It surprised me to see Sam Altman on this list. Where does that money come from? Maybe Loopt is very profitable and he takes a big salary? Or maybe he had cash before Loopt?
From there he can invest whatever he wants -- $1k, $10k, $100k, etc. -- assuming the entrepreneurs agree.
YC alums in a position to invest can interact with the founders for months in very social and relaxed settings as peers. That's orders of magnitude more data than what you get in normal angel investing.
"income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year"
And it is not like you have to submit to an audit to the company before sending them a check -- all you have to do is sign something that says you are accredited. That way you will have a harder time suing the company claiming you were mis-led or whatever.
I'm assuming the same for Kevin Rose who's a pretty active angel.
Likely the sums invested are fairly small as well.
The Foursquare guys took $4M home out of a current funding round
http://www.theequitykicker.com/2010/07/15/foursquare-founder...
That would be interesting given that Sequoia is an investor in Kayak as well.
So it would be the same basic idea. Sequoia sees that there's a lot of money to be made by investing in good startups early, but also sees that there are people who are better than them at doing so, since their expertise is traditional VC rounds. So they give YC money to invest in super-early-stage startups, and YC and Sequoia share the returns.
There's no reason they couldn't do the same thing for someone who's interesting in angel investing but doesn't have the money or doesn't want to risk his own money.