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Taking in small, <$10k angel checks is very common and most founders I know who have raised recently have done it (including me!)
Here's a quick guide for how to structure a party round while not destroying your entire cap table
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Here's a quick guide for how to structure a party round while not destroying your entire cap table
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First - you should absolutely get as many helpful angel investors involved as you possibly can. They'll be some of your biggest cheerleaders and if they're also operators, you'll have an entire network of people to lean on when shit goes wrong (or right)
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The problem with raising money from too many angels is that your cap table quickly gets crowded and messy when it's time to hunt down signatures. + it's an incredibly tedious process.
Here's what I did
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Here's what I did
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When I raised my last round I got ~45 angels involved, with checks ranging from $1k up to $50k.
Because I didn't want to deal with 45 signatures and managing 45 wire transfers, I formed an AngelList syndicate.
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Because I didn't want to deal with 45 signatures and managing 45 wire transfers, I formed an AngelList syndicate.
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It was structured so that I was the manager of the syndicate, there was no carry, and I ate the $8k in standard fees (more on this in a sec).
Investing via the syndicate was nearly identical to investing direct, except there would only be one entity on the cap table, not 45.
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Investing via the syndicate was nearly identical to investing direct, except there would only be one entity on the cap table, not 45.
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Other pros:
- I had a link I could share with any interested investors with an AL page for them to view details and invest
- I could take checks as small as $1k, meaning anyone helpful could get involved
- AngelList handled all the movement of $, I wasn't stuck managing wires
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- I had a link I could share with any interested investors with an AL page for them to view details and invest
- I could take checks as small as $1k, meaning anyone helpful could get involved
- AngelList handled all the movement of $, I wasn't stuck managing wires
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AngelList charges $8k for each syndicate. Fair, given legal and operational overhead. There are two ways to cover the cost:
1. Pass it to investors. They split the $8k proportionally to their investment
2. Eat it. Receive $8k less in investment but keep investors equity whole
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1. Pass it to investors. They split the $8k proportionally to their investment
2. Eat it. Receive $8k less in investment but keep investors equity whole
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I opted for the latter.
I wanted the syndicate process to feel exactly like investing directly and leave no room for pushback.
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I wanted the syndicate process to feel exactly like investing directly and leave no room for pushback.
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Here's how the math works:
Let's say you receive $100k via the syndicate. AngelList gives you $92k when they wire funds at closing. The $ comes from investors but to them, it still looks as if they invested their full $100k.
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Let's say you receive $100k via the syndicate. AngelList gives you $92k when they wire funds at closing. The $ comes from investors but to them, it still looks as if they invested their full $100k.
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When the syndicate wraps up, AngelList sends a separate document to sign and they become 1 entity on your cap table, representing N number of investors in your syndicate.
The investment is wired and you're back to building.
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The investment is wired and you're back to building.
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I've never done a true party round outside of a syndicate, but I have heard horror stories of trying to track down signatures 6, 12, or 24 months into running the business when it becomes time to raise again.
I wanted things to be easy.
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I wanted things to be easy.
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If you're a founder and you can raise enough from angels to justify the $8k expense, I highly recommend it.
Angels are the best and I love platforms like AngelList which make it super easy for most people to get involved early on!
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Angels are the best and I love platforms like AngelList which make it super easy for most people to get involved early on!
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Also, forgot to add - you can still have certain angels out of the AngelList syndicate. I typically advise this if they're super experienced which means they likely have an entity they invest out of.
And the one downside of AngelList is that if you want to give pro-rata rights to someone you have to offer it to everyone in the syndicate.
Not a huge concern but was somewhat of an awkward conversation with certain investors in the syndicate.
Not a huge concern but was somewhat of an awkward conversation with certain investors in the syndicate.
