Angel Funds: Venture funds for angels — and $35M to back them
Today, we’re introducing Angel Funds, which are full-fledged venture funds for angels. They let angels make larger investments in startups, without the overhead of running a fund.
The number of startups has grown dramatically over the last decade. More startups require more angels, especially the operator-angels that startups love. Angel funds let operators fund operators, without the hassle of running a fund.
35 angel funds have already invested $15M in 220 startups. This includes funds led by operator-angels like Matt Humphrey, Rick Marini and Roger Dickey. These companies have gone on to raise follow-on capital from Sequoia, Accel, Index and many others.
How angel funds work
Here’s an angel fund in action. Rick Marini’s angel fund raised $750K from backers on AngelList, including $50K from Rick himself. He will then invest the fund in 5–10 startups over 6–12 months.
If the fund is profitable, Rick receives 15% carry on the fund, and AngelList receives 5% carry. There are no management fees — backers only split a $12.5K fee to cover costs.
Angel funds can be set up in a few days, without legal, regulatory and back office hassle (we take care of that for you). They are legally and operationally like a traditional venture fund. They raise capital up front, so they can make investments quickly and privately. And angels contribute to their own fund, so they have skin in the game.
$35M for angel funds
Maiden Lane, a venture firm dedicated to investing on AngelList, has committed $35M to back angel funds. This builds on $25M that Maiden Lane already invested in 125 syndicates, funding over 300 startups like Clutter, Cruise and Opendoor. (Maiden Lane is a partnership with Accomplice, an early investor and longtime supporter of AngelList.)
Angel funds complement syndicates
Angel funds complement syndicates, which let angels invest in one startup at a time:
- Angel funds require angels to commit to building a portfolio, and to commit to investing only through the fund while it has capital (with a few exceptions). Backers also commit to all of the fund’s investments up front.
- Syndicates give angels the flexibility to make one investment at a time and the flexibility to invest outside their syndicate. Backers can also opt out of any investment.
Operators funding operators
There are already 35 angel funds with $50M invested or committed. And there are over 225 active syndicates with $525M invested.
Syndicates powered a new wave of operators who previously didn’t have the infrastructure and capital to invest in other operators. We’re excited to see what happens next with angel funds. Learn more about starting or investing in an angel fund.
It’s a great time to be an entrepreneur, an angel–or both.
Past performance is not indicative of future returns. Examples of past investments led by operator-angels are purely for illustrative purposes. There is no guarantee that any angel fund will achieve the same exposure to or quality of portfolio companies held by any existing angel fund or syndicate. An investment in venture funds, including angel funds, involves a high degree of risk and is suitable only for sophisticated and qualified accredited investors. This announcement is not intended to be a recommendation for any investment or other advice of any kind and shall not constitute or imply any offer to purchase, sell or hold any security or to enter into or engage in any type of transaction. Any such offers will only be made pursuant to formal offering materials containing full details regarding risks, fees and expenses of any angel fund. Terms described above may be modified in the sole discretion of the fund’s investment advisor.
Originally published at blog.angel.co on May 16, 2017.