AngelList – BootstrapLabs

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AngelList: The World’s First On Demand VC-as-a-Service Platform

October 25, 2015/in AngelList, beGLOBAL, Blog, BootstrapLabs, Event, Investor /by Benjamin Levy

[Disclaimer: BootstrapLabs is an investor in AngelList and we have two syndicates, BootstrapLabs Syndicate and BootstrapLabs A+ Syndicate with Gil Penchina]

Last week I had the good fortune to find myself interviewing Kevin Laws, the COO of AngelList just a few days after they had launched a series of announcements that sent tremors through the entire startup and venture investment ecosystems:

Launched CSC Upshot: a new $400M seed fund dedicated mostly to early stage startups and syndicated deals on AngelList; which comes in addition to the existing Maiden Lane’s $25M fund launched in April 2014
Opened-up its backend infrastructure to offer “SPV as a Service” for angels and VCs interested in capturing pro-rata and/or additional carry on their best deals, across stages
Pushed its iOS App for its “joblist” marketplace

First of all, let’s briefly cover what came out of my fireside chat:

AngelList is trying hard to stay in love with the problem they set out to solve when they first launched: “How do we help founders (globally) focus on what matters most, which is building their company and products, and spend less time fundraising?” You can sense that they have made this problem a core value at AngelList.

We argued that cross-border angel investing would not be possible without online platforms like AngelList, bringing both sides together (founders and angels), yet maybe more importantly without a trust & expertise based syndication model that aligns everyone’s interest, removes significant friction in the decision process (“emotional friction”) and ultimately building technology and processes to close the transactions (“physical friction”). Among the new stats shared by Kevin during our talk, he said that 10% of the capital invested online on AngelList was from outside Silicon Valley, while only 3% of completed fundraising online was for companies outside of the US. The new fund will definitely give a huge boost to the foreign capital percentage number above, unless they classify it as a US fund, event though it is backed 100% by Chinese capital.

Kevin placed the number of startups on AngelList at approximately 300,000 with 30,000 or 10% of them being in fundraising mode at any one time. In one sense, the odds of being “discovered” on AngelList are much better than they were in the Apple Store as of June 2015. There were over 1.5M apps, but the syndication of your round by a well known angel investor in Silicon Valley remains your best shot to stand out (kind of your equivalent to being featured by “Apple” in the store). The interesting bit for me was that this was still holding true for foreign companies trying to fundraise on AngelList. Kevin used the example of Descomplica, a Brazilian online education startup that raised $5M in February 2014 from Social+Capital, and used a syndicate led by my friend Lee Jacobs, a local angel investor with ties to Brazil, to ignite the fundraising on AngelList. Lee was also the very first to do a syndicate on AngelList so he gets pioneers’ points in my book :). Kevin also makes a very important point on the video below…you can invest anywhere but you might not be able to get your money back everywhere! Let us not forget that over 80% of technology M&A deals happen in Silicon Valley (buyer or seller is located there) and the last time I checked, corporate sales were responsible for 95% of the return of capital for VCs.

You can find a “meerkat” version of the interview here for now and I will upload a professional version from beGlobal as soon as it becomes available.

Now on with my two cents on their recent announcements:

CSC UPSHOT FUND

Some dubbed it the world’s largest seed fund and it sure is an impressive amount, but read the fine print. You realize that the investment thesis is broader…you are talking about investing in top startups (based on their metrics and syndicate leads) not just in Silicon Valley, but globally with the ability to do pro-rata and access later stage opportunities too (which are now facilitated even further due to their new SPV product). As I mentioned on stage, it takes a “Chinese billionaire” to have the humility to say “I do not have access to Silicon Valley deal flow, nor may I have the skills to vet it, but I sure can get some of the smartest people in the business to discover, vet, and syndicate some of their best deals for me, as well as secure access to follow-on funding via pro-rata rights and SPVs.” I am convinced that many institutions and family offices that invest in venture have been asking themselves why they did not think of it before, how maybe they just needed a lead to follow.

FREE ONLINE SPVs FOR ANGELS & VCs SYNDICATING LATER STAGE ROUNDS

This part did not grab the headlines, but this is probably the submerged part of the iceberg in my own opinion. By opening up its backend infrastructure and making these online SPVs free for Angels and VCs ($10K admin fee is spread among the LPs and AngelList does not charge any carry), AngelList is getting 3 very significant benefits:

they are getting all the LP contacts
they are accelerating the growth of their funds under management, and
last but not least, they are capturing performance and return data at the source

This is by far the most significant announcement AngelList made that day for the future of AngelList.

“JOBLIST” iOS APP

If fundraising is among the top pain point of founders, recruiting talent is probably way up there as well, so it is only natural that AngelList spends a significant amount of time and capital improving its job marketplace product. It will also over time become a very strong competitive advantage and barrier to entry as “startup” skills and know-how are in very high demand across the world. There is also a very natural and synergistic relationship between fundraising and hiring since most $ startups raise goes to hiring more talent!

At BootstrapLabs we ask all our portfolio companies to create and maintain an up to date AngelList profile as a way of communicating with their stakeholders, including future employees.

Thank you to Kevin and the team at beGlobal for providing me with the opportunity!

So long and happy investing.

Presentation used by AngelList for their PR announcement

AngelList Press Presentation, Oct 12 2015 from Venture Hacks

About Ben Levy

Twitter | LinkedIn

Ben is the co-founder of BootstrapLabs, a Venture Investment Company that invests capital, experience, and skills into disruptive software companies from around the world, and helps their founders relocate to Silicon Valley to build BIG. Born in France and living in Silicon Valley for the past 17 years, Ben is a repeat entrepreneur who launched, built, and exited two startups in the financial technology space, one to Mergent, and another one to SecondMarket, who was recently acquired by NASDAQ.

He has also helped founders raise over $300M of capital from Venture Capitalists and Private Equity Investors and closed $5B worth of technology M&A transactions as an investment banker earlier in his career. He is a frequent speaker on innovation, investing, technology, entrepreneurship and globalization.

Learn how to be a successful Angel Investor!

September 4, 2015/in Blog, BootstrapLabs /by Luigi Congedo

The venture world is changing profoundly and over the next few months we will see a huge increase in “big” seed stage (Pre Series A) deals.

As Ben Levy, co-founder of BootstrapLabs, mentioned in his recent blog post “Seed is the New Series A”, we will over time see more and more seed stage investors creating syndicates and inviting fellow angels to co-invest in their deals.

The number of angel deals, crowdfunding platforms and micro VCs is growing dramatically.

Number of active Micro-VCs

*the majority of these funds of this size are closed without any traditional institutional LP backing. Source: CBInsights; graphic BootstrapLabs.

Learning the ins and outs, strategies, and best practices needed to be a successful angel investor is not easy, but here are a few steps you can follow in order to get started in this exciting new world of “private is the new public”.

Angel investing is often considered by many people to be like a poker game, but with the new market structure and the emerging models of crowdfunding, I believe that Angel investing is becoming more of a team game than a solo gambling endeavor.

One of the most important steps for an Angel Investor is gaining access to quality investment opportunities and spreading their risk by diversifying investments (into a minimum of 10/15 deals if you are active and closer to 30 if you are passive). To invest in 10 good deals you should meet and evaluate at least 100 startups, and this is not easy thing if you are doing angel investments on the side!

You should probably not make 10 investments at once or in a short time span by the way…each deal you invest in will teach you something, and you definitely want your later deals to benefit from your early ones.

This is also why joining a syndicate on a crowdfunding platform or investing alongside or in a Venture Capital fund is recommended. Participating in deals with experienced and expert investors will reduce your risk and save you the time of doing due diligence.

In any case, if you have not already done so, the first thing you need to do to become an angel investor is to verify your Accredited Investor status for a variety of reasons, not the least of which is to make sure the startups do not get into hot water with the SEC for selling private securities to “naive” investors.

To be an Accredited Investor you need to be eligible with one of the following criterias:

Individuals with annual income over $200K (individually) or $300K (household) over the last 2 years and an expectation of the same this year
Individuals with net assets over $1 million, excluding their primary residence (unless more is owed on the mortgage than the residence is worth)
An institution with over $5 million in assets, such as a venture fund or a trust
An entity made up entirely of accredited investors

For more information read the SEC documentation.

What Angel Investing means?

Angel investing is buying equity (or convertible securities that can be converted into equity) in a startup company at the earliest stage of a company’s lifecycle. These investments are high risk but also potentially the most profitable since investors benefit from lower valuation and their relatively small check still buys a decent amount of ownership. On that note, angel investors should not aim to “own” or “control” a business if they want to ensure the long term success of their investment. If you should feel you have to do this for the company to succeed, you might be better off investing in another company altogether.

Why is access to good deals limited today?

Because good deals are mostly funded by people who do angel investing as a full time job, and includes a few friends in their trusted network, the financing round will be filled very quickly and will be closed before anyone else even knows about it.

Today, competition is very high in this space and the majority of good startups are participating in accelerator programs and/or having their deals syndicated on platforms like AngelList by expert seed stage angel investors and even Micro-VCs.

applications to YC by batch for the past 17 batches: pic.twitter.com/nBtC86wMZA

— Sam Altman (@sama) July 7, 2015

Why do startups need Angel Investors?

To pay for their initial expenses and to provide capital to build the first version of their product. Also for many startups, finding an Angel Investor is a good way to prove that their endeavor is or will be valuable. Validation by expert and successful Angel Investors is considered by other angels or seed stage VCs as almost a requirement these days to rise above the noise level.

From a startup’s perspective, it is very important to have respected and value-add Angel Investors on their cap table at the beginning of their journey, especially when the time to raise another round arises, and it will always be sooner than a founder would like to admit.

What does the typical Angel Investment Strategy look like?

As described above, one of the most important steps to becoming a successful Angel Investor is having access to good deal flow. Angel Investing is a high risk investment and you have to invest in at least 10 deals (would recommend even more with small checks) over time in order to diversify your risk.

While the typical Angel Investment is between $5K to $25K; the return of a successful Angel investment can be up to 500x but you will also face the very real fact that 50% of the investments you make will have a low or even zero return, as many startups fail.

To reduce your risk and increase your chance of investing in the next unicorn at an early stage (500x return) as a new Angel Investor, the best thing to do is to participate in deals with other trusted investors or invest a bigger check into a VC to start building your network and knowledge in this space!

Learn more about BootstrapLabs Syndicate here

I will publish more articles regarding this topic soon, so if there is anything you would like to add or ask, please contact me @luigicongedo !

Also I would like to recommend this NY Times article to learn how the world of angel investing has changed in Silicon Valley in the last decade.

Trusted Insight: Disrupting the $6 Trillion Alternative Asset Market

May 21, 2015/in Blog, BootstrapLabs /by Benjamin Levy

Two weeks ago, we wrote about how AngelList is disrupting the angel investment landscape with its syndication model, and last week we announced our own AngelList syndicate in partnership with Gil Penchina, the #1 AngelList Syndicate lead. Today we would like to tell you about Trusted Insight, a company that is applying the same disruptive syndication model, but to the entire alternative asset industry, not just startup investing and venture capital.

Our recent posts created a lot of engagement and sharing on social media (thank you for that) and were recently reinforced by a series of conversations and posts that emerged from interviews of Naval Ravikant and Gil Penchina at the NVCA Annual Meeting in San Francisco and the Collision Conference in Vegas.

What are Alternative Assets and how big is the industry?

Alternative assets usually include illiquid and private investment opportunities such as Venture Capital, Private Equity, Real Estate, Hedge Funds, Infrastructure, and Illiquid Credits. Institutional investors, including family offices, professional fund managers, endowments, pension funds, and other wealth managers, invest in these “assets” as part of their allocation strategy, either directly or via specialized funds.

Globally, the alternative assets industry represents $6 Trillion each year, dwarfing the $30Bn US Venture Capital Industry.

Why total addressable market and average deal size matters?

Last year, AngelList, the leading startup investment platform, enabled over $100M in private financing, and while not all of these were syndication deals, it is fair to assume that the vast majority were. On average, a syndicate financing on AngelList is ranging from $150K to $500K per deal, with individual angel investor checks ranging from $1K to $100K.

In contrast, a typical investment opportunity at the institutional investor level ranges between $25M to $1Bn per deal (e.g. fund, real estate project, buy-out), with each investment check in the millions, if not tens of millions of dollars.

In other words, the market opportunity is 100 to 1000x bigger than angel and venture investing.

Basic unit economics: private placement fees vs. syndication carry

Traditionally, players in this space have been entrenched in the private placement business model (i.e. broker-dealers regulated by FINRA / SAIC) as it provides them with the following benefits:

Commissions are paid at closing
Fee as a percentage of transaction amount provides some level of scalability (linear)
Commission is “earned”, independently of the investment outcome, successful or not

Fee percentages tend to range from 7%+ for smaller private placements to 1-2% for larger transactions. In the example above, we assumed a 2% fee, given the $100M financing amount.

In contrast, the syndication model provides a profit share return on work performed only if the opportunity that was syndicated in the first place is an overall success, meaning that cash or liquid securities are being delivered to the investors as a result of their ownership of the asset.

An average timeline to exit or return on investment might be 7 years, with some being shorter (rarely) and some being much longer (especially real estate or infrastructure deals). As the platform facilitating these syndicated financing deals, your are now sharing the investment risk but are also looking at a much higher return potential.

Additionally, that increased risk is being mitigated in a few ways:

Positive selection: for a deal to be syndicated, it needs to be vetted and syndicated by a “lead” who is not only respected as a professional in the space, but who is also investing his own capital, thereby creating long term alignment with fellow investors backing his syndicate/investment opportunity
Diversification: the syndication model, across alternative assets and geographies, will provides for a natural risk diversification of the “carry portfolio” owned by the platform
Syndicate lead incentive: syndicate leads will naturally emerge as the platform provides them with a highly efficient and scalable way to syndicate opportunities and capture carry from 3rd party investors that leverage their access, knowledge and expertise. As shown in the table below, the incentive is significant
Scalability: the marginal effort required to run a new syndication on the platform, including discovery, vetting, marketing, due diligence and closing, will add minimal costs to the platform (compared to a traditional private placement process), while maximizing the overall upside potential

About Trusted Insight and why BootstrapLabs lead their Series A Round

Trusted Insight is a New York-based big data alternative asset management platform disrupting the way institutional investors discover, connect, analyze, and ultimately syndicate deals with one another across different verticals and geographies.

Since its inception, the company has experienced continuous growth and engagement from its user base including many of the world’s largest asset management institutions and family offices, representing over $18 trillion in assets under management globally.

At BootstrapLabs we have known Alex Bangash, the founder of Trusted Insight, for many years and have been tracking the progress of the company since its inception. We have great respect for the work Alex and his team have accomplished thus far and we look forward to contributing our technology and fintech expertise to help the company reach the top.

We believe the winner in the space will need to bring 3 core components to the table:
Curated professionals engaging via an industry-centric social network driven by content, communication, events and jobs
Big data analytics, behavioral science, and pattern recognition algorithms enriching user experience and personalization, and facilitating targeted syndication
Ability to jumpstart the syndication model with proprietary fund-of-funds vehicles that have credibility with the institutional investor community

Overall, the alternative asset industry is ripe for disruption and represents a massive opportunity for those who dare to try.

Alex and his team at Trusted Insight are leaders in this space and we are truly excited to be working closely with them, in true BootstrapLabs’ fashion, to shape the future of the global alternative asset investment space.

Learn more at www.thetrustedinsight.com

(Disclosure: BootstrapLabs is an investors in both AngelList and Trusted Insight.)

BootstrapLabs partners with Gil Penchina, launches AngelList Syndicates

May 12, 2015/in Blog, BootstrapLabs /by Benjamin Levy

AngelList logo BootstrapLabs is partnering with Gil Penchina, the #1 Syndicate Lead on AngelList with over $6.5M in backing (more info below), and launches its syndicates.

Last week we published the blog post “The rise of Angel(List)” because we felt it was important for the world to wake up to AngelList and its disruptive potential when it comes to angel investing.

At BootstrapLabs we have been early adopters, advocates and investors in AngelList and we have watched the platform evolve and grow. Launched in the fall of 2013, it took some time for the Syndicate business model to take off but it is now here to stay.

By launching our syndicates on AngelList, BootstrapLabs will be able to provide its investors and portfolio companies additional value, which has always been our goal.

Syndication Framework Summary

Initial Seed Investment – BootstrapLabs Seed Fund
All our Seed Investments are made out of BootstrapLabs Seed Fund, where we curate, cherry pick and lead investments into some of the world’s most promising and innovative technology companies. All our portfolio companies go through our 12 months hands-on Lab model.

Follow-on Seed Investment – BootstrapLabs’ Syndicate ($25K lead; $2.5K min. backing)
As our seed portfolio companies start to grow and seek additional capital (before a Series A), we will systematically syndicate a tranche of their new financing to our backers on AngelList using our BootstrapLabs’ Syndicate.

Series A (and up) Investment – BootstrapLabs A+ Syndicate ($25K lead; $2.5K min. backing), in partnership with Gil Penchina
BootstrapLabs will syndicate a tranche of all the Series A (and up) rounds it will participate in (including pro-rata rights from its seed portfolio investments).

It is interesting to note that until now, very few deals promoted on AngelList have been Series A and up. Angels and accredited investors have historically only been able to access Seed and Pre-IPO stage deals (mostly via secondaries with the right connections), the growth phases – Series A, B, C, D, etc. rounds – have usually been the exclusive playground of VCs and their Limited Partners. Arguably, Angels were left with the two riskiest parts of the equation, very early stage deals with high risks and high rewards, and supposedly lower risks and (most certainly) lower return – due to high pricing – pre-IPO opportunities.

Now, with BootstrapLabs A+ Syndicate, our backers have the ability to invest alongside us across all stages of venture investing.

To engage with the exciting opportunity of AngelList, explore our AngelList Syndicates below:

Our Seed Syndicate Our A+ Syndicate Our AngelList Profile

About Gil Penchina

Gil Penchina arrived in Silicon Valley in the 90’s and has since had an extraordinary career as an executive, entrepreneur and prolific angel investor. Today, he is one of the most successful angel investors in the Bay Area, and likely globally, with over $25 Billion in combined exits.

Gil has held several executive positions in the Bay area, including eBay, GE and as the CEO of Wikia (now a top 50 website). He has been investing in over 70 companies as an angel investor over the past 17 years and is today one of the most well-known and respected startup investors in Silicon Valley and globally. Some of his well-known investments include companies like LinkedIn, PayPal, AngelList, Evite, Couchsurfing, Wealthfront, Indiegogo and many more. He is currently the #1 Syndicate Lead on AngelList with over $6.5M in backing.

Note: Some information on AngelList may not be available to you if you are not deemed an accredited investor.

The Rise of Angel(List) and how it is rapidly changing the game of angel investing

May 6, 2015/in Blog, BootstrapLabs /by Benjamin Levy

Disclosure: BootstrapLabs invested in AngelList, see our profile here.

The cost of building technology companies over the past decade has decreased by a factor of ten. Software has been eating the world, yielding incredible productivity gains that empower entrepreneurs to execute two to five times faster. Globalization, standardization and connectivity have all been driving unprecedented scalability, allowing a small group of people to reach millions, across the globe.

In a world where it takes less capital to do more, the winners are the entrepreneurs – as they can hold on to more of their companies (especially early on) – and angel investors – whose smaller checks when combined with many others, represent a significant enabler for early stage companies.

Regulatory changes allows new investors

The Job Act of 2012 dramatically broadened the definition of who could invest in private companies as long as they invested within certain boundaries and through registered broker-dealers. Equity crowdfunding and the technology platforms that support them became a hot topic of conversation (and still is). In effect, the rank of potential angel investors had just been multiplied to accommodate a flood of new, mostly inexperienced aspiring angel investors. As players started to jockey for position, two camps formed on the platform side. The ones that were or sought to become registered broker-dealers in order to leverage the new regulation and capture upfront success fees, and the ones, like AngelList, that decided to forgo the short term focused success fee model and instead share the risks and rewards with fellow investors by capturing a small share of the profits (a.k.a. carry), if any.

AngelList is born

AngelList was started by Babak Nivi and Naval Ravikant, first as Venture Hacks, a blogging website bringing the startup community together and aiming at increasing the transparency of the VC world. After crawling under the avalanche of requests from entrepreneurs to connect them with angel investors, Naval suggested to “simply list them online”. AngelList was born. (Image: AngelList co-founder, Naval Ravikant)

What is AngelList?

AngelList is designed to make capital raising less taxing and more flexible for entrepreneurs, and at the same time more efficient, transparent and scalable for angel investors. One of the unique and disruptive element of AngelList is its Syndication Business Model, launched in the fall of 2013. Instead of registering with FINRA / SIPC as a broker-dealer in order to charge commissions, AngelList sought and received a No Action Letter from the SEC to deploy its disruptive syndication model.

How AngelList delivers value to all players

AngelList’s technology platform delivers value to all players involved; founders, backers and angels.

Benefits for Founders

Reach many angels with one online profile; build a following.
Amplify noise signal with each progress, milestones, commitment.
Convince one top angel and have many more chip in via their syndicate with no extra effort.
Syndicate backers (up to 95) become potential “fan” and can help you and your startup succeed.
All the backers are lumped into a single LLC, managed by the Lead Angel and AngelList, which keeps the capitalization table simple.

Benefits for “Backers”

High profile angels usually build a group of “backers” – fellow angel investors – for their syndicate so that they can easily share investment opportunities with them and receive carry in exchange for providing them access, vetting and post investment value-add to increase success/outcome.

Backers can rely on experienced and reputable angel investors to discover, vet and invest in quality opportunities they would otherwise never see.
Backers get to cherry-pick the deals they are investing in and build their own portfolio allocation.
Backers are aligned with the syndicate lead who is also investing and risking its own capital.
Backers are not charged upfront fees but pay a share of their future profit (“carry”), if any.

Benefits for Syndicate Leads

High profile angels can share investment opportunities with a group of “backers” (definition above). In exchange the angels receive carry.
Syndicate Leads don’t have to manage funds or go raise a fund with institutional investors that are usually slow and for which smaller investments or funds do not make sense.
Syndicate Leads can increase their appeal to founders by being in a position to invest larger amounts and provide more value-add to their portfolio companies by leverage their Backers.
Syndicate Leads can rank backers and ultimately curate their syndicate members based on value-add, investment patterns, etc.
Deal per deal carry is yielding better returns for the syndicate leads than if they were running a traditional VC fund with equivalent carry terms.

Top Syndicates on AngelList

These top angels have formed Syndicates that are potentially capable of funding startups to the tunes of several million dollars, elevating themselves to the ranks of Super Angels or Micro-VCs. In this context, strength definitely comes in numbers and the trends are in favor of platforms like AngelList that are leveraging technology to deliver values to all players involved; startups, angels and backers.

What have the VCs been doing in the mean time?

Interestingly, in this very fast changing landscape, the venture industry and its economic model have seldom changed, with General Partners raising money for 10 years from institutional investors, charging 2%+ annual management fees and 20% carry after repaying the LPs’ principal. The funds usually get invested within 3-4 years and the General Partners then seek to raise another fund, hopefully on the early successes of the prior vintage funds.

In another post, we will cover the disruption happening among the VC firms, how some are leveraging platforms such as AngelList and what the benefits are for the angel investors/backers. Stay tuned and as always, stay foolish!