Brad Feld

Tag: angellist

A key ingredient of Techstars accelerator programs is our experienced and engaged mentor community. Mentors embrace the Techstars “Give First” philosophy by offering founders their time, advice, and connections. We treat mentorship seriously – you can read about it in our Mentor Manifesto and my blog series on the mentor manifesto. And, my book Give First, coming out at the end of 2017, will cover mentorship in depth.

Our global network now consists of over 5,000 mentors, including many successful Techstars alumni. As Techstars continues to selectively expand into new geographies and industry verticals, our mentors are important as ever.

Serving as a mentor is intrinsically rewarding on multiple levels. Guiding founders through the ups and downs of entrepreneurship creates a deep sense of contribution. It provides an outlet for mentors to engage in their local startup communities and keep a pulse on emerging technologies. It’s a chance to learn by teaching, and engage with a new generation of entrepreneurs. And it’s fun.

Beyond the intrinsic rewards, Techstars has been considering creative ways to recognize our mentors while deepening their relationships with founders. Today we’re happy to announce a new partnership with AngelList to offer Techstars mentors and alumni an exclusive opportunity to invest early in accelerator companies. Our first two pilot funds will be the 2017 city programs in Austin and Boston, launching on January 23rd. The AngelList funds will give mentors and alumni early investment access while providing companies with additional early stage capital.

At Foundry Group, we learned a lot by running our own FG Angels syndicate. AngelList syndicates helps enable seed stage investing at scale. We believe in the model and its power to further enhance the Techstars network.

If you are a Techstars mentor or alumni founder and would like to learn more about the Techstars AngelList funds, or an experienced entrepreneur or tech executive interested in becoming a Techstars mentor, please contact help@techstars.com.


After two years of a dedicated experiment, we’ve decided to stop making new investments via our FG Angels Syndicate. We’ve learned a lot, achieved some of our goals, but ultimately have decided that the effort required to maintain our investment pace on AngelList is too great for us, at least for now. More on that in a bit, but let’s start with some history.

The Monday after AngelList announced their Syndicate product in September 2013 we decided to to jump in with both feet and start FG Angels. As a result, we were one of the very first syndicates and the first VC firm to create a syndicate.

We had several high level goals:

  1. Understand how AngelList and Syndicates worked by actively participating;
  2. Be able to experiment with seed investments outside of our themes;
  3. Extend our network of entrepreneurs and angel investors; and
  4. Generate additional economic returns for our funds.

It took a few months for AngelList to gear up Syndicates so that they actually worked. As a result our first investment wasn’t made until early January when we invested in OnTheGo Platforms, which was just acquired by Atheer.

Our plan was to make 50 investments, directly committing $2.5m from our funds ($50k from us for each investment) through 2014. When we did a retrospective on our first year of FG Angels, we had invested in 42 companies. Seth did a nice job of summarizing what the deals and the syndicate activity for the first year looked like.

  • Total number of investments: 42
  • Average syndicate investment amount per deal: $316k
  • Largest syndicate investment in any single deal: $785k
  • Total number syndicate investors (syndicate members who invested in at least one FG Angels deal): 116
  • Total number of investors (all investors who have joined FG Angels in at least one deal): 410
  • # of investors who have participated in at least half of FG Angels deals: 30
  • Most active syndicate member investment total: $905k across 41 of our 42 FG Angels deals
  • % of investments with a female co-founder: > 20%

Our plan was not to generate investment deal flow for us to follow on with our main funds. Instead, we took a one time seed investor approach patterned after an angel strategy that I’ve used for almost 20 years that has now generated a realized return over 10x invested capital and still has about half the money at play.

We’ve ended up investing in three companies through our main funds that we had invested in first with FG Angels (Mattermark, Revolar, and Havenly). However, both Revolar and Havenly went through accelerator programs that we are involved with (Techstars and MergeLane, respectively), which allowed us even more perspective into working with them.

We decided to continue making FG Angels investments through 2015 at about the same pace. By the end of 2015, we had made a total of 65 FG Angels investments. We have 49 funded Backers, a 236 unfunded Backers, a total syndicate backing of $976,653, and an estimated 30 day raise of $171,058.

At the end of 2015, we revisited the goals I mentioned at the beginning of this post. Let’s see how we did and what we learned.

Goal 1: Understand how AngelList and Syndicates worked by actively participating: In addition to understanding in depth how AngelList and Syndicates worked, I’d like to think we helped Naval and his awesome team at AngelList on figuring out the legal, workflow, and UX dynamics around AngelList. We’re fans of both AngelList and Syndicates and it was important to us to give back to the platform and help them work through the dynamics involved in creating and rolling out their Syndicates product.

Goal 2: Be able to experiment with seed investments outside our themes: While we did a lot of investments outside our themes, we generated very little incremental learning on our part. While we could be very helpful in a generic early investor way, the time to value ratio was way off in both directions. While we regularly did short, quick hit help via email, whenever someone wanted to spend an hour or more with one of us, we eventually realized that our investment and ownership in the company was dramatically underweighted. And, this took time away (we each have a finite number of hours each week) from companies we had much larger investments in. We also realized that we were getting the experimentation value and learning at a greater rate from our deep engagement in Techstars.

Goal 3: Extend our network of entrepreneurs and angel investors: As we expected, our network of entrepreneurs was expanded (by about 150 people across the 65 companies.) These founders are active members of our portfolio and our goal is to be helpful to them any way we can, given time constraints. However, we have been disappointed in how we have – or haven’t – been effective at building a broader network of angel investors. We’ve made some new friends and built strong connections with a few angels in the syndicate, but we’ve struggled to build any kind of extended community. The tools for this on AngelList just aren’t there yet and we haven’t committed the resources to do this separately. And, ultimately, some face to face time is likely needed which we haven’t been willing to do.

Goal 4: Generate additional economic returns for our funds: We’ve invested about $3.2 million in FG Angels and are excited about the portfolio. However, it’s a very early stage portfolio that will take a very long time to mature. Even when you include the carry we are getting on FG Angels (15%), this total amount represents less than one fund investment on our part (our typical investment size is $5m to $15m, with this growing to as much as $40m when you include our late stage fund.) Even if we generate a huge multiple on our overall FG Angels investment (say 10x), the impact on our fund return is limited given the size of the investments we were making.

Ultimately, we’ve decided that the effort that we are putting into FG Angels is too great for us to continue on in the way that we’ve have been for the past two years. However, by running the experiment, we’ve better understood the leverage points at the angel / seed level that AngelList and Syndicates create, which for some investors, and many entrepreneurs, is very powerful. Finally, we’d like to believe that we’ve contributed to the evolution and dynamic of angel / seed investing through this effort.

While we are no longer going to be actively making FG Angels investments, every now and then we might do something out of FG Angels. We continue to believe that AngelList Syndicates is an effective platform for companies and investors. We simply felt that we needed to better balance the time and effort we were spending on FG Angels relative to the weight it has in our overall portfolio.

It’s important to all of us at Foundry Group to experiment around the edges of our industry and to push the boundaries of the venture model to find new and innovative ways to create value for our investors while supporting as broad a set of entrepreneurs as possible. We’ll continue to look for ways to do that.


If you’ve been following along at home, you know that we recently created an AngelList Syndicate called FG Angels. Our goal is to make 50 investments through AngelList before the end of 2014. We’ll contribute $50k to each investment; our FG Angels Syndicate will contribute up to $450k.

Shortly after doing our first few investments, I got a really nice email from a member of Impact Angel Group, a Colorado-based angel group that organized an investment in the FG Angels syndicate. It shows a second order effect of what we are trying to accomplish with FG Angels. I thought it was worth sharing.

I just wanted to say thank you for all of your work in breaking through the red tape to put together FG Angels. I believe all of our committed members have completed their investments as individuals and we have made our first investment through the LLC we put together.

We really appreciate the time you spent to answer our questions and work through the details. I thought it might be helpful for you to see the positive impact you are making for our small group, which I’m sure can be multiplied a hundred times over. As you all know, herding angels and getting new angels to actually pull the trigger is not an easy task. FG Angels has helped us address all of our major angel-herding challenges through the following:

  1. FG Angels increased the amount of capital our group has committed since our official founding in 8/13 by 103% which will certainly help us with deal flow, member acquisition etc.
  2. 18 of our 37 angels pledged to participate and 14 are actually participating. Our members have a variety of different backgrounds and interests, so this is the largest participation rate for one deal that we’ve seen to date. 
  3. 15 of the 18 had never visited AngelList prior to researching FG Angels.
  4. 6 of the 18 who pledged and 4 of the 18 who participated are never-ever angels. 
  5. 7 of the 18 are making their first investment as Impact Angel Group members.
  6. 2 angels are considering creating their own AngelList syndicate as a result of their experience.
  7. We created an LLC of 145k to allow some of our newer angels to participate at smaller amounts. 1% of the carry will go to the Entrepreneur’s Foundation of Colorado. 1% of the carry will go back to us to help us support angel investing in Colorado.
  8. I learned an incredible amount about SEC regulations, crowdfunding and the logistics of AngelList.

 


We recently funded Blinkfire Analytics using our FG Angels Syndicate. The CEO and founder, Steve Olechowski, was co-founder / COO of FeedBurner, which Google acquired in 2007. I was an investor and on the board of FeedBurner, which is how I got to know Steve.

If you don’t know the FeedBurner story, there were four FeedBurner founders – Dick Costolo (now CEO of Twitter), Eric Lunt (now CTO of BrightTag and until recently a board member at Gnip, which Twitter just acquired), Matt Shobe (now at AngelList), and Steve.

In addition to bootstrapping his new company forever (since he’s a multi-time successful entrepreneur), Steve could easily raise an angel round any time he wanted to. So, we were psyched he was willing to do an FG Angels Syndicate with us.

Steve had some unsolicited comments for me, AngelList, and angels as a result of the process. I asked him if I could post them – he said yes. Following is a thoughtful set of reasons AngelList is so powerful, along with some constructive feedback for us to consider.

1) Some of your backers are really good citizens.  When it was oversubscribed they kept their syndicate commitment, but offered a much bigger investment outside the syndicate.  When 50% of the money didn’t close, they went back and put it back into the syndicate.

2) You have a bunch of “shadow backers” who seem to follow your investments, and then try to go direct to invest to avoid paying your carry.

3) There are some backers that request an awful lot of due diligence for a $1000 investment.   If they are that worried about losing $1000, perhaps AngelList isn’t the right place for them to be investing.

For us, the benefits of the syndicate are:

1) Access to capital we wouldn’t have otherwise been able to raise on angel list, and offline

2) Keeping the number of entries on our cap table relatively small

3) Though #2, we still have the transparency of knowing who the “LPs” are, and can mine them for help if needed

For the investors, the clear benefits are:

1) Access to deal flow they wouldn’t otherwise get

2) Ability to diversify their funds without a huge minimum ticket

3) Piggybacking on an investment thesis without having to do the research

The only negatives so far are the days of uncertainty where do you don’t know how much is going to get filled and if you need to generate more demand or turn people away on a daily basis.


When the JOBS Act was finalized, one of the rule changes that had a lot of fanfare around it was the increase in the number of shareholders a private company could have. Prior to the JOBS Act, it was 500, after which point the company had to register and report to the SEC just like it was a public company (even if it hadn’t gone public.) This was a major issue for many fast growing companies that either went through strange contortions not to have 500 investors, or filed with the SEC to get no-action letters. There were plenty of nuances around this rule and I was in the middle of several situations that structured around it legally. Each time it was a lot of overhead for the company in question, none of which added anything to the system except fees to the lawyers.

Lifting the number of investors to 2000 seemed to make sense. In the situations I was involved in it would have immediately solved the specific problem. So that’s good.

But ever since we started working with AngelList on FG Angels, we’ve been wrestling with something called we’ve been referring to as the 99 Investor Problem. We structure our investment in companies via an LLC that has all the individual FG Angels syndicate members in it. This simplifies life for the company as they only end up with 1 investor – the FG Angels syndicate LCC – rather than a bunch of individual investors. At this point we have 217 backers in our syndicate, so with us each company would end up having 218 separate investors if we didn’t use the LLC.

If everyone was on the cap table, the company would have to chase down 218 signatures for everything. Instead, using our approach, they have effectively two investors – our FG Angels syndicate (one investor) and Foundry Group (another investor). Two signatures. Much easier. We handle the Foundry Group signature. AngelList handles the syndicate signature.

Except it doesn’t work that way. The SEC limits an LLC to having 99 investors. So we can only have 99 of the 217 syndicate members participate. Now, there’s a nuance that excludes “qualified purchasers” (QPs) – individuals with $5M in assets and firms with $25M in assets – from the 99 investor count. Overall our QPs + the top 99 investors in our syndicate represent $321,000 based on committed amounts to FG Angels. If you include the balance of the 237 members, we end up at a syndicate of $439,000. The company then gets our commitment of $50,000 on top of that.

As a result of this 99 investor limitation, we have two disappointing problems. First, we have over 100 investors who would like to invest in our syndicate with us who get excluded because of the 99 investor rule. Next, there is $118,000 per investment that we’d like to include in each syndicate that the companies we are investing in won’t get. Bad for the companies and bad for the investor.

We’ve spent lots of time over the past 60 days trying to solve the 99 investor problem. At this point, we’ve run into a dead end. We’ve tried multiple LLCs – that doesn’t work as they end up getting viewed as a single entity. We’ve tried other structures – that doesn’t work. We’re certainly open to ideas at this point.

In the mean time, until we solve this, AngelList is making the following changes to their Syndicates product.

Qualified Purchasers: AngelList will include all Qualified Purchasers (individuals with $5M in assets and firms with $25M in assets) in each syndicated deal as they are exempt from the SEC’s 99-investor limit. We will soon email your backers to determine if they are Qualified Purchasers (QPs) and we will update your syndicate management interface to indicate the QPs.
Top 99 Backers: The next time you syndicate a deal, we will include all QPs and the top 99 non-QPs by commitment amount. You can override this default to include specific backers who are not in the top 99. The top 99 backers will change dynamically as backers adjust their backing amounts.
Funds: We are working on new funds products to allow additional investors who are not in your top 99 backers or QPs to participate in your syndicated deals.
Notifying Backers: Finally, we will notify your backers of the SEC’s 99-investor restriction this week and give them the opportunity to change their backing amounts.

We are bummed about this because part of our goal is to build a very large angel network as a result of the FG Angels activity. The 99 investor rule directly undermines this, and limits the amount of investment and support for the companies we are investing in. It’s another example of the challenges of the JOBS Act and another discovery on our part of the “miss” between the goal of the new law and the implementation.


One of the most annoying things about being an angel investor is filling out the same Accredited Investor Questionnaire over and over again. I’ve made about 200 angel investments and over 50 VC fund investments at this point since 1994 and I’ve filled out some version of this form at least 250 times.

A few weeks ago Fred Wilson made an open request for A Web Service For Qualified and Accredited Investors. He was referring to the form that used to be required under what is called “501” that now goes by the friendly name 506(b). I doubt he has yet to fill out a form for 506(c), which is the new requirement for “general solicitation” under the JOBS Act. At least I hope he hasn’t, because there are a whole host of new and exciting issues with companies that use 506(c).

It’s incredibly annoying to fill out the same paperwork over and over again for each investment. So Fred’s request was timely and likely something on a lot of people’s minds – or at least mine.

And the gang at AngelList. They totally nailed it by releasing the AngelList Accreditation Report. It’s exactly what Fred wants and is another great example of how far ahead of the curve AngelList is. If you have no idea what AngelList is trying to accomplish overall, read the great article from this week’s BusinessWeek titled AngelList, the Social Network for Startups.

We’ve been working really closely with AngelList lately on our FG Angels initiative. We’ve completed one investment, have a second that should close this week, and a third that we are about to launch. We are settling into a tempo of about two a month and hope to be at four a month by Q2. We’ve had to do a lot of work – with AngelList – to get the documentation, legals, and workflow correct and appropriate for a fund like ours. But we feel like we are almost there.

The AngelList gang continues to be a joy to work with. And things like the AngelList Accreditation Report show that they’ve got a deep understanding of what is needed to truly democratize angel and seed investing.


What better way to start off a new year than by closing a new investment. This morning we announced that we have closed a financing in OnTheGo Platforms via our FG Angels syndicate.

On October 1st, 2013 we announced that we’d be forming an AngelList syndicate called FG Angels and making 50 seed investments through AngelList by the end of 2014. We committed $2.5m from our Foundry Group funds for this effort and decided to max out the syndicate at $500k / investment, or $25m total. So $2.5m would come from us and $22.5m would come from syndicate participants.

We knew we had a lot to figure out around how the AngelList syndicate would actually work. We also knew that AngelList had a lot of work to do to get all the software and legal dynamics working properly. We’ve spent the last three months working with AngelList, our lawyers (Cooley), and a few other experts to make sure everything was set up the correct way. It was much more complicated than we expected, and we’ve learned a lot more about 506(b), 506(c), what the JOBS act made better, what the JOBS act made worse, and the general insanity of unscrambling new government regulations that purport to make thing easier, but actually make things harder.

But we’ve figured it out. And are psyched to have led a seed round in OTG Platforms. We’ve also got a healthy AngelList syndicate called FG Angels ready to roll. And we’ve got a second investment in the final stages of closing and a third one getting ready to launch. We expect to be in a 2 – 4 investment per month tempo for Q1.

The OTG Platforms gang has been incredibly patient with us. We were originally planning to announce things at the Defrag Conference in November but at the last minute realized that we’d blow all the 506(b) exemptions and generate a huge pile of work for everyone, so we held off until things closed. As we ran into issue after issue with the AngelList syndicate process and docs, they hung in there patiently as we worked it out, being willing to be the test case. They are just an awesome team – exactly the kind of people we love to work with.

The AngelList gang was equally amazing. We’ve loved what they are up to from the beginning. I’ve given Naval and Nivi lots of feedback over the years and have been active on a few non-tech angel investments through AngelList. We knew going in that the AngelList Syndicate process was a new thing and figuring out how to do it correctly, via a VC fund, was going to be a challenge. But we’ve mastered it and the AngelList team continues to be well ahead of the curve on all fronts.

Over time I’ll write more about what we’ve learned and what the issues are. But for now, congrats to OnTheGo Platforms – we are psyched to be partners with you. And thanks AngelList.


We had a fascinating week trying to get everything figured out on our FG Angels initiative with AngelList. Our syndicate, which we are going to max out at $450,000, is currently right at $300,000 after one week. We are humbled by all the support and interest.

Geir Freysson, founder of Five Hundred Plus, did a super cool visualization of some of the top syndicates and how the participants in the syndicate relate to each other.

 

AngelList Syndicate Visualization

 

We’ve chosen our first deal to do. But we aren’t ready to pull the trigger yet – probably early next week. We’ve spent the last few days wrestling with some legal / compliance issues. The AngelList gang has been AWESOME to work with. We aren’t surprised that we are having to figure this stuff out – we knew the new JOBS Act rules, 506 compliance, and the ambiguity around a bunch of stuff would be problematic. Yeah – the problems are obscure ones generated by our government, and there are moments where it seems like the SEC simply doesn’t want any of this to actually work. But that’s part of the fun of it.

I continue to be mildly amused and amazed by the prognostications from the sidelines from a variety of folks (angels, angel groups, VCs, and entrepreneurs). Some of the strong opinions are based on virtually no data, or misinformation, or a complete lack of perspective. And others are based on a lack of understanding of dynamic systems. Either way, when asked, I continue to tell people our mantra – the best way to learn about stuff like this is to participate.

So – if you want to participate with us and learn a bunch in the process, join our syndicate.


This morning my partners at Foundry Group and I announced that we are going to make 50 seed investments of $50,000 each on AngelList between now and the end of 2014. We’ll be doing this via AngelList’s new Syndicate approach through an entity called FG Angel where we will create a syndicate of up to $500,000, allowing others to invest $450,000 alongside anything we do. For now, we are using my AngelList account (bfeld) which I’ve renamed Brad Feld (FG Angel). We are working with Naval and team at AngelList to get this set up correctly so that a firm (e.g. Foundry Group) can create the syndicate in the future, at which point we’ll move the activity over to there.

For years, we have had people ask if they can invest alongside us at Foundry Group at the seed level. We’ve never had an entrepreneurs fund, or a side fund, so we’ve encouraged people to invest in Techstars and other seed funds that we are investors in. As of today, we have a new way for people to invest alongside of us – via AngelList’s syndicate. The minimum investment is $1,000 per deal, so if you make a $1,000 commitment to our syndicate, you are committing to investing $50,000 alongside of us between now and the end of 2014 in the best seed investments we can find on AngelList. Simply go to Brad Feld (FG Angels) and click the big blue “Back” button. Special bonus hugs to anyone who backs FG Angels today (as I write this, the first backer has come in – from Paul Sethi – thanks Paul – awesome to be investing with you.)

This is an experiment. If you know us, we love to experiment with stuff, rather than theorize about things. We are huge believes in seed and early stage investing and through a variety of vehicles, including Techstars and our personal investments in other early stage VC funds, have well over 1,000 seed investments that are active. This has created an incredible network that adds to our Foundry Group portfolio. With FG Angel, we are taking this to another level as we begin a set of activities to amplify this network dramatically.

So there is no ambiguity, the investments come from our Foundry Group fund. All economics, including the syndicate carry, go to our fund. We are calling this FG Angel because we are approaching this the same way we do with any angel investment. I’ve written extensively about my own angel investing strategy in the past – you’ll see this reflected in what we are doing here. Over the years my angel strategy has been very successful financially and our goal with FG Angel mirrors that.

We expect we’ll learn a lot about this between now and the end of the year. When we learn, we’ll share what we learn. We believe deeply that the best way to learn about new stuff is to participate. So – off we go. We hope you join us – both in the syndicate and the ensuing network.