AngelList, the company that brings angels and startups together, is planning an expansion taking advantage of a novel affiliate model, and changes in SEC rules on how private companies can raise money.
AngelList is a competitor to other early startup investors and some VC firms. Dan Primack at Fortune, reports that AngelList has raised money at a $150m valuation:
Fortune has learned that AngelList recently raised around $24 million at a valuation in the $150 million range. Atlas Venture and Google Ventures helped lead the round, which included participation by more than 100 other institutions and individuals. Among the more notable names are Kleiner Perkins Caufield & Byers, Draper Fisher Jurvetson, Marc Andreessen, Max Levchin and Ev Williams…
. . . one reason the company raised money from so many different sources was so as not to appear beholden to any particular firm or individual.
A change in SEC rules goes into effect Monday, allowing startups to pitch publicly instead of in private meetings. Investors will still need to be accredited — startups will have to make sure that they are rich enough to invest otherwise they could face serious problems and be prevented from raising money for up to a year.
Startups will have to tell the SEC in advance that they are fundraising and must agree to make sure all information told to investors is made public.
Foremski's Take: The change in SEC rules means that more investors will have a chance to maybe find the next Google or Facebook instead of the insider clique of Silicon Valley having access to all the deals.
It also means good news for the media outlets covering the startup sector since that there will be more information available publicly about who is raising money, and about the performance of these private companies.
One risk is that public disclosure of business performance by a startup could raise them into the cross-hairs of larger firms, and their business model could become the target of copy-cat ventures. This means the best startups will continue seek private meetings with investors leaving the less promising companies to solicit in public venues.
However, it's always the ugly ducklings rejected by the establishment that become the black swans and return massive amounts to their lucky investors. So there will be some high profile winners among less well connected investors, which will undoubtably encourage others, and raise the total amount of early stage capital available.
AngelList plans to help startups with their new SEC obligations, and create a public pitching site to take advantage of the new rules. It is also promoting a novel affiliate model that rewards intermediaries in raising money for startups from their networks.
Angels, or networks of small investors such as AngelList, have taken over most of the early stage investing in Silicon Valley startups, allowing VC funds to concentrate on larger, later stage deals that can help scale young companies towards a potential IPO, or make it as a stand alone company.
It's not clear if the change in SEC rules will improve the success rate. Less than 10% of early stage startups succeed in growing larger or in being sold to a bigger company.
Few have the ambition to be independent and most angel investors would rather see an early sale than face dilution and the long road to getting their money back.
Delphix is one of the only startups I've come across lately that is well positioned to becoming a major software company in Silicon Valley.
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