AngelList Feature Gives Investors “Ready-Made Startup Portfolio”

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WSJ Blog | By Lora Kolodny | October 22, 2013

angelpadAngel investors can now get a piece of all the startups in a batch at prominent accelerators TechStars Austin, AngelPad and Rock Health with the click of a few buttons online—a new wrinkle in the rapidly changing world of early-stage investing.

Crowdfunding sites like FundersClub and WeFunder have allowed individual, accredited investors to back a startup or a select group of startups in an accelerator class before, but a little-known feature on the crowdfunding platform AngelList called “Classes”  is the first to enable investors to back an entire class at once, said AngelList Chief Executive Naval Ravikant.

AngelPad founder Thomas Korte said he raised more than $1 million in additional seed funding for his accelerator’s current batch of companies in about two weeks using AngelList Classes. As a result, AngelPad startups will get more than $100,000 each in seed funding, instead of the $60,000 or so they would normally receive as part of his program, which focuses on business-to-business startups in San Francisco and New York.

“It’s like locking in a bridge round before you need it,” Mr. Korte said.

For now, AngelList only allows accelerators to raise funds on its site by invitation. The platform authorizes accelerators that “curate the hell out of their companies,” Mr. Ravikant said, and that have a proven track record.

Mr. Ravikant was partly inspired to offer the Classes service by Y Combinator’s StartFund, the vehicle formed by Yuri Milner, Andreessen Horowitz and SV Angel that offered $150,000 non-capped convertible notes to all Y Combinator companies.

“Those investors paid an uncapped note, but got options to look into the next venture round,” he said.

Y Combinator is not currently offering funding by the batch on AngelList, but Mr. Ravikant said they would be very welcome to do so. The pioneering accelerator’s alumni companies include Dropbox Inc., Airbnb Inc. and Heroku (sold to Salesforce.com for $212 million).

Mr. Korte of AngelPad sees AngelList Classes ushering in a new era for accelerators and angel investing in general.

“People with money…can make financial placements [without having] to build themselves up [as] a brand now,” he said.

Alan Razzaghi, chief executive of FreshLunches Inc. and a former IT executive at Toyota and Accenture, used AngelList Classes to back the twelve new companies participating in AngelPad. For years he had wanted to invest in startups, but running his own business–making and distributing healthy food to students in private schools throughout Los Angeles—didn’t allow him the time to properly research every venture that interested him.

From the individual investors’ point of view, AngelList Classes provides “a ready-made startup portfolio,” which is especially helpful for those who want to do more deals in less time, Mr. Razzaghi said.

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