Online community investment site Angel List has this week launched a $25 million fund to “bet” on leading investors, and companies they select.
The Maiden Lane fund will give increased prominence to selected investors and the startups they decide are worth backing. People will essentially be able to sponsor vetted investors via the fund.
Several investors have already been selected, including ex-Twitter executive Elad Gil.
Many Australian startups seeking funding beyond our shores, and particularly in the United States, register on Angel List.
Leading accelerator program Startmate requires applicants to register on the platform as part of the entry process.
Startmate and Blackbird Ventures managing director Niki Scevak told StartupSmart the new fund was another disruptive and positive step by Angel List.
“AngelList is transforming the early stage fundraising market and there is no crowdfunding startup that is even in the same postcode in terms of influence. They have been tremendously helpful to nearly every Startmate company that has raised money from US investors,” Scevak says, adding fast-growing startup Bugcrowd were introduced to nearly three-quarters of their investors through the site.
“The new syndicates feature and now Maiden Lane to reliably back the best angel syndicates means that startups have a step change more number of investor options and that in the end will mean a whole bunch more startups getting funded.”
There are currently 1,236 Australian companies listed.
The Wall Street Journal described the new initiative as an antidote to concerns raised about the lack of transparency of venture capital funds.
“Yet while some venture firms have adopted more palatable fee models and shared more information, the industry’s dynamics have largely remained unchanged. Venture firms typically charge a 2% management fee and take 20% to 30% of the profit, or what’s known as a carry. This structure incentivizes venture capitalists to raise larger funds and allows them to make money even when they fail to return capital, some limited partners say.”
Maiden Lane includes several other funds as limited partners including Makena Capital Management, Venture Investment Associates.
Angel List cofounder and chief executive Naval Ravikant told The Wall Street Journal venture capitalists “are not predisposed to like this, as some could see it as competitive.”
Tony Glenning is the investment director at institutional venture capital fund Starfish Ventures. He told StartupSmart they particularly love the notion of notable angel leading syndicates and the model boded well for shaking up angel investment.
“However in the short term it won’t impact venture capital, as it is targeting a different (early stage) stage of company,” Glenning says. “With respect to the proposed fund, that is a fantastic experiment to validate syndicate investing.”
He adds the model, which has no fees but a 30% carry will return less in successful investment than the classic venture model, which usually charges 2% fees but has a carry of 20%.