Connecting startups with investors via internet

So burned out in fact that he bought the web address idontdocoffee.com. When startup companies looking for financing request in-person meetings, they get a reply from the e-mail address [e-mail].

“I thought, we’re dealing with internet startups here, there has got to be a better, more efficient way to evaluate them than to do thousands of coffee meetings,” said Ravikant. “Coffee should be the last step, not the first.”

So in February 2009, Ravikant and Babak Nivi, a fellow investor and startup mentor, started AngelList, a networking website that substitutes endless pitch meetings with internet-based matchmaking.

Akin to online dating sites, AngelList allows eager startup companies to pair up with investors looking to buy into the next Twitter or Facebook. More than 1,300 investors have already joined the site, including about 400 venture capitalists. The rest are angel investors, the name given to investors who buy a stake of a company with their own money.

On average, more than 20 startups from all over the world join the site every day, and about 200 companies have been financed. Ravikant and Nivi vet the investors before they are allowed on the site, which is free for both investors and startups to join and has become hotter in Silicon Valley than many popular startups.

The site combines deal-making with social network profiles to make it “one of the most innovative things that has happened in venture capital in the last five years,” said Dave McClure, an angel investor and founding partner of 500 Startups, a Silicon Valley technology incubator.

McClure is one of the most active investors on AngelList’s site, writing checks for up to $2,50,000 to dozens of startup companies, including $1,00,000 recently to forrst.com, an online community for web designers.

Adding more fuel

Not everyone shares McClure’s enthusiasm. Some Silicon Valley venture capitalists have voiced concern that AngelList adds more fuel to an already overheated startup market.

Among the site’s detractors is Bryce Roberts, co-founder of O’Reilly AlphaTech Ventures and an investor in Foursquare. He recently wrote a blog post detailing why he had deleted his AngelList account, saying the site created an environment where “angels feel compelled to invest for fear of missing the boat everyone else is getting on.”

His post started an online skirmish among prominent angel investors, venture capitalists and bloggers. “AngelList does allow people who are not knowledgeable to jump into deals they perceive to be hot because certain influential investors are involved,” said McClure. “But that’s no different than any other trading environment. If Warren Buffett invests in a stock, it moves the stock. Is that a reason not to use the stock exchange?”

Kapor recently invested $50,000 to $200,000 in several companies he had found on AngelList, including fundly.com, an online fundraising  platform that raised $2 million through AngelList.

As for Ravikant, he sees AngelList enabling startups from a wider geographic range to find the capital needed to build their companies.  If some small startups fail along the way, and many undoubtedly will, that is no reason for concern, Ravikant said.