Fintech

AngelList expands into private equity with acquisition of fintech startup Nova

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AngelList, an organization that started out by teaming up founders with early-stage investors, is expanding into the private equity space. And it’s acquired a Y Combinator-backed fintech startup in the industry to kickstart that effort.

Founded in 2010, AngelList started as a mailing list for high-quality angel investors before turning into one of the most powerful fundraising channels for early-stage startups. Over the years, it has evolved its model and today touts itself as an organization that “creates products and services for venture firms, investors, startups, and fund managers to accelerate innovation.” Earlier this year, venture capitalist Harry Stebbings, host of podcast “The Twenty Minute VC” podcast, shared his view that AngelList had transitioned from being an SPV (special purpose vehicle) provider to “slowly becoming the software platform for the entire industry venture and startup ecosystem.”

With its mid-June acquisition of Nova (only the company’s second buy since inception), which has built investor management software for institutional private funds, AngelList continues to broaden its scope.

Over the years, for example, AngelList has moved from solely serving micro-funds to launching SPVs to pioneering the concept of rolling funds, which are investment vehicles that raise money through a quarterly subscription from interested investors. Another offering is Stack, a suite of products designed to compete with Carta in providing services to help founders start, operate and maintain ownership over their companies. 

The move into private equity might feel like it’s counter to AngelList’s original venture focus but CEO Avlok Kohli, who took the helm of the company in 2019, told TechCrunch in an exclusive interview that he believes the expansion into private equity was a logical and natural one.

“At the highest level, the way to think about what AngelList does is we’re really building the infrastructure that powers the startup economy, including all the infrastructure needed to run venture funds,” he said. “This includes serving the GPs and LPs in the funds…Over the years, we have continued to move up market.”

The expansion is also indicative of the lifecycle of a startup, which typically starts by raising capital from venture funds, Kohli added.

“As they mature, the scope of capital providers they can tap into expands into private equity and of course, even the public markets,” he said. “So, this is expanding the lifecycle of products AngelList can build to serve startups throughout their journey.”

Pradyuman Vig, 26, started Nova out of Austin after selling his previous startup, Asuna, to Swift Media. (Asuna, now known as Legends.ai, was a popular League of Legends statistics website). Nova was designed to help replace subscription paperwork “with flexible digital workflows that save time and reduce friction.” Among its customers are Van Eck, which has about $78 billion in assets under management; Pantera, which has about $3.5 billion in AUM; Broad Street Global (about $3 billion in AUM); Galaxy (about $2.5 billion in AUM) and BlockTower (which doesn’t disclose AUM).

Nova currently has over 10,000 investors with identities on Nova who invested billions of dollars through the system in the last year, according to Vig. Revenue tripled in 2022 and is on target to grow by 2x this year, they added.

The startup will continue to run as a business unit within AngelList and packaged within the Investor Management suite of products within AngelList to help the company expand into the larger private markets industry. Nova’s digital subscriptions offering has been rebranded to AngelList Transact, while its data room and investor portal too will become AngelList products. 

“Like Nova, we’ve also seen firsthand the value funds place on replacing disparate products that don’t talk to each other with a unified software stack that just works. We’re integrating Nova’s investor management products with a series of other products we’re building for larger institutional funds such as Treasury and the rest of our software suite,” Kohli said. “As part of this push to serve institutional funds, we’ve found early success selling to private equity — given Nova’s historical focus, their customer base significantly expands our presence there and accelerates our growth in the larger private markets industry.”

The expansion follows a year of growth for AngelList. According to statistics shared by Kohli exclusively with TechCrunch, assets supported for investors on AngelList increased by 50% to $15 billion year-over-year in 2022. It took six years to reach $1 billion (in 2018), according to Kohli. Also last year, the number of startups funded on AngelList increased by 21% to 8,300. The organization also saw a 19% increase in fund managers in 2022 versus 2021 and a 17% bump in LPs invested into an SPV or fund supported on AngelList.

Data visualization by Miranda Halpern, created with Flourish

While Kohli did not reveal hard revenue figures, one can assume that since all these metrics were up in 2022, revenue, too, was up. AngelList makes money through a variety of sources, he said, including subscription & SaaS fees and carried interest.

“AngelList’s business is pretty diversified at this point. We’re operating at significant scale,” he said. “Going through a giant downturn basically leaves open the ability to consolidate the market. So AngelList is in a position to consolidate the market.”

In March of 2022, AngelList Venture (which became AngelList late last year as it took over the main brand) turned to venture to fund its own growth — raising a $100 million Series B co-led by Tiger Global and Accomplice at a $4 billion valuation. 

Adding complexity

So why didn’t AngelList simply create its own private equity-focused product, rather than buy up a startup? As in the case of many acquisitions, AngelList recognized the value of buying an existing company with established customers. Plus, it already had its own version of a product in its Treasury offering, but even Kohli admits it was not as robust as what Nova developed.

“We had a closing flow built out but with Nova, we were able to add more complexity in a good way,” he said. “And while AngelList has primarily played in the venture space, and even though venture is a subset of private equity, we saw in Nova and Pradyuman a way to absorb and accelerate our understanding of the PE space. Venture and private equity are closely related cousins in our view.”

The acquisition was at least one year in the making, though.

“When Pradyuman and I originally started talking, it was very clear where we’re seeing the world in the same way and at first I was just thinking about having him come in as a leader in the company,” he told TechCrunch. “But the timing wasn’t right.”

The pair kept in touch and the deal, for which financial terms were not disclosed, closed in June.

Now, Nova is getting integrated into AngelList’s business as part of its new Transact offering — the latest in a string of recent product releases for the company. It launched its AngelList Treasury offering a few weeks ago, in addition to Projector, a portfolio modeling tool, and, more recently, it launched Relay, an AI-driven portfolio Analyzer tool.

AngelList very quietly made its first acquisition about 18 months ago — a brand design agency that included the former head of marketing and design at Square.

For now, AngelList is not planning any more acquisitions, but Kohli says the company is open — for the right fit. Today, AngelList has 130 employees, not including the 50 workers employed by Bell Tower, a fully owned fund and tax administrator. Kohli said he could not comment on how many of Nova’s 12 employees would be joining AngelList.

History

Nova was technically founded in 2018, and went through YC in the summer of 2018. It raised about $2 million afterwards, led by Justin Kan. It was preempted on a $7 million Series A that closed in July of 2022 and was led by Avichal Garg at Electric Capital.

“From 2018-2021 we were experimenting, and then finally found success in 2021,” Vig told TechCrunch.

In 2021, Nova launched its digital subscriptions product that replaced subscription paperwork with digital workflows so that investors would not have “to spend hours sorting through conditionals and unfamiliar questions to complete their investment,” Vig said.

Once investors completed a subscription through Nova, they could reuse their Nova Identity on future subscriptions at any other fund that also used the product. The company called this the Nova Network. 

Last year, Nova launched a data room product to help its customers market to their investors ahead of the subscription process. And this year, it created an investor portal so that investors can receive documents such as K-1s, see investment performance and make additional investments with Nova as well.

“By launching the portal, fund managers are able to handle their entire investor management process in the same system,” Vig said. “With these three products, our customers are now starting to refer to our product as a full stack Investor CRM — it’s a message we’ll be doubling down on as part of AngelList.”

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