Venture Hacks

AngelList Scouts find high-quality startups for the angels on AngelList. When a Scout tells us to look at a startup, we pay attention.

Update: Liz Gannes covers this story for GigaOM.

We look at every startup that applies to AngelList — whether or not they have social proof — but a little social proof makes it easier for us to say yes. And the social proof of a Scout is especially interesting to us.

Why? Because the average Joe usually doesn’t get anything when he makes intros for a startup. He might get some advisory shares but that’s rarer thank you think.

The Scouts program is different. First, the Scouts are getting AngelList profiles with badges that display how many high-quality startups they’ve referred to the community. With the startups’ permission, we’ll list the names of the startups too. And most important: the Scouts will be able to send startups directly to AngelList, under their own names, without us in the middle.

Who are the Scouts? Each of these Scouts has sent us one high-quality startup that was good enough for AngelList. And most have sent more.

Los Angeles:

J. Grubb (@jonathangrubb), Founder of Get Satisfaction

Seattle:

Tony Wright (@webwright), Founder of RescueTime

Chicago:

Harper Reed (@harper), Former CTO of Threadless

New York:

David Lifson (@dlifson), CEO of Postling

Silicon Valley:

Jamie Quint (@jamiequint), Founder of Snaptalent

Gagan Biyani (@gaganbiyani), Founder of Udemy

Sam Odio (@sodio), CEO of Divvyshot

Jason Putorti (@putorti), Mint designer, Votizen advisor

Boston:

David Hauser (@dh), Founder of Grasshopper, Chargify

London:

Brendan Baker (@brendanbaker), Oxford MBA

And here’s a Twitter list of the Scouts: @angellist/scouts.

How do you get to be a Scout? Refer one high-quality startup that’s good enough to share with AngelList (tell startups to list you in the referrer field). Then get in touch with us, tell us you want to be a Scout, and we’ll start a conversation. I’m sure we’ll modify these guidelines over time, but it’s a good start.

Questions? Contact our Scout @brendanbaker and cc me @nivi.

If you’re a startup that’s trying to contact the angels on AngelList, consider getting in touch with one of our Scouts. They can help.

We’re recruiting a product designer for AngelList. Here’s how we’re doing it and what we’re learning. (If you’re interested in working with us, details are at the bottom of this post.)

I didn’t start by putting up a job post. I figured if everybody else is doing it, I need to take a different approach. So I called the smartest designers and entrepreneurs I knew and asked them for advice. Here’s what I’ve learned:

• We want a product designer. This job post from Quora defines a product designer as “Extraordinary product, interaction, and visual design talent [with] a curiosity and passion for crafting amazing experiences.” Product design encompasses visual design, interaction design, branding… it’s the whole user experience.
• A small team like ours should hire designers who can build what they design. At a minimum, that means building HTML, CSS, perhaps JS, perhaps beyond. See these posts by Jason Putorti and Rebekah Cox for more info. Also read Rebekah’s Early Quora Design Notes.
• Quora has the best job postings I’ve seen in a long time — they’re muscular and much better than all the quirky job postings in the world.
• Consultants are good if you want to build the product. Full-time people are good if you want to build the team. We want to build the team.

The opportunity for product designers

AngelList is a community of angel investors who make it fast and easy for worthy startups to raise money. These links tell the story better than we ever could:

What do people think of AngelList?
AngelList Twitter Favorites
Fred Wilson covers AngelList

In short, the 250+ angels on AngelList are bringing startup funding online — in fact, they’ve already funded about 40 startups (here’s a few of them). This is a very high-impact and difficult problem… and a giant opportunity to help the industry that funds the startups we know and love: Facebook, Google, Twitter, Apple, you name it.

What’s in it for you? Investors throughout Silicon Valley and the world will use your product daily. You get to lead the product and company by turning vision into product, with no managers in your way. Your title will be the same as everyone else on the team: Venture Hacker. You’ll work with a founding team of investors (Twitter), founders (Epinions), students (life), and advisors (billions served). And you get to push the envelope of what is possible with product design on the Web.

We’re committed to building a high-impact and long-lasting team. If you’re a product designer who’s irrationally interested in this problem and wants to work with us full-time in San Francisco, send us a few links (we don’t need/want anything else), and please let us know if you have any questions.

This Xconomy article by Wade Roush does a great job of telling the AngelList and Venture Hacks story:

In Seed Funding Race, AngelList Sorts the “Junk” from the “Maybes”

I hesitated to link to it because these articles always make you look more handsome than you really are. But Wade does a great job of rounding up the state of the art of angel investing and placing AngelList in that context. Here’s a choice quote:

“I think the way to get into angel investing is, first, you obviously have to have money; you have to have a brand, otherwise you are not going to be differentiated and you are not going to see good deals; and you have to have a network of angels to work with, so you can move in packs and find other people to help you with due diligence,” Ravikant says.

It’s only then that AngelList can help. “The final thing is that you need to have good deal flow, so that you can see when the good things come along,” Ravikant says. “We will bring you deal flow, make it easy to syndicate deals, and we’ll show you deals that hopefully over time matches up to your interests.”

Check out the rest of the thoughtful article.

Quora is a Q&A site. We were planning on posting a question asking startups and angels to share their AngelList experience. But someone beat us to it:

What do people think of AngelList?

I can’t think of a better piece of marketing than this thread. There’s nothing we could say better. I want to replace the AngelList homepage with this thread.

Quora spam

Quora’s goal is “to have each question page become the best possible resource for someone who wants to know about the question.”

The Quora community will kill you if you fill it with rubbish. You have to have a lot of very happy users to try Quora marketing. And you have to expect negative reviews too. Quora’s looking for the best answer — not your answer.

Hating Quora

I’ve resisted Quora since they were in closed beta. Partly because everyone was raving about it. Partly because I thought the user experience was insane.

Now I’m hooked. And I think they’ve created a new class of user experience.  It’s a “go with the flow” experience. Don’t try to load a model of the site in your head — it’s too complicated and they’re constantly redesigning it. Just expect things to be there when you need them. And expect that you can do a lot with each piece of data on the site (suggest revisions, revise it, revert it, vote on it, eat it, thank the author…).

Quora’s a lot like The Wire, you’ll hate the first 5 episodes — then something will happen in your head and you won’t be able to shut up about it. Follow me and Naval on Quora and check out the AngelList thread already.

Last week, Naval and a slew of angels shared their investing advice with an audience of angels-in-training at AngelConf 2010. Here’s the video (each talk is 7 minutes long):

Wade Roush at Xconomy took detailed notes on all the talks and published them here and here.

7 angel investing tips

Naval’s 7-minute talk starts at 26:00. Here are Wade’s detailed notes:

“1. Don’t move in a herd, but do be a pack animal. Not everybody has all the information. One angle might know the market, one might know the founder, one might know the customer base. Every time an angel comes into a round, they bring a piece of information. Ride on their coattails.

2. Say no early and often. You should be doing one deal for every 20 to 30 that you see. If you do more than that, you’re overinvesting.

3. You need to have a brand. The really great deals are obvious, and everybody wants in, and if you want to get in you need a brand. That could be that you have been successful with great companies in the past. And building a brand does not mean taking coffee meetings. Shallow connections do not mean much. If you have a fancy office on Sand Hill Road or Market Street, the best deals are not going to come to you. If you’re not out there running around getting to know people, then you are really just practicing the VC model.

4. Humility. When you’re sitting there all day and people are asking for money and more often than not you are saying no, it eventually goes to your head. The problem is that when a Mark Zuckerberg walks in, those guys have more offers than they have room for. If you come across as arrogant, they will drop you.

5. Your job is to be a little dispassionate. Don’t try to run the company. Don’t even take the power—if you don’t have it, you won’t be tempted to use it.

6. Filters. Every winner is unique by definition, because what they’re doing is new. But the losers tend to cluster around common mistakes, such as investing in a company with one founder. You will find you can establish filters, even one as simple as “Do what you love.”

7. There are many paths to success. You have to be very careful about taking your limited experience and trying to shoehorn your companies into it.”

I haven’t watched all the angels yet but I’m making a mental note to watch it while I brush my teeth tomorrow morning.

7-minute abs

If you’re not an angel investor, watch this instead:

I use Twitter favorites to keep track of AngelList testimonials. I just favorite the testimonials I like. It’s super easy:

And it’s trivial to embed them anywhere:

Widget: AngelList Favorites

Not every testimonial is a tweet

You can track a non-tweet testimonial by linking to it on Twitter and then favoriting it. Or by bookmarking it on del.icio.us — I use the testimonial tag.

If you go to my testimonial tag on del.icio.us, you’ll see I’ve also bookmarked private Gmail conversations. Gmail lets you link to threads — although you have to be logged in to see them.

I pull up these testimonials when I’m telling people about AngelList. There’s a story behind each tweet and it’s a fun way to start the conversation.

Paul Graham says “The future [of funding] is no fixed amount, no fixed closing date, and no lead.” In other words, the future of financing is continuous, not discrete.

This post explains how to raise a seed round with no lead, no fixed amount, and a fluid closing date. The process is called mass syndication, or a party round.

Paul proposes eliminating rounds altogether, but we’re not there yet. Mass syndication is a single continuous seed round and I think it’s the state of the art in continuous fundraising.

We originally offered this interview exclusively to AngelList applicants — now it’s available to everyone.

Another future

The future of funding is also finding the right investors for your startup, quickly. Not just picking from the investors you can get introductions to.

How? You want to get instant meetings with any investor you want. And you only want to meet investors who are genuinely interested in your startup. That’s what AngelList is for. One danger of this approach is that your round is oversubscribed.

Despite the name, you can use AngelList to request intros to any subset of investors on the list — you don’t need to send it to the whole list.

Leads aren’t going away

Fred Wilson writes “If you don’t want a lead investor, then don’t knock on my door because I don’t know any other way to be.”

This interview explains how to raise a seed round with the conservative assumption that a lead won’t step forward — but it doesn’t preclude you from changing course if a lead appears.

1. Interview

Video: Interview with chapters (for iPod, iPhone, iTunes)
Audio: Interview without chapters (MP3, works anywhere)
Transcript: Below

2. Outline

Here’s an outline and transcript:

1. You can close an angel round with ‘mass syndication’
2. Start with terms and valuation below market
3. What you want in your term sheet
4. What you don’t want in your term sheet
5. Should you have a board seat for seed investors?
6. This isn’t comprehensive term sheet advice
7. Memorize the term sheet before your first meeting
8. How do you set your valuation? Price it to move
9. How do you bring up the terms in a meeting?
10. Describe how the terms are investor-friendly
11. A preferred round is a good way to set up good initial terms
12. Does a small seed round need protective provisions? Pros and cons.
13. Get feedback on the terms in the first meeting
14. Drop names to build social proof
15. Social proof works differently in a Series A round with VCs
16. See if the “interest” includes a dollar amount, intros, and name-dropping (a.k.a. soft circled)
17. When do you need a lead?
18. Approach the financing as if you won’t find a lead
19. What’s a lead investor?
20. If they say “find a lead,” ask why
21. How to create a deadline
22. Raise the money when you don’t need it
23. Send two emails to the angels
24. Do a rolling close: the cash comes in just- in-time
25. Mass syndication can fail if a very high social proof investor drops out
26. Use AngelList and StartupList to get intros to angels
27. What do angels look for?
28. Advisors are good for getting your foot in the door, not in a pitch
29. Get advisors by going to events or talking to entrepreneurs
30. Before you raise a seed round, you need a product in the marketplace
31. Use customer development and lean startup techniques to get to market with less
32. Pitching hacks free chapter: Advice on getting investor intros
33. If you need money to get something in the marketplace, pitch idea investors
34. Pitch incubators or do your startup on the side
35. What are the different types of seed stage investors?
36. If you’re talking to a VC, make sure they really do seed stage rounds
37. Potential concerns with pitching multi-stage and seed-stage firms
38. Get intros to seed investors with AngelList/StartupList

3. Transcript

Music: Squarepusher

Nivi: Hi there, this is Nivi from Venture Hacks.

Naval: And Naval from Venture Hacks.

Nivi: And we’re going to talk about how to close an angel round, how to put together an angel round, or in other words, how to herd a motley crew of angel investors and turn those meetings that you’re getting into money in the bank.

I think we’re going to start off by talking about mass syndication, which is an approach that I think more entrepreneurs should be taking to close their angel rounds.

You can close an angel round with ‘mass syndication’

Nivi: I think entrepreneurs make two typical mistakes when they’re doing an angel round, and they come from what they’ve read online about how to close a VC round. So, there are two things.

One: they don’t name drop enough. They don’t mention who else is interested.

Two: and I guess more importantly, they’re looking for a lead, which you don’t necessarily need in an angel round.

When you put those two together and combine them with a term sheet that you essentially write yourself, you’ve got a new way to close an angel round which we call mass syndication, which I’ve done personally. And Naval, maybe you can talk about how often you see that happening, or if you don’t see that happening, or whatever.

Naval: It happens fairly often these days. Especially the Y Combinator companies, which are well trained by Paul Graham and crew, will exercise mass syndication a lot. So, they take the standard term sheet that they’ve been given and they go out and do a rolling close of various convertible notes. And it generally works pretty well.

The keys are that you have to set the terms and the valuation very, very reasonably. In fact, you have to probably price slightly below market, because otherwise the angels don’t trust you, then they want a lead who’s done the due diligence. You have to work with people that you have warm intros with, you have to name drop like crazy, and you have to create forcing functions to get the round to close. You can’t give people all the time in the world.
Read more→

Today we’re announcing that LearnBoost has raised money with AngelList.  LearnBoost makes an “easy-to-use online gradebook for teachers.”

LearnBoost was referred to us by two-time Power Broker Harper Reed. They used AngelList to contact George Zachary and Jeff Fagnan who invested:

George Zachary (Investor in Twitter)

Jeff Fagnan (Investor in Songbird)

George then introduced LearnBoost to AngelList members Bill Lee, James Hong, and Othman Laraki who also invested:

Bill Lee (Investor in Tesla Motors)

James Hong (Investor in Slide)

Othman Laraki (Founder of Mixer Labs)

Finally, here’s a few of the investors who sourced LearnBoost without AngelList and invested:

RRE (Investor in Venmo)

Bessemer (Investor in Postini)

Update: Read more about LearnBoost’s fundraising experience on the LearnBoost blog.

About LearnBoost

What is LearnBoost? In their own words,

“Our Teacher Gradebook is the best gradebook software on the web.

“Beautiful design and wonderful user experience makes you wonder why you’ve been using other gradebooks. Plus we’re free. Your new found productivity means you can spend more time doing what you do best: teach.”

Update 2: Learn more about LearnBoost in this detailed Xconomy profile: LearnBoost Bets on Better Tools for Teachers.

Startups: Get intros to AngelList here.
Angels: Join AngelList here.
Everyone: Get AngelList updates via Twitter and RSS.

Today we’re announcing that Thumbtack has raised money with AngelList.  Thumbtack is “your marketplace for local services.”

Thumbtack got their first commitments at Open Angel Forum, from Joshua Schachter, Cyan & Scott Banister, and Jason Calacanis. Then they used AngelList to contact Ariel Poler and Auren Hoffman who invested:

Ariel Poler (Investor in AdMob)

Auren Hoffman (Investor in Aardvark)

Thumbtack’s CEO, Marco Zappacosta, sent me this very nice email about his AngelList experience:

“Both Ariel Poler and Auren Hoffman came from AngelList. And Auren introduced me to Scott Fabor and Mark Britto who are also now investing. Joshua Schachter & Jason Calacanis are also on the list but I was first introduced to them through Jason’s Open Angel Forum.

“The value of AngelList goes beyond the money, though — the introductions have been killer, even when they didn’t net a check. I got to meet with Keith Rabois, Bryan Schreier, Floodgate, First Round, Jeremy Levine, and others: relationships that I would not have been able to initiate without you guys.”

Read more about Marco’s fundraising experience on the Thumbtack blog.

About Thumbtack

What is Thumbtack? In their own words,

“Why can you go online right now and buy any product you want but you can’t do the same for tutors, handymen, dog walkers, or other local services? Thumbtack is changing that.

“Thumbtack isn’t like typical local search directories that simply return business listings with ratings and reviews, leaving you no better off than the paper Yellow Pages.

“Instead, Thumbtack gives you the ability to vet, contact and book service professionals the moment you find them.”

Sounds like a service I need to try.

Startups: Get intros to AngelList here.
Angels: Join AngelList here.
Everyone: Get AngelList updates via Twitter and RSS.

Fred Wilson reviews AngelList:

“…The old model of angel deals is alive and well. Angels love to share deals with each other. It is how angel rounds come together. But AngelList adds at least two things to the mix. First, it adds a place where the deals can come together online. And second it adds people to the mix that would not be part of the offline deal sharing networks that already exist.

“I am on AngelList. I see all the deals come together. I don’t personally invest in angel deals in the web/tech space because of potential conflict with USV down the road. But even so, I find it immensely useful to see what companies are getting traction in the angel market. It’s part of my radar/early warning system. And it is entirely possible that we will decide that USV needs to participate in an angel round that is coming together on AngelList, although that has not yet happened.

“So if you are putting together an angel round, particularly if you already have it partially raised but need to finish it off, I strongly suggest looking into AngelList. It’s a great service.”

[Emphasis added.]

Fred describes our value proposition better than we do. It’s not just great PR when your users blog and tweet about you — it’s also a form of customer development.