Ask HN: Is AngelList Legit? | Hacker News Reader

Ask HN: Is AngelList Legit?

84 pointsthrowaway294849 comments

I've been investing in a few startups through AngelList. On the platform you can invest in startups, through a special purpose vehicle which invests in the startup via a SAFE.

Recently a syndicate lead posted such a clueless update on a startup (claiming their product passed a milestone it clearly did not, based on just reading their public updates), that I started doubting whether they've actually invested in it at all.

This made me question the platform. How do I even know these leads have invested my money in the startups they say they have?

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I've invested in over 100 startups through syndicates on AngelList in the past few years. It's not possible for a syndicate lead to steal the money. AngelList collects directly from the investor and wires directly to the company. Plus I've been paid out 6 times from exits.

But you can definitely make bad investments, just like on Robinhood. Except in angel investing, odds are you're never going to see that money again (like 1 in 20 startups makes it).

Also try to remember that you and the syndicate lead are most likely a tiny check to the company, so you aren't getting information rights. You're essentially just along for the ride. Buckle up.

> I've invested in over 100 startups through syndicates on AngelList

Good on you ;)

Are these startups there for the convenience, or are these slightly less connected founders?

> try to remember that you and the syndicate lead are most likely a tiny check to the company,

Also remember all the high quality startups have their pick of funding sources. They aren't going to be on platforms like this or secondary markets. And certainly not with good terms for investors.

I don’t think this is accurate. It’s usually not the company directly raising on AL. Rather it tends to be a syndicate with partners who have a connection with the company that is raising.

There are various reasons why a hot company might still have a syndicate including the syndicate lead was an early investor in the company so the founder is giving them an allocation in the subsequent rounds.

Would you mind sharing high level results?

From the post, invested in 100, paid out on 6, some will still be in flight and some have died.

Even if the other 94 are dead, 6% is not horrible.

I am curious what the "pay out" was for those 6 exits.

If you invest $1000 in 100 startups. That's a $100,000 investment across the board. Just to break even for all "angel startups", those 6 exits need to return at least $17K (1,700% ROI) per successful exit.

This is just gambling in a different form lol.

It is, but gated gambling (accredited investor requirements) and you get something fun to talk about at parties and online (versus degenerate options trading or horse racing, which is out of vogue).

There's an argument that most forms of investing are some form of gambling, depending on how you define it. If you take gambling as "staking money on an outcome you don't control," perhaps.

It really depends on your financial situation and what you enjoy; for some spending $$$ on startups is much more entertaining than spending similar amounts traveling to see professional sports. Hell, some may spend the money and count it well spent "just to be in the front-row seats at the game" (e.g., learning all the things startups are doing) - even if they never make back any of it.

In which case even a partial return is better than nothing.

True. Just walking outside and using the crosswalk is a “gamble”. But the odds are very much in my favor.

Never know though. Maybe a drunk asshole barreling over a blind hill in an EV on “BeAsT MoDe” side swipes me

Yeah, most people use "gamble" to refer to something where the EV (expected value) is below what they would consider "wise". This varies wildly from person to person.

Most people would say buying a Powerball ticket today is gambling; but if you had a 50/50 chance to win $1million for a dollar, they'd say it's a sure thing; but both are gambling.

Wikipedia mentions their impact on U.S. fundraising law, https://en.wikipedia.org/wiki/AngelList

  In mid-2012, Naval Ravikant and Kevin Laws, AngelList's chief operating officer, were active in Washington in his support for the Jumpstart Our Business Startups Act (JOBS Act), a law that eased many of the United States' securities regulations with the aim of making it easier for companies to either go public or to remain private longer while continuing to raise capital.

Some stats, https://techcrunch.com/2023/07/28/angellist-expands-into-pri...

  Assets supported for investors on AngelList increased by 50% to $15 billion year-over-year in 2022.. [AngelList] turned to venture to fund its own growth — raising a $100 million Series B co-led by Tiger Global and Accomplice at a $4 billion valuation.. AngelList has 130 employees.

The platform itself is "legit" in the sense that it has real people well known in the tech community behind it. I personally would be very surprised if they are running a blatant scam in that they are lying about the SAFE investment.

However I wouldn't be at all surprised if the smallprint somewhere in a long chain of paperwork means that you will never get any financial return in your "investment". There are a few platforms and crowdfunding platforms that let retail investors put small amounts of money into startups and I have never heard of a single case, even from an anonymous netizen, of anyone getting money back from such a structure.

Actually I've had "money back" twice from AngelList. Once a startup got acquired (for like 3-4x), another one shut down and distributed the remaining funds.

But I did not withdraw it and just reinvested to other startups, so in that sense I've never received money from them.

That feels like buying more lotto tickets with the winnings from previous lotto tickets :)

Sure, but stock market investing is no different. Once you’ve saved “enough”, you need a place to store wealth that isn’t cash. If you cash out on a winning stock, that money is likely going into other stocks, or real estate, or some other financial vehicle.

As an aside, all the punditry around a former billionaire president who can’t raise 450M in 30 days are playing on the fact that many people do not realize this. No billionaire has a significant fraction of their wealth in cash unless it benefits a short term strategy or they are rebalancing. Those with money put their money to work through investment. Net worth is based on the estimate of those holdings.

Certainly investors have seen returns from companies on Crowdcube [0] in the UK - or am I missing something about AngelList? (not having looked at it)

Disclaimer: I work for one of the companies currently raising money on Crowdcube.

[0] http://crowdcube.com/

It was legit when it first came about, I know that much, and was started by well known and trusted people in the tech scene back then, but any platform that has money flowing through it will undoubtedly be found and utilized by folks who aren't legit, looking to scam, or to otherwise move money between hands.

I'm not saying AL has that, but it's old enough now to where I'd be surprised if it didn't have that. Same is true for GitHub Sponsors, Patreon, GoFundMe, etc.

These platforms are all ripe for laundering imo. Investment or sponsorship funds go in dirty, and come out the other side as clean income complete with year end tax documents. Again, I'd be more surprised if this isn't happening on these platforms, but that doesn't mean the platforms are not legit either.

I feel like that kind of abuse would be easy to spot on GitHub.

Yet organizations like these usually have entire teams dedicated to combating such things, governments have entire departments or full organizations tasked with finding and prosecuting such people, credit card companies/banks have internal investigators tracking down who's messing with their money, and countless books and movies have been created to tell the story of unique, hard to catch perpetrators of such fraud.

You'd be surprised what lengths people will go to avoid detection, and the sometimes genius people who are involved in money laundering or other types of wire fraud.

> Online job marketplaces such as Freelancer.com and Fiverr, which accept funds from clients and hold them in escrow to pay freelancers. A money launderer can post a token job on one of these sites, and send the money for the site to hold in escrow. The launderer (or his associate) can then sign on as a freelancer (using a different account and IP address), accept and complete the job, and be paid the funds.

https://en.wikipedia.org/wiki/Money_laundering#List_of_metho...

Or patreon, onlyfans, facebook marketplace, ebay, amazon, godaddy domain sales...

I have seen investments come through, I don’t doubt that.

The company I know that got the funding I would not have invested that kind of capital in , ever.

Then again that’s VC for you, a long list of failed ventures and a shorter list of impressive huge returns on investment.

I subscribe to very conservative accounting principles, I get insanely fixed on burn rate, I cannot sleep at night if my company is in the red. If everyone thought like me innovation would be at a humanity level low. Huge credit to all founders, it is a big mind fuck.

I would try contacting the startup to confirm they have received investment via AngelList, but conveniently their terms forbid you from contacting startups directly.

That seems weird. Is it so that you don't invest directly and cause Angellist to lose income?

Seems to me like some line of communication between founder and investor should be enabled/encouraged.

Party of the benefit of funding through platforms like AngelList is not having to deal with questions from 25 different investors, and instead having one, freeing your time up to work on the business instead of having to respond to 25 different well intentioned but not fully plugged in investors.

It's to protect the startups from hundreds of tiny checks emailing and hassling them. There is a line of communication between the founder and the syndicate which is technically the real investor here.

This would not be productive. Investors who come in throught mechanisms like this (SPV) do not appear on the companies cap table and would not directly interact with a startups IR team. This is normal for this type of investment.

I’ve withdrawn money from AngelList after distributions, the platform is legit.

I think you're asking two different things. AngelList is legit. They have a popular investment platform many legit investors use and many other products and features.

The private syndicates on the platform is a different story. I would be very cautious with my money. If you don't know and trust the people in charge, you better off investing your money somewhere else. I doubt most of them can make meaningful returns, yet alone not losing money.

Never assume you can trust all the parties on any platform, due diligence is ALWAYS required, no matter the source.

Just because AngelList can be trusted generally doesn't mean every entity on there can be trusted, there are always a chance for things to fall through whatever protection they have, and then you're on the hook.

One of the investors in our pre-seed used angel list to push their investment. They had a small fund ($10m) and I think they used it for the legal structure. The platform is legit, but I am your ymmv on the startups that raise money there. But that is true for any startup you are investing in.

Don’t confuse angellist with the crowdfunding platforms. Crowd funding platforms are used by companies that can’t attract legitimate VC investment, angel list are real VC syndicates that send accredited investors opportunities to invest in specific deals.

I've invested in 1 startup via AngelList, because I personally knew the founder. In my particular case, it is legit. They have not raised any new rounds of funding nor have there been any liquidity events unfortunately.

Thank you, this makes me feel a bit better.

Angelist is legit. Syndicates and even VC stakeholders aren't always on-point with what's going on in a company. Take it with a grain of salt. They're human beings and have many irons in the fire (keep that in mind with risk mitigation).

I raised some money via angel list at my last startup. From my perspective, it is legit. We certainly received the money.

could you share your thoughts and experience on the process? what were the benefits of raising money via angellist as opposed to elsewhere?

Thanks for answering, I also want to know it.

My company was on the receiving end of $500k syndicate from AngelList in 2015-16.

Part of the problem re: updates is companies aren’t required to provide them. We’ve had individual syndicate investors reach out to us demanding to see our financials (even though they individually invested only $5-10k). Before they reached out directly to us I’m sure they went to the syndicate lead first.

TLDR: I don’t think it’s a scam. But it’s 100% frustrating that companies don’t always provide satisfying updates because (simply) no one is making them.

theres a very easy way to find out: take your money back

I mean, it’s been around for a while, and I haven’t heard negative things.

That doesn’t necessarily translate to trusting them with money though.

Right, that's why I'm also working with the assumption they are legit. Just too high-profile not to be.

But what's to prevent a rogue syndicate from taking money without actually investing it forward...

> Right, that's why I'm also working with the assumption they are legit. Just too high-profile not to be.

People like Madoff etc. were super high-profile and ran scams worth billions for decades. Being high-profile was part of their strategy. So no, AngelList being "high-profile" and not seeing any evidence of fraud for a decade doesn't mean anything. To be clear, I'm not accusing AngelList of fraud - just trying to make a point.

Not a very good point, though.

Madoff was successful in big part because there was no one that could independently verify anything. (and apparently the government botched multiple investigations after referrals from suspicious people).

That part of AngelList is about coordinating between lots of parties i.e. companies that seek funding and people providing funding.

I'm not sure how you could keep a scam going by publicly telling people that you've invested in hundreds of legit startups on your behalf without a single one of those startups saying "wait a minute, we have no idea what AngelList is and we never got any money from them".

Being skeptical is good but this isn't it.

I am also curious about this.

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