The way startup companies get funded is changing, and it's freaking traditional venture capitalists out.

Today, we're going to talk about a new way how a startup can be financed.

A company called AngelList came out with a new product called AngelList Syndicates. Through AngelList Syndicates, wealthy individuals can invest their money with so-called "angel" investors, who will turn around and invest the pooled money into startups.

Angel investors will be able to "lead" rounds in early-stage startups. "Angels" are usually well-connected, wealthy people in the tech industry who invest their own money into startups. They've been around for a long time. But thanks to AngelList Syndicates, they can now write much bigger checks — checks as big as the ones only professional venture capital firms used to be able to write.

Over theweekend, entrepreneur and "angel" Jason Calacanis shocked the startupworld by saying he'd started an Angel Syndicate and raised $300,000 with it injust one week.

 Here's how AngelLists Syndicates will change things, according to people in the industry:

 Angel investors will be able to "lead" rounds in early-stage startups. "Angels" are usually well-connected, wealthy people in the tech industry who invest their own money into startups. They've been around for a long time. But thanks to AngelList Syndicates, they can now write much bigger checks — checks as big as the ones only professional venture capital firms used to be able to write.

 

Jason Calacanis

How it works?

What AngelList Syndicates really does is commoditize startup capital and put a premium on who you're getting it from, and what the people you're getting it from can provide you

AngelList will collect 5% of any profits those investments earn. The angel investors will get 15%. The wealthy individuals will get the rest.

This is a great way to fund apps. Apps are inexpensive to make, but they have short idea-to-execution windows, so they can't afford to spend lots of time time fundraising. Entrepreneurs will have more choices, and will probably get better terms.

GlobalOrg