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?
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.
Good on you ;)
Are these startups there for the convenience, or are these slightly less connected founders?
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.
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.
Even if the other 94 are dead, 6% is not horrible.
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 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.
Never know though. Maybe a drunk asshole barreling over a blind hill in an EV on “BeAsT MoDe” side swipes me
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.
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.
Disclaimer: I work for one of the companies currently raising money on Crowdcube.
[0] http://crowdcube.com/
But I did not withdraw it and just reinvested to other startups, so in that sense I've never received money from them.
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.
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.
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...
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.
Seems to me like some line of communication between founder and investor should be enabled/encouraged.
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.
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.
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.
That doesn’t necessarily translate to trusting them with money though.
But what's to prevent a rogue syndicate from taking money without actually investing it forward...
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.
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.