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How The AngelList Website Is Shaking Up Tech Startup Funding

Oct 28 2013

Jason Calacanis2

Jason Calacanis2 (Photo credit: Wikipedia)

How The AngelList Website Is Shaking Up Tech Startup Funding

The funding process for startup companies is evolving, and it is making traditional venture capitalists worried. A firm called AngelList introduced a new product named AngelList Syndicates. Using AngelList Syndicates, rich people can invest their cash with "angel" investors, who manage the tech startup funding process with the pooled money.

AngelList takes five percent of any profits earned by those investments. The angel investors receive fifteen percent. The rich people will receive the remainder. About a month ago, "angel" and entrepreneur Jason Calacanis shook up the startup industry by revealing that he'd set up an Angel Syndicate, which raised $300,000.00 in only seven days.

Now, with AngelList Syndicates, an Angel investor can write a far bigger check -- a check as large as the ones professional venture capital companies only used to be capable of writing. Moreover, fundraising will not take as long as it does with VCs, and entrepreneurs should get improved terms. This is an excellent way of funding apps, which are cheap to make, but have a short idea to implementation window.

In all likelihood, lower tier VC companies, who do not offer much value, will fold. Also, less angel investors will end up investing in startups. This is because investors, who might have previously collaborated, will write large checks to sideline other angels. Furthermore, some well known angel investors, who are unaccustomed to taking an active role in their investments, will be exposed as bad lead investors. Consequently, companies like Andreessen Horowitz can promote their consultancy services to entrepreneurs.

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