AngelList: Birthplace of Startup Unicorns
- Gregory T
- Dec 6, 2024
- 3 min read
Updated: Dec 27, 2024
By: Gregory T.
Starting as an email list in 2010, AngelList has become a multi-billion-dollar company that connects startups and large investors with the goal of fostering innovation. As of 2024, there are currently $124 billion of total assets on their platform. To maintain a competitive edge, they provide streamlined tools to make creating a business and investing in them simpler than ever.
On the AngelList platform there are two groups of users: Investors/Fund Managers and Founders. In the Finance Industry, individuals who invest in startups are called Angels, which is where the company gets its name. These Angels are single investors who make all the decisions about their investments. As of writing this, there are over 85,000 investors on the platform. Investors and fund managers are similar but have some differences. An investor is risking their own capital but also reaps all the rewards from their investments. A fund manager, however, manages large sums of money from a company or high net worth individuals. Therefore, if a fund manager loses money, it will show negatively on their performance, but the fund manager will not lose capital. Subsequently, a fund manager will have access to sophisticated risk management tools to be able to analyze a startup with greater scrutiny than a single investor could. However, a fund manager is required to invest based on the investment objectives of the institution or individual that owns the capital the fund manager is investing.
The final group is the founders who create all the startups on the platform that the Angels can invest in. Originally, AngelList was only to help the startups connect with investors, but the platform has evolved. There are many different paths for collecting money from investors. For example, Roll Up Vehicles (RUV), first popularized by AngelList, are a way that up to 250 investments can be treated as one investment. A RUV reduces the amount of paperwork as well as administrative costs. Additionally, all of these investments can show up as one line in the founder’s cap table, a spreadsheet that displays all the equity ownership for a company. A RUV is just one of the many optimizations and quality of life improvements that make AngelList a successful company. Another tool is the dashboard with everything a startup would need to manage their finances. On the dashboard a founder can manage their equity, grant shares, manage their employees, easily stay tax compliant and even have an Ai go over important tax and finance documents to catch errors. It is simple to see why over 12,000 startups pay a substantial fee to use their services.
A lesser-known feature of AngelList is the syndicate system available to eligible investors and fund managers. When not part of a syndicate, investors or fund managers can only invest in funds. These funds are a portfolio of companies which your money will go to along with regular reports of the fund. Upon joining a syndicate, members will gain access to deal by deal investing, instead of having to invest in funds. This gives more control and transparency in your money. The syndicate will have a lead investor who will find the deal that the members can invest in and does all the paperwork for the investment. The lead investor is more likely to be a fund manager because of the greater reputation and network over a single investor. The investors in the syndicate will then choose which deals and how much to put in, sharing the risk with other investors.
In conclusion, AngelList capitalized on two markets at once while being mutually beneficial to both groups. They rose from humble beginnings to a multi-billion-dollar company in only 10 years. They are a unicorn that creates unicorns.
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