AngelList Review: Connecting Investors and Job-Seekers With Startups

AngelList is a site founded with one simple mission: "to increase the number of successful startups in the world." It accomplishes this aim by making it easy for accredited investors to invest in startup companies—either by selecting deals to invest in directly or by buying into a fund that provides exposure to startups. 

In addition to offering an unprecedented chance to invest in businesses as they get off the ground, AngelList also offers a Talent website where startups can offer jobs, and would-be employees can find a company to work for either in person or remotely.

AngelList has two missions: Providing more investors the chance to "participate in the venture economy," while also giving startup organizations "the resources they need to change the world."  

The site provides the chance for accredited investors to gain exposure to burgeoning new companies and potentially make a substantial profit, while also making it easier for promising startups to find the capital they need to grow and thrive.

How does AngelList work? 

AngelList offers accredited investors a choice of several different options to add startup companies to their portfolios. Options include:

• Rolling Funds: Investors can choose from a wide variety of different funds that invest in specific types of startups. For example, an investor could put money into the Footprint Coalition if they want exposure to startups that address environmental challenges or in the Forefront Venture Fund if they want to put their money into early-stage companies with amazing founders that are already generating revenue and that have the potential for substantial growth. 
• Managed Funds: These funds, including AngelList Select and AngelList access funds, are actively managed by industry operators who specifically select startup deals to put pooled investor money into. All deals are chosen by early-stage investors with a successful track record of performance.   
• Syndicates: Buying directly into syndicates means selecting individual startups to put money into. You can build your portfolio on a deal-by-deal basis. 

Who can invest with AngelList? 

In order to invest with AngelList, you must be an accredited investor and you must have prior experience working for, investing in, or advising a startup company. Many investments require an ongoing commitment and/or a substantial minimum initial investment.

Wide variety of different investments are available

AngelList offers multiple different ways to invest in startups. Accredited investors can choose between selecting deals individually or buying into a fund that gives them exposure to startups in different industries or with different goals. 

Rolling and managed funds make investing easy

For investors who want exposure to startups but who don't want to select individual companies to invest in directly, rolling and managed funds provide an ideal solution. With hundreds of different funds to choose from, almost any investor can find one that aligns with their goals. 

Proven performance track record 

AngelList indicates that 57% of top-tier U.S. venture capital deals involve venture capitals that are on AngelList. Further, 190 Unicorns have been backed by AngelList funds and syndicates. A Unicorn is a privately held startup company that has a valuation in excess of $1 billion.

Only accredited investors can participate 

AngelList's requirement that investors be accredited means that many people are ineligible to invest. To be classified as an accredited investor, you must meet certain criteria such as earning an individual income of more than $200,000 over the past two years or a joint income of $300,000 with your spouse. Or you must have assets in excess of $1 million excluding your primary residence. Many people are unable to fulfill these requirements. 

Investors need a lot of money to get started and may be required to make an ongoing financial commitment 

It can be expensive to invest in AngelList funds or to fund specific syndicates. You may also need to make a relatively long-term commitment. For example, many rolling funds require you to invest a minimum of $5,000 or $10,000 per quarter and to make a commitment for at least four quarters. Managed funds require either a $50,000 per quarter investment for at least four quarters or a $75,000 investment if you would prefer to be able to cancel your subscription at any time. 

It can be difficult to determine the total fees you'll pay 

The fee structure is complicated when investing on AngelList. For example, each fund or syndicate sets its own individual fees and you may pay a wide variety of different costs including setup fees, carrying costs, administrative fees, and ongoing management fees.

It is definitely possible to make money with AngelList, although the performance of your investments will depend on the specific deals you invest in or the specific rolling or managed funds you put your money into. AngelList Select Fund I, for example, provided a 23% internal rate of return (IRR) while AngelList Access Fund III provided a 20% IRR.

How do I make money with AngelList? 

You can make money with AngelList if the startups you invest in—either directly or through your purchase of a rolling or managed fund—are successful. For example, if you invested in a syndicate and the company is acquired, the syndicate will receive a payout. Each investor will get their initial investment returned, plus a portion of profits. 

How do I cash out with AngelList?

You are required to make a long-term commitment when investing with AngelList. You cannot liquidate your position unless there is a portfolio company exit or unless a fund ends its lifecycle and is liquidated. Typically, venture investments are made over seven to 10 years, so you should not expect to be able to cash out quickly. 

AngelList vs traditional investing 

Investing with AngelList is very different from investing in stocks in individual companies. You can generally buy stock only in publicly-traded companies with most brokerage firms.  But AngelList allows you to invest in privately-held startups. Your investment is far less liquid with AngelList, as you may not be able to cash out for a decade or longer. However, you have the potential to earn higher returns if the startups you're invested in are acquired or go public.

Reviews of AngelList are mixed. One Reddit user described the "aggregate quality and hit rate" of the 800 to 1000 deals he evaluated as being "very, very low." However, another said they had "invested in various funds and syndicates (single-company deals) on AngelList over the past 5 years and been happy with the returns." 

AngelList is a good option if you are an accredited investor and you want a simple way to gain exposure to startups. Its rolling and managed funds provide more diversification and an easier option for those who don't want to evaluate individual deals, while the wide variety of syndicates you can join to fund particular companies is also attractive for more experienced startup investors.