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Angel Investors Can Now Join Late-Stage Rounds As Life360 Posts Series C To AngelList

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A small syndicated fundraising opportunity posted today on AngelList may have sweeping ramifications for venture investing in the long-term. Angel investors on the funding platform can now get a piece of a later-stage company for the first time, as Life360 has opened up part of its large Series C round to a syndicate on AngelList led by Expansion VC.

The money Life360, a family networking tool, is seeking on AngelList is small: just $500,000, or 1 percent, of the $50 million it had already announced it was raising from a group led by home security company ADT . But as a company with $76.1 million in venture funding already in the bank, Life360's a much more mature company than you'll typically find available to would-be individual investors on a site like AngelList.

"Angels are now getting the chance to get into a public financing where any accredited investor can just go click and invest," says Ash Fontana, head of AngelList's fundraising products.

AngelList currently works by allowing companies to list their fundraising, typically privately, for interested investors to target. A common way to do that is through a syndicate, a group led by a frontline known tech investor who receives the backing of a number of individuals, who then commit their money to whatever deals that the syndicate leads select. Author and investor Tim Ferriss, for example, has 574 backers on the site who've helped give him a total of $3.2 million to commit.

Most companies list privately on AngelList, meaning that you need to already be logged in as an accredited investor to see the company raising. Life360 is listed publicly, however, meaning that anyone can see they're in the process of fundraising. Fontana at AngelList argues that more transparency from public listings should encourage eligible investors who may not currently feel comfortable with the process to join in specific deals.

"It's great that angel investors, smaller dollar investors, can now get into really big deals," Fontana says. "This is bucking the trend of normal Americans being kept out of wealth creation."

On that count, Fontana may be stretching a bit. Even though anyone can see Life360's listing, you still have to be SEC accredited to actually join the Expansion syndicate. Most typically that means net assets of over $1 million or a repeat annual salary of at least $200,000 at minimum, a bit beyond the "normal American," at least outside of the Silicon Valley tech circle.

The implication, however, is that a well-heeled individual investor can now get into some of the later-stage deals where typically they would be blocked out in the past. AngelList handles the combination of the syndicate's money into one check and processes it all for the company, blocking the group together to function like another VC firm in the deal. For companies that are delaying going public or just looking for more diversity from their investor group, the window to take in savvy individuals can now stay open much later.

Uber, Leap Motion and Pinterest are all companies that once raised on the platform, Fontana says. The implication is clear--syndicate later, and you don't have to find the next Uber so early at its seed round maturity.

Other syndicates are already looking to form later-stage groups, Fontana says, but Life360 chose to be the first Series C syndicate on the site. Cofounder and CEO Chris Hulls wrote in a statement that the company had enjoyed a good experience raising its Series A on AngelList, and came back for the chance to bring angels into its new round.

The opportunity for AngelList, which gets about a 5% carry from investors' bets, could become huge if more companies want to break free from the model of raising quietly from just one or two firms. (Ironically, half the investors in AngelList syndicates are representing some sort of institutional money.) But while the potential flexibility there is great, the dollars won't be bigger. Big venture firms will still take the lion's share of the room in funding deals, just as strategic partner ADT accounted for fully half of the $50 million Life360's announced.

Structurally, don't expect the flow of deals to change with this news. Even Fontana says that while he believes syndicates will encourage more diversity in later-stage deals over time, he doesn't see any one offering causing an overnight change. But this capability does allow startups to reconsider how they disclose information on their fundraising process and to be a bit more open in who they'll consider at each raise down the line.

Individual investors--whether full-time angels or industry execs or institutional partners--can diversify their investing pattern a bit more and at least theoretically throw more cash behind a winner, should that winner be willing to give them the opportunity.

Realistically, plenty of startups still won't. But in an industry where fundraising process can be so important and yet so limited to a handful of top firms and well-known partners, any founder can appreciate the benefit of having that extra option.

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