500 Startups’ Christine Tsai: Why I’m Excited, Not Worried, About AngelList Syndicates
Some worry that new rules for Angels will mean more competition for traditional VCs, but this Women 2.0 conference speaker isn’t breaking a sweat.
By Jessica Stillman (Editor, Women 2.0)
With the SEC having loosened the rules around fundraising, AngelList and other crowdfunding platforms are already leveraging the change, most recently in the form of AngelList’s new ‘backers’ feature.
Building on the platform’s much discussed syndicates, backers essentially allows individual angels to raise money through AngelList for future investments rather than for a single investment in a particular company as with a syndicate. TechCrunch’s Kim-Mai Cutler sums it up: ”With syndicates, follow-on investors are basically betting on a lead angel’s judgment in a specific company. But with backers, they’re betting on the lead angel’s overall investment judgment.”
“This could make the seed and Series A market for financing much more competitive,” she concludes. Should traditional VC’s worry?
The More Options The Merrier?
But when Women 2.0 called up 500 Startups partner (and a speaker at our upcoming conference in Vegas) Christine Tsai, she sounded more intrigued by the new options than stressed. “That’s actually been very interesting to me,” she says of the new syndicates. “I’ve just started to see it come my way where people will send AngelList messages on investing in a syndicate,” she reports.
“It’s making the playing field equal in terms of who can invest and where startups can get money from,” she says, agreeing with Cutler. But rather than fret, she notes that these developments present positive options for founders: “The whole trend is companies don’t need necessarily a ton of money right from the beginning, and sometimes even taking smaller checks like $5-10,000 from angels can help a lot. Tools like FundersClub, AngelList and all the crowdfunding platforms that are starting to emerge can certainly help with that.”
Some Classics Never Go Out of Style
Tsai’s lack of alarm probably boils down to her faith in the value added by traditional funding sources and her confidence that founders will continue to seek out so-called “smart money.”
“Part of me thinks it’s great that there are a lot more channels for entrepreneurs. If you think about a few years ago it was just so much harder to figure out who these people were and get access to them. Just because they’re not well known doesn’t mean they’re not going to be just as useful to you,” she says. But along with the upsides of AngelList, Tsai also sees significant downsides, “At the same time, I do think you can’t completely replace the human aspect, the relationship building, so that’ll always potentially still prevail for at least the right investors.”
“One of the biggest things startups look for when they’re raising money is smart investors. [Crowdfunding] creates a little bit of a different dynamic in that maybe you feel more separated from investors,” she says.
Overall, at 500 Startups “we view the online channels as incremental. Maybe you want to raise most of your round the old-fashioned way then fill out the rest through things like AngelList or Funders Club. I wouldn’t necessarily suggest raising your entire round on those platforms,” she concludes.
What are your thoughts on AngelList Syndicates?
Jessica Stillman (@entrylevelrebel) is an editor at Women 2.0 and a freelance writer with interests in unconventional career paths, generational differences, and the future of work. She writes a daily column for Inc.com and has blogged for CBS MoneyWatch, GigaOM and Brazen Careerist, among others.