Have you ever wished to support new startups and ventures that have great ideas while potentially getting a return on the money you invest? That’s what angel investing is.
AngelList Venture aims to give angel investors quick and simple methods of accessing startups and working with entrepreneurs. Although you must be an accredited investor to participate and commit to investing a set amount of money each quarter, AngelList might make the investment experience easier.
But how does this platform work? And what forms of investments does it offer? Let’s explore how AngelList might help you join the startup community and support the businesses you believe in.
What is AngelList Venture?
AngelList Venture was founded in 2010 by Babak Nivi and Naval Ravikant. It’s headquartered in San Francisco, California, and operates in the U.S., the U.K., Canada, and India.
AngelList’s goal is to support startups and improve their chances of success. It provides a way for startup founders and investors to connect and share their visions. The company fundraises money from investors and provides it to startups to help them grow.
AngelList says that investors have supported 43% of all U.S. startups valued at more than $1 billion through their platform since it was founded. Most of the startups AngelList supported in 2021 were fintech, biotech, artificial intelligence, and health tech startups.
How does AngelList Venture work?
AngelList is designed to allow you to start investing money alongside venture capitalists. The platform claims to have helped more than 12,000 startups and supported $10 billion in assets by the end of 2021.
There are four main methods of investing through AngelList Venture. These methods are rolling funds, AngelList’s own managed fund, syndicates, and Demo Day funds.
1. AngelList rolling funds
Rolling funds allow you to access investing in startups by contributing a certain amount of money regularly instead of making a significant startup investment once.
When you subscribe to one of these rolling funds, you’d be committing a minimum amount of money to it for a minimum period of anywhere from one quarter — or three months — to 16 quarters.
This contribution model allows startup founders to build lasting relationships with their investors while cutting their administrative costs. AngelList Venture charges startup founders a one-time admin fee that covers startup formation, tax documents, fund management, and subsequent investor payouts if the startup is successful.
Each rolling fund is different. As an investor, you generally need to commit at least $5,000 per quarter, with many projects requiring about $10,000 per quarter. Your money is then distributed among the startups in the fund you choose.
Each rolling fund has specific fees that vary from one fund to another. The three main fees you might be subject to are:
- Management fee: Each rolling fund on AngelList operates under the supervision of a fund manager. This is the fee you pay the fund manager for their service. The management fee ranges from 0% to 2.5% per year, depending on the rolling fund.
- Administration fee: This fee covers the costs of administrative processes related to operating a rolling fund. Most rolling funds on AngelList charge about 0.15% per year.
- Carried interest: This is a portion taken from your potential future fund profits, often ranging between 20% and 30%. This carried interest portion goes to the fund manager as an incentive to boost the performance of the fund.
Before investing in a rolling fund, ensure you understand how many quarters you’re committing to, the minimum investment required, and the fees you’d pay. You could estimate your fees using AngelList’s rolling fund fees calculator.
2. AngelList Access Fund
This AngelList Venture fund gives you access to several startup deals with a single investment each quarter. The deals that the fund participates in are chosen by SAX Capital, a venture capital investment advisor.
You have two commitment options when you invest in AngelList Access Fund:
- Quarterly commitment: This gives you more flexibility since you get to choose which quarters you want to join. The minimum quarterly investment is $75,000, and your commitment is only for the quarter you invest in.
- Yearly commitment: This option offers less flexibility but a lower quarterly minimum investment. The minimum quarterly investment is $50,000, and you commit to four quarters.
The AngelList Access Fund has no administration fee and charges a management fee of 1% per year. Although the fund itself doesn’t take a carried interest cut from future profits, it primarily uses investment vehicles that have carried interest. In that case, there would commonly be a 20% carried interest.
3. AngelList syndicates
A syndicate is a group of investors that a lead investor guides in exchange for earning carried interest on the investments they make. The lead investor aims to provide high-quality startup deals you might invest in, and it’s up to you whether you join these deals.
Unlike rolling funds and AngelList Access Fund, syndicates allow you to invest deal by deal. You have to apply and get approved for each syndicate, and you could increase the number of deals you could access by applying for several syndicates.
AngelList suggests you write a detailed profile that includes investment preferences, previous investments, and a thoughtful note for the lead investor if you plan to invest using syndicates. This might improve your chances of getting the lead investor's approval to participate in a deal.
4. Demo Day funds
AngelList raises funds regularly to invest in early stage startups coming out of Y Combinator, a company that helps new startups develop their ideas and learn how to run a business.
Y Combinator runs three-month programs where startup founders work on their startup pitches and refine their ideas. At the end of each period, the startups deemed most promising by Y Combinator present their ideas on Demo Day.
Accessing Demo Day as an investor might be challenging, as it’s an oversubscribed, invitation-only event. However, when you invest in AngelList Demo Day funds, you get indirect access to Demo Day startups through five Y Combinator insiders.
These insiders invest your money in the startups approved by Y Combinator during your investment cycle. Keep in mind that AngelList isn’t directly affiliated with Y Combinator.
The minimum investment in a Demo Day fund is $20,000 per cycle. AngelList charges a 0.75% administrative fee per year, and the carried interest on future profits is 20%.
How much can you earn with AngelList Venture?
As with any investment, the amount you might earn depends on your investment, the returns you receive, and the fees you pay.
It’s important to note that investing in startups is often considered a risky alternative investment. As a result, if the startups in the fund do well, you could receive significant returns. On the other hand, there’s always a chance that a startup might fail, and you might experience substantial losses.
You’re likely to pay one fee type or more on all the funds on AngelList. Most management fees are between 1% and 2%. You may also pay administrative fees of about 0.15%. Lastly, if the fund is profitable, there would be carried interests of about 20% to 30% taken out of your profit.
The minimum investment requirements at AngelList are relatively high. Some of the most affordable rolling funds have minimums of $5,000 per quarter, and the minimum subscription period ranges from one to 16 quarters.
Before investing with AngelList, consider the risk of your investment and whether you could afford to lock up the sum of money you invest.
Who can earn money with AngelList Venture?
One of the main stipulations when investing through AngelList is that you must be an accredited investor. Accredited investors need to meet one of the following criteria:
- Net valuation of at least $1 million, excluding the value of your primary residence
- Individual income of at least $200,000 per year or joint income of at least $300,000 per year during the past two years
- Holding specific investment licenses
These conditions are placed by the U.S. Securities and Exchange Commission (SEC) to limit who could risk their money by investing in startups and companies that are not publicly traded.
AngelList asks you to put together a detailed profile that includes some of your financial information if you qualify as an accredited investor. As with any investment, consider using this platform if you meet the requirements and can afford to lose the money you’re investing.
On the other hand, if you’re new to investing and starting to learn how to invest in stocks, AngelList might not be the right choice for you. Funds that invest in startups and new businesses might have a high level of risk. They also often require you to lock up your money for a minimum period, which might not align with your financial needs.
How to open an account with AngelList Ventures
To open an account with AngelList, you need to provide information about who you are and the value of your assets. You’d need to prove that you have the income, assets, or net worth to qualify you as an accredited investor. Depending on how you plan to qualify, some of the information you need to provide might include:
- W-2 forms
- Tax returns
- Brokerage account statements
- Bank account statements
Once you’re ready to open your account, simply follow these steps:
1. Create an account by providing your full name and email address and creating a password.
2. If you’re planning to use AngelList to invest, click apply to invest to begin the process.
3. Next up, AngelList asks several questions to confirm that you’re an accredited investor. Fill in your legal name, country of residence, and your accreditation qualification.
4. Next, fill in your investment goals and share how much money you plan to invest on AngelList.
5. AngelList also wants to know your experience with investing and startups. Provide a link to your LinkedIn profile and answer several questions about your investing experience.
6. Once you finish, your application will be reviewed. AngelList gets back to you in about one business day.
Alternatively, you could also have a licensed professional, such as a certified public accountant or a licensed investment advisor, verify your information and provide a confirmation letter to AngelList.
FAQs about AngelList Ventures
Is AngelList Venture legit?
Yes, AngelList Venture is a legitimate investment platform. AngelList says that the startups it supports are well-vetted and chosen by lead investors and fund managers with a proven track record.
How does AngelList Venture make money?
AngelList Venture makes money by charging fees. Because AngelList offers backend and administrative help for venture capital funds, the platform charges fees for these funds. These fees might include a management fee, an administrative fee, or a percentage of the carried interest, based on the type of fund involved.
What is an AngelList rolling fund?
An AngelList rolling fund is a fund that pools money from investors every quarter instead of receiving one-time contributions. The fund continuously invests in different startup deals each quarter. These deals are curated by the fund manager, who receives the management fee you pay.
Other investment apps to consider
If you aren’t an accredited investor or don’t feel like AngelList Venture is the right choice, you could consider one of the best investment apps that allow you to begin investing with lower minimums or less commitment.
Betterment offers a hands-off approach for individuals who might not have the time or experience to manage their investments independently. You simply answer a few questions about your risk tolerance and timeline when you sign up to Betterment, and it constructs a portfolio using various exchange-traded funds (ETFs).
Read our Betterment review.
Acorns is an investment platform that uses a robo-advisor that puts together a portfolio of ETFs based on your risk tolerance and goals. A unique feature of this platform is that it enables you to connect a credit or debit card, round up your purchases to the nearest dollar, and invest the amount rounded up. This feature allows you to add a little pocket change every time you buy something.
Learn more on our Acorns review.