AngelList VC funds

In April 2015, after AngelList launched pre-funded syndicates, I published a post about AngelList’s future direction. In the post, I wrote that “I wouldn’t be surprised if syndicate leads first remove an investor’s ability to opt out of investing in specific startups, and then start raising an aggregate amount of capital to invest in a number of startups during a fixed period of time (a fund) rather than on a deal-by-deal basis. In other words, AngelList may become the very system it was looking to displace.”

Fast forward 2 years and AngelList announced that it is indeed beginning to launch new VC funds on its marketplace. The fund sizes are small for now (sometimes as small as $0.5M-$1M), but will likely grow larger as the model begins to show results. This will attract more institutional capital like Bain Capital Ventures which is already backing some of the new funds. The funds are also beginning with a fixed 1 year life, but once again this is also likely to grow longer as the model is proven to work.

What I did not predict was that the general partners of these VC funds would primarily be current operators. This is the natural result of AngelList decoupling a general partner’s ability to add value from their ability to raise money. This favors current operators whose experiences give them an edge in the former area while their limited time makes it challenging for them to do the latter.

However, AngelList’s new program is unlikely to be limited to current operators in the future. Anyone who has the ability and work ethic to add value to startups but could use some help with fundraising is a great candidate for the program.

The program will help shift the skills necessary to be a successful venture capitalist away from the ability to fundraise from limited partners towards the ability to add value to companies. And that will increase the number of successful startups, which is a good thing.

Also published on Medium.