of people who create and invest in social networks.”
Simply put, AngelList is an online marketplace where entrepreneurs can connect with ready investors. More open forum than Internet storefront, startup owners post descriptions of their businesses, or ideas, on AngelList. Investors then peruse the forum for one that strikes them as a worthy risk.
And, as Stone explained, a risk it is. All the start-ups on AngelList are in their nascent, high-risk stage, and all investors are those who regularly gamble on new, risky ventures. The forum is a bold new way to introduce startup owners to the world of venture capital, and the venture capitalists. Ravikant, who is also the chief executive officer of AngelList, said it is also a much needed medium “to make startup investing transparent, efficient, and more open.”
In the past year, AngelList has morphed into something more than a meet-and-greet exchange of ideas and money. Startups post profiles describing the venture and disclosing previous amounts invested, and by whom. With one single profile, entrepreneurs essentially “pitch” numerous investors on the site. AngelList takes care of most of the required regulatory filings for the entrepreneur, and offers tips and resources for startup owners new to the website, and to sourcing investors in general. And the forum last year added a syndicate feature that lets users on the site shadow a well-heeled investor, and pool their smaller amounts of money to invest when the angel finds an investment to his liking.
According to Stone, AngelList is accomplishing its mission. Last year alone it connected 500 startups with $125 million in funding. “Fundraising is a pain that takes you away from building a company,” says Gagan Biyani, CEO of Sprig, a meal delivery service in San Francisco. Turning to AngelList, Biyani said, “was a no-brainer.”
Stone, Brad. “AngelList, the Social Network for Startups“; BusinessWeek. 1/16/14.