AngelList’s acquisition of Product Hunt is being described as the two coolest kids joining the same team at Silicon Valley High. Startup founders already use AngelList to meet investors and raise money before launching their products on Product Hunt, the premier discovery site for the latest hotness (or sometimes in reverse order).
But the acquisition may also mark the official end for a traditional venture capital model that has dominated Silicon Valley for decades. As the two companies export Silicon Valley’s advantages to the internet, early-stage venture capital is getting upended by its own technology. ”The bigger picture is that the traditional things that only valley startups have available to them are going online,” said Naval Ravikant, co-founder of AngelList. “Cash, customers, and talent. Those are the things companies care about.”
Since the 1960s, startups have thrived along the stretch of Highway 101 between San Francisco and San Jose. Entrepreneurs, engineers, and investors glided between the new companies rising and falling, and built networks and companies along the way. A visit to the boardrooms of the venture firms on Sand Hill Road was the starting point to recruit, raise cash, and build new technologies. That’s no longer true.
Access to capital is democratizing. AngelList has proved to be the most successful platform at institutionalizing a way for thousands of angel investors to place money in multiple startups without screening them one by one. The platform lets accredited investors back trusted individuals to invest for them (without being professional VCs), as well as buy into diversified startup portfolios.
That’s pushing traditional venture capitalists to invest later in companies’ life cycles, and leaving seed investors, or “angels,” to invest in a greater number of early-stage companies in many sectors. AngelList has closed more than 1,000 investments, as well as connected investors with thousands more. At the same time, VCs have directed more dollars to larger investments: The median size of a Series A round in the US has risen to $5.2 million, up 30% from $3.9 million in 2006, according to private equity research firm PitchBook.
Ravikant says the two companies will be “the technology network” for startups: an early-stage LinkedIn that gives founders one place to meet investors, raise money, hire new employees, and market their products. The reported $20 million deal will give Product Hunt resources to expand beyond its Silicon Valley fans, and offer AngelList a channel to market its community’s products. But not too much will change immediately at the two companies.
Product Hunt, founded by Ryan Hoover in 2013, will still just showcase new products (it claims to have enabled 100 million product “discoveries,” or visits to product websites, for 50,000 companies), while AngelList is busy expanding its network of 300,000 companies, which have raised $500 million on the platform. Eventually, says Ravikant, there will be some “tasteful integrations” allowing startups to showcase their Product Hunt profiles in AngelList profiles, with more tie-ups possible. Bigger brands are already starting to recruit on AngelList, and Ravikant expects to launch their products through Product Hunt as well.
Pitfalls await. Combining the investment platform with a showcase for new products runs the risk of AngelList and its investors prioritizing products they’ve backed over those favored by the community. At the moment, the process to list on the site is opaque. “Taste-makers” appointed by Product Hunt select products listed on the site, while an even smaller number have permission to feature companies on the coveted front page. AngelList COO Graham Jenkin insists that Product Hunt “will remain independent,” and Ravikant says the two companies will be run separately and “democratize the [selection] system as much as possible.”
But for many enterprising founders, AngelLists’s acquisition of Product Hunt formalizes what they are already doing. Alex Yaseen, co-founder of the data analysis company Parabola, said he was already using AngelList to meet investors. After Parabola appeared near the top of Product Hunt’s listings on Nov. 29, the company received more than 1,000 referrals, and signed up two Fortune 500 trial customers for its software.
“The amount of traffic Product Hunt drives is pretty remarkable,” Yaseen said. “I think it’s a savvy move on AngelList’s part to be able to be the go-to place for the three most important things startups do: fund-raise, hire, and now find and talk to customers.”
The image above was taken by Mark Coggins and shared under a Creative Commons Attribution 2.0 Generic license on Wikicommons.