Inside the Deal: Think angels can’t play the big game? Pascal Levy-Garboua thinks differently.

Inside the Deal is a new series where we interview the syndicate leads and entrepreneurs behind some of the most high-profile, invite-only deals on AngelList.

In this interview with Pascal Levy-Garboua, an angel investor in over 40 startups, we go inside his investment in Checkr, a background screening platform that recently closed a $40M Series B with the Y Combinator Continuity Fund, IVP and Accel, to learn:

  • How he invested his pro-rata in Checkr’s Series B
  • How he’s using AngelList to raise Series A and B rounds in his “winner fund”
  • How you can use AngelList to do completely private rounds

Julie Ruvolo: I heard Checkr’s Series B was an extremely difficult deal for people to get into. How did you get allocation for your AngelList syndicate?

Pascal Levy-Garboua: I met Daniel Yanisse, the CEO of Checkr, a year before he started the company. We were both working in the same day delivery space — I was as a founder at SixDoors and he was an engineer at deliv.

At the time, there were less than ten companies doing same day delivery in the Bay Area, so everyone kind of knew everyone, one way or another. When Daniel had the idea for Checkr, he shared it with me. I thought it was a great idea and decided, with a friend of mine, to invest as Checkr’s first investors — before Daniel and Jonathan, his co-founder, had even started the company. I was also an advisor to the company early on and helped introduce Daniel to some of his first customers. Then he got into Y Combinator and raised a Series A round [$9M, led by Accel] straight out of Y Combinator, which is not common.

AngelList is one of the platforms that changed my professional life in many ways. It’s more democratic, in a way, than if you were starting your own fund, which is much more about who you know.

When we raised our Series B, I asked Daniel if it would be OK for me to privately syndicate part of the deal on AngelList. He and the board agreed, and as a consequence, I did it.

It’s a bit of a unique relationship. I’m involved in so many aspects, first as an investor, then advisor, operator [currently Checkr’s VP of business development] and now a lead on the Series B, so I am very connected and involved with Checkr.

This is your first time using AngelList, but you’ve been angel investing for years, with over 40 investments, including Shyp, Sprig, RealtyShares, Caviar (acquired by Square), Wit.Ai (acquired by Facebook), and Womply. Why did you come onto the platform?

Frankly, when I first saw AngelList Syndicates, I didn’t see myself as a lead, especially for seed investments. I liked the lightness of writing a check myself, especially because I used to invest very very early. I was first in Checkr, third in Sprig and Shyp. Many companies I’m involved with I’m one of the first 5–10 angels.

But when I saw AngelList and had people tell me, “You’re an angel but you’re going to be diluted because VCs make money taking advantage of their pro-rata,” I thought, How could I do that? I don’t have the money to do that.

When I had people tell me, “You’re an angel but you’re going to be diluted because VCs make money taking advantage of their pro-rata,” I thought, How could I do that? I don’t have the money to do that.

So I saw there was an opportunity to do that with syndicates, and I started looking for people who would want to be part of my syndicate. At one point I thought about raising a fund just for that, then I learned about all the complex process and rules and decided it’s a job in and of itself, and not what I wanted to do.

I started getting really interested in syndicates when I started thinking about doing Series A or B deals in what I’d call my “winner fund”, companies in my portfolio that are doing really well.

Doing private deals was key for me. Founders need to feel comfortable about the situation, and the only way to do that is by making deals private.

What was it like pulling this deal together on AngelList?

The way I approach it is almost like raising a round for your own startup. When I have a deal — and I have a few more in pipeline — I share it with the funds through the AngelList team, and if I see interest, I move forward with the deal with my syndicate. I just write my investment memo to my backers and know how much I have already. The number of people in my syndicate is not that numerous, so it’s easy for me to know them. I know who might be interested or not.

At one point I thought about raising a fund just for that, then I learned about all the complex process and rules and decided it’s a job in and of itself, and not what I wanted to do.

I also know, if there is a small gap, I can ask AngelList to introduce me to other angels who are interested in the category to look at a deal. But it won’t be widespread or shared with everyone out there, which is very important to me — and especially for founders — because we’re talking about companies at a later stage so their data is very valuable. You’ll have decks with revenue numbers and traction. For a Series B, you typically have revenue in the millions or tens of millions; you don’t want that information to be on TechCrunch the next day.

Initially I didn’t want the deal information to share too much so I had a very high bar in terms of a minimum for my backers to invest. I lowered it over time for various reasons, but I never made it all the way down to $1K. [Pascal’s syndicate has a $10K minimum investment.]

What was it like working with the funds?

The funds were a game changer for me. If I bring them a good company raising a round with a good lead investor, the odds that the funds linked to AngelList are going to invest are high. As a consequence, you can invest more money faster on AngelList.

Are you still writing checks for seed investments on your own?

I’m doing less of that today, mostly because Checkr is taking a lot of my time as an operator. I still see things that people send through my network but I’m seeing a lot less than I used to.

And the reality is that your best investments are going to exit after a longer period of time. For the majority of them, from a money standpoint, I’m doubling down on winners and leveraging AngelList syndicates.

AngelList is one of the platforms that changed my professional life in many ways. I started investing a lot and I think syndicate model, especially with funds involved, is a game changer. It’s more democratic, in a way, than if you were starting your own fund, which is much more about who you know.


Originally published at blog.angel.co on May 31, 2016.