Start Fund

Halo Effect: All AngelPad Companies Will Get $100K Investment Offers From 2 VC Firms

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Earlier this year, Yuri Milner, SV Angel, and Y Combinator shook the early-stage investment world with Start Fund, a $150,000 investment offered to every startup in every new Y Combinator class, no questions asked. Today, another startup incubator, AngelPad — you know, the one run by a bunch of ex-Googlers — is announcing a similar offer. But it’s more traditional from the investment perspective: each AngelPad startup will have the option to accept $100,000 from two prominent venture capital firms at the start of their class.

Previously, AngelPad gave their startups $20,000 to get started with (money that came from AngelPad itself as a small investment). With the new $100,000 offer, this means that startups will be able to exit AngelPad with $120,000 in funding. $50,000 will come from one VC firm, $50,000 from another. AngelPad’s Thomas Korte is declining to give the names of those firms right now, but says that they should disclose their affiliation soon.

To be clear, just as with Start Fund, the AngelPad startups will not have to take this money. They can still get started with the usual $20K investment from AngelPad, if they don’t believe they want or need the money. If they do decide to take the money, they will need to take the full $100K (meaning, they can’t just take $50K from one of the VC firms). But the two firms offering the deal have enough faith in AngelPad’s judgement in startups that it will be offered to every startup in each class going forward, if they do want it.

And again, this is a more traditional investment than Start Fund. It’s a convertible note with a cap, Korte tells me. He says that it’s quite startup-friendly, but it is a proper investment, “not the free money floating around,” he says, clearly alluding to Start Fund.

“We looked at the last few classes — the ones that begin with money, it makes a distinct difference,” Korte says. “The money mixed with our advice and network really helped. Companies that have some money just build things faster,” he says, noting that instead of having to wait three months for each new hire, they can quickly hire people on as contractors and then bring them on full-time later. “They have money to play around with.”

Korte also believes the amount being offered it right. “This is not one million dollars on day one. That’s unhealthy potentially, because you might not value the money,” he says. “Starting companies is all about running faster. Doing more things. Doing things quicker. Out-competing the competition. Google is always just three weeks behind doing the same thing. You launch of TechCrunch and hundreds of other entrepreneurs see it and are on that idea as well,” he continues.

“We wanted to have the founders look at the terms and the firms and see if they want to do this. They’ll determine that. Both of the firms involved have the expertise in the main areas our startups have been focusing on,” Korte says. “We see ourselves as a conduit to the venture community,” he continues.

The structure of AngelPad itself will remain the same. The plan is to have two classes a year with up to 15 companies each. In fact, the entries for the last one this year are just about to close, but AngelPad was nice enough to keep one spot open for any entrepreneur(s) reading this post. If you’re interested in applying, you have until Wednesday, so get on it.