Crowfund Insider | By Georgia Quinn | June 4, 2014

AngelList, the crowdfunding trailblazer, who was “equity crowdfunding” before people even knew what that meant, initially started as simply a matchmaker for angel investors and startups. As a legal and securities nerd I understand the difference between the Magna Carta and the AngeList SEC No Action Letter – but they were close.

Seriously, AngelList began as a “giveback” to the startup community by Naval Ravikant and Babak Nivi and has arguably become the top equity crowdfunding platform in the world.

In 2010 they officially started the site and brought on Kevin Laws as COO. Initially AngelList’s value-add was a set of standardized legal documents; now, it provides employment resources, syndications and financing opportunities for startups and small companies.

Because AngelList was technically providing assistance to issuers by using form documents and giving a helping hand, the SEC issued an inquiry letter from SEC enforcement questioning their non-broker-dealer status. Once it was explained that AngelList was not receiving any compensation for its activities, the SEC backed away.

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It was quickly clear to the young platform that AngelList activities may cross certain legal lines and new regulation or no action relief (letters provided by the SEC which ensure that they will not prosecute certain behaviors) was necessary. In 2012 new regulation came in the form of Section 201(c) of the JOBS Act. Not enough has been written regarding this JOBS Act provision which allows an online platform to avoid registration and compliance as a broker or dealer pursuant to the federal securities laws as long as it doesn’t take transaction based compensation, or custody of customer funds, or is otherwise disqualified from participating in the securities industry, but there it is. In addition, in 2013, AngelList received the much heralded no-action letter that allowed for their syndication model to exist (and thrive).

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The syndication model allows for certain seasoned investors to amalgamate other investors they may know, or who may know of them, to co-invest in businesses they deem worthy. Other investors in their network may choose to tag along in the lead investor’s decision based on such investor’s past track record, experience or otherwise. The process basically provides for another level of vetting.

Looking at all investment models – AngelList has some impressive stats:

• 2,500 companies with successful raises
• $250 million in funds raised “via” AngelList (this number is 100% verifiable through the platform and may be a little light)
• 30,000 accredited investors in their network

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