A fun innovation in financial engineering I saw recently and thought was worth sharing: I am an extremely tiny angel investor, which means I periodically send small checks to startups in return for an equity investment. This has historically been very toilsome for all parties.
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Typically, a startup will be collecting checks from many people like me along with, possibly, a few firms distinctly unlike me (in that they're professionalized and running someone else's money). Theoretically speaking, every conversation is independent of each other.
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Practically speaking angels do not particularly desire to have entirely independent conversations about contractual terms, because they/we rationally believe almost all of the value created happens outside the contract, but even with standardized terms (SAFEs, etc) it toilsome.
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Meanwhile, lawyers have to review *everything*, because professionals are professionals and it would be extremely bad news if they missed "Oh whoops 6 years ago we actually promised an angel the moon and stars on a silver chain" in the runup to an IPO.
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The cost of legal review and overall annoyance factor (having conversations, chasing down checks, etc) has historically made the minimum viable angel investment +/- $25k.
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Replying to @patio11
Hey
@patio11 thank you very much for sharing these insights, very valuable. What (from your experience) is the low end / average check size that is allowed/makes sense for most Angels when using an SPV on Angellist as a startup (a startup owns the syndicate without carry)? Thanks1 reply 0 retweets 1 like
I think that sort of depends on what your value add is, what the startup's disposition is vis you, how much they're raising, etc etc, but suffice it to say that I've often felt bad for startups with check size that buys a nice Macbook and feel like plausibly I don't have to now.
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Replying to @patio11
Wow ok, so you are seeing checks below $5k? Interesting, thanks for sharing. Is it fair to say that most Angels on Angellist can write a check of $10k?
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