Don't underestimate the value of the angel investor being a person you can talk to. I've made several angel investments, and sometimes the company needed to restructure in a way that a strictly profit-focused institutional investor would not have allowed. Since I invest mainly because it's interesting and it helps people, I've never said no to what the founders wanted to do.<p>Of course, individual angels can be hard-asses. But an institutional fund is legally required to be a hard-ass. So I agree with Aaron's advice: you should know exactly whose money you're taking, and go for as long as possible only taking money from people you can reason with. If you don't have a good sense of the investor, ask a founder they invested in where the company ran into trouble.
Throwaway account for obvious reasons:<p>While the words of warning in this article may be true, they (sadly) sound like a thinly veiled complaint about competition increasing pressure on YC's investment turf.<p>Founders should be grateful for, not skeptical of, increased funding and competition in early rounds as it should help them raise on better terms!
> Founders have a right to know where the money they are taking comes from, and they need to know how that source might influence the advice given them by their investors.<p>That's correct. However, a provocative question: does every YC company know where YC's funds come from? My purely anecdotal evidence is that at least half, possibly 2/3rds of them, don't. If that's the case, it might be useful for YC to disclose that to everybody.
Is it accurate to interpret from the article that if an angel investor is in fact backed by money from LPs, her fiduciary responsibility to her own investors is greater than the flexibility she might have toward the company if she were just running her own money, and therefore these incentives can put her interests at odds with founders?<p>Further, is there an implication that it's the SAFE itself that sets this up in the first place? The example I'm thinking of is an institutional LP who can't do risky deals like startup SAFEs, but they can buy into "established," funds where the risk is distributed over other partners who can, and this angel front gets them the startup portfolio exposure they need.<p>The downside is the SAFE explodes into giving up more equity than founders anticipated to their proxied angel, whose partners' risk appetite causes complexity and conflicts with potential A-round participants.<p>I've only read about this stuff, but what would you correct about these interpretations?
Does anyone else think that angel investing seems like an odd concept in that it implies a single person investing a large amount in a very early stage business.<p>Most people with sub 9 figure net worth should probably steer towards investing in larger derisked businesses as they are unlikely to back the 100+ startups required to get the 1 really big winner.<p>In contrast, large VCs who have the capacity to invest in several hundred startups are much better suited to this form of investing as they can derisk by having a large portfolio size?
One thing I don't understand - why would exceptionally high or uncapped safes be a bad deal for founders? The post mentions that this leads to dilution and other issues in the eventual series A, but doesn't an uncapped safe lead to less dilution in the series A than a safe with a lower cap? Why is it a bad thing that there are more "to good to be true" offers being made now?
This is a bullshit article... ycominator is an “angel” who invests in “startups” like alpaca markets, a “free” trading platform.<p>This “free” trading platform, isn’t a startup, it’s a front for the front running side of the business alpaca.ai, yes the users in this YC backed front, are just the inputs to a more elaborate Japanese trading firm that front runs US markets.<p>You guys are Hippocrates.