We can now match investors and startups based on location at http://angel.co/locations.

It’s simple. Investors follow locations and startups add location(s) to their profile. Then they get matched.

Browse

Browse by continent, country, region, or city. Here’s a screenshot of Silicon Valley:

I want to see everything

If you’re an investor and you want to see everything, follow Earth. But you should still follow other locations if you’re particularly interested in them. It will help our code and community match you to interesting startups.

Where are the startups?

San Francisco and New York are essentially tied for the top spot:

Flattening and Fattening

The Internet is obviously flattening investing. So investors in India can find good startups in New York. And startups in Austin can find good investors in Europe.

But I think it will also fatten cities all over the world. So startups in Paris can find investors in Paris. And investors in Moscow can find startups in Moscow. We just need to fatten up those cities. There’s no reason we can’t have Silicon Valleys all over the world.

Startups are starting to raise Series A’s and B’s from big VCs on AngelList (Ed: We should have spent more than 30 seconds thinking of a name for the site).

Taulia recently raised a $3M Series A from Matrix Partners via AngelList. Josh Hannah from Matrix has joined Taulia’s board of directors. Trinity Ventures and The Angels’ Forum also participated in the round.

Matrix doesn’t have the biggest brand in the VC world but they do have the top performing VC fund ever. Which is insane. We’re very happy to have them in the community.

Here’s what Bertram Meyer, Taulia’s CEO told me about the experience:

“We were distributed on AngelList one Friday evening based on a signed term sheet from The Angel’s Forum and some initial traction. Requests for introductions started to come in immediately and by the end of the weekend we had received close to 40 requests; the majority from senior partners at top VCs. We felt a great fit with Josh Hannah and David Skok from Matrix, who also were the fasted to commit, such that we were oversubscribed by next Wednesday. 4 weeks later we closed our round with Matrix, Trinity Ventures and TAF, but compared to the initial term sheet we had more than doubled the round size and significantly increased the pre-money. Hindsight my only mistake was to contact Naval a bit too late in the process—had I known how powerful AngelList is (and how willing Naval is to give advice), I would have done so much earlier.”

I also reached Josh Hannah from Matrix for a quote and he said:

“AngelList is a powerful service for connecting entrepreneurs with the investors who can be the most helpful to their business. For Matrix, the Taulia investment was as close to a no-brainer as you’ll see: a full battle-tested team, on their second venture together, in a market they know intimately. Put that together with the deep expertise in scaling a SaaS business that Matrix can bring, and I think together we have a shot to build a really big company.”

What does a typical AngelList email look like?

Here’s the email that Naval sent to the investors that Taulia wanted to meet (I’ve updated it a bit to meet Naval’s current email style):

Subject: Taulia - Enterprise discount network, serial entrepreneurs, Postini investor committed

Taulia "helps Global 2000 corporations save tens of millions of dollars annually by enabling their suppliers to opt for earlier payment of approved invoices against a discount." Check them out at http://taulia.com and see their profile at http://angel.co/taulia.

Thanos Triant (investor in Postini) and The Angels' Forum are committed to this round.

[1-2 sentences about traction normally go here. Redacted for obvious reasons.]

The founders previously founded and sold Ebydos, a provider of AP automation solutions, to ReadSoft.

Taulia is based in San Francisco and is raising a $xM Series A and $yM of this amount is already committed.

Every elevator pitch should be this short: product, social proof, traction, team, location, deal. The end.

The other thing you should know about AngelList is that Naval and I are not the only people who can share startups via email. Anyone can share a startup with their followers. And we’re building tools to make that easier and move obvious. Naval and I want to get out of the dealflow curation business and let the community curate dealflow. And it’s already starting to happen.

If you’re an investor, there are more Series A’s and B’s happening on AngelList right now. And if you’re a startup raising a venture round, please get in touch via AngelList.

If you’re looking for more non-AngelList content go subscribe to my posts on Quora.

The latest post, Fred Wilson’s 5 rules for finding product/market fit and turning it into dollar bills y’all, is a winner.

Here’s an RSS feed of my Quora activity, but it’s not just posts, it includes activity like votes too.

Finally, I’m always posting the best startup content on the Web to the @venturehacks Twitter feed. I read all the startup blogs, Hacker News, Quora, etc. and tweet about the best of the best.

Is it fair for founders to own about 100% of a startup while employee #1 only owns a few percent? Are founders 10-1000x more valuable than employees?

The answers are

  1. Yes, it is fair.
  2. Value doesn’t matter, timing does.

In fact, many employees get better equity deals than the founders. There are two cases.

1. The founders are not intrinsically fundable

When the founders start the company, it is worth approximately $0. So their equity is worth $0.

Let’s say the founders work for 6 months, make progress, and then raise money at a $10M post. Then employee #1 joins and gets 1% of the company. So his shares are worth $100,000.

So each founder got $0 of stock when he joined the business. The employee got $100,000 of stock when he joined the business.

Every employee that joins the business gets more stock than the founders did. Not in shares, or as a percentage of the company. But in the only metric that really matters, the dollar value of stock at the time the employee joins.

That’s why some people say that anyone who joins a company before they raise money is a founder. In other words, anyone who joins the company before the stock has value to a third party, is considered to be a founder.

2. The founders are intrinsically fundable

Some founders can raise money with nothing to show other than their smiling faces.

Let’s say the founders raise money at a $10M post-money, simultaneous with founding the company. In this case, the market is valuing the founders’ contribution at $10M.

Then the company identifies employee #1 and tries to hire her. The company will have to compete with every company in the world for that employee, and therefore the market, not the company, is setting the employee’s compensation.

Continued in Part 2.

Addendum

Measuring your stock in dollars is not at odds with measuring your stock in percentages. They’re just different views on the same data. If you’re an employee at Facebook and the stock price is monotonically increasing, look at the dollar value of your stock. If you’re joining a company today and you’re trying to figure out what you get if the company sells for $100M, use percentages.

(Note: This is the first time I’m testing this argument. Be gentle.)

You can’t do all the work in a startup yourself. So you have to scale. Here are four ways to scale:

  1. People
  2. Product
  3. Capital
  4. Community

In detail:

  1. People. Hire people to help you. This will be your first instinct but it should really be your last resort.
  2. Product. Build product to do the work for you. Every single product in the world is a type of scale. Facebook has taken this to the extreme through automation.
  3. Capital. This is what VCs do. They raise billions of dollars, invest it, let their CEOs manage it, and hopefully profit.
  4. Community. This isn’t a recent innovation but it might seem that way. Communities have been banding together for a long time to form countries, topple dictators, knit, save the environment and so on. But now they’re forming quicker than ever and building products like Wikipedia.

Which kinds of scale are you using and why?

Note: I prefer the word leverage to scale because it implies that there is a goal and that one should not scale for its own sake.

Some people don’t like our posts about AngelList. I’ve heard this enough times now that I want to address it. But first, thanks for the feedback and for reading our stuff. Here we go…

AngelList is product-izing everything we’ve written on Venture Hacks. Would you rather do a search on Google or would you rather have Larry and Sergey tell you how to use the Dewey Decimal system?

Nothing would make me happier than making everything we’ve written on Venture Hacks irrelevant. Our motto at the office is “productize yourself.” And I think you can learn as much from our posts about AngelList as any of our posts on how to structure your board of directors.

That said, we’ll try to write more about non-AngelList topics. As always, thanks for the feedback and for reading our stuff.

Liz Gannes from AllThingsD has a great article on AngelList today:

“AngelList ran the numbers this week and found that venture capitalists are actually more active than angels on its year-old service…

“Currently, 725 angels and 557 venture capitalists subscribe to their matchmaking service. (Nivi counts 378 of the VCs as multi-stage investors, and 179 as seed-fund investors.)…

“AngelList doesn’t formally track the investments that occur due to those intros, but Nivi estimated that the service has helped orchestrate funding for 219 start-ups from 384 investors.

“AngelList counts about half of the investors in each category as active participants. Active seed fund investors have taken 5.6 AngelList intros on average, active multi-stage VCs have taken 5.4, and angels have taken 5.

Read the article to find out who are the 5 most active VCs on AngelList and which VCs have recently invested in startups via AngelList.

We generated most of the data in Liz’s article at her request. It’s always fun answering questions from reporters like Liz because they force you to think.

The venture industry works on the premise that investors are generalists and entrepreneurs are specialists. VCs are good at being, well, VCs, and the entrepreneurs have to be really good at whatever specific task they set out to do.

This isn’t by choice—ask an entrepreneur what they’re looking for in an investor and they won’t say things like “advice, corporate governance, recruiting.” Entrepreneurs would prefer someone who has specific connections, interest, and knowledge about the market they’re attacking and the technology they’re building.

The problem is that it’s very, very difficult to find VCs by sector and expertise. The new markets feature on AngelList solves that problem. For example, a smartphone baby monitoring company joined AngelList. They wanted to meet investors with who had expertise in Analytics, Babies, Consumer Electronics, Parenting, and Mobile. A music startup joined AngelList and wanted to know which investors still love the music market (and which hate it).

Now you can go find your specialist investor. The one who can really add value. Try the search box or browse.

See Part 1 for an introduction to the new markets feature on AngelList. This part is all about the details.

Creating new markets

We encourage people to use the existing markets, but anyone can create a new market:

Admins organize the new markets

The admins regularly review new markets and delete, rename, alias, or merge them (we stole this straight from Quora). Only the admins have these powers and only the admins can set the parents and children of a market. For example, see Internet’s parents and children in the sidebar at http://angel.co/internet:

…and you can see the full Internet tree at http://angel.co/internet/tree.

Trying to make it “just work”

I don’t think we could have made a list of 20 canonical markets and called it a day. Believe me, we tried—and it would have been a lot easier. Just check out the rich set of markets here—20 hand-picked markets wouldn’t do justice to the diverse interests of investors and startups.

It’s also the nature of venture capital to chase new markets, whether it’s a broad new market like Mobile or a specific one like Location Based Services. A static set of markets defeats the purpose.

So we let anyone create a new market and we use tricks to keep things from spinning out of control. I’ve already written about how admins organize the markets. Next, we hide markets with fewer than 10 followers:

Third, we use color to indicate that following a market also implicitly follows its children. For example, I just followed Mobile and all of it’s children turned green:

If I hover over one of Mobile’s children, I see a message like this:

So if you’re already following Mobile, you don’t need to follow Mobile Commerce. But the “Follow Anyway” link lets investors add Mobile Commerce to their profile, if they want to show startups that they’re specifically interested in Mobile Commerce.

The markets are technically not a tree

Even though I say that the markets are organized in a tree—like your desktop file system—that’s not technically true. They’re actually a directed acyclic graph (DAG). The main difference between a DAG and a tree is that a market can have multiple parents. It’s as if a file on your desktop could be in two folders at once.

For example, Games has two parents: Information Technology and Consumers. You can see the Games tree at http://angel.co/games/tree:

Structuring the markets as a DAG is Yet Another Idea I Stole from Quora™. It would have been impossibly difficult to implement markets with an actual tree—we would have had to put each market inside exactly one parent. Where would you put Games or Mobile Enterprise or Digital Media? Multiple parents ease the burden of organizing markets.

(Crazy people can learn more about different classification systems like DAGs, tags, and trees here).

The most accurate set of market names in the world?

Back in the day, when investors applied to AngelList, we had a text box that asked investors to list the markets they’re interested in, and the markets they’re not interested in. We extracted the initial set of market names from this text. Then we automatically made those investors follow and block those markets. Finally, we replaced the text-box with a nice autocomplete form:

I think we now have the most accurate set of venture capital market names in the world. First, the initial markets were self-reported by investors, so they came up with their own names for markets. Second, there was no autocomplete until very recently, so each investor named their markets independently, without looking at what other investors were doing.

In other words, investors voted for market names independently, without being influenced by how other investors were naming markets—and that’s a critical component of a wise crowd.

AngelList now has markets at http://angel.co/markets and we’re using them to match startups and investors. The markets look like this:

Startups add markets to their profile, investors follow markets, and we match them. Magic!

1. Adding markets to startup profiles

Startups can add 4 markets to their profile:

And here’s what a startup sees while they’re editing their markets:

2. Adding markets to investor profiles

Investors can add markets to their profile with a similar interface:

(For example, check out the markets Mitch Kapor is following and blocking.)

You won’t see this part unless you’re an approved investor, but investors can also follow and block markets from various places on the site like http://angel.co/markets:

…or any market page like the cloud computing page:

3. Matching startups and investors

If an investors blocks a market, the admins won’t email them startups in that market at all (but investors can still find these startups on the website).

If an investor follows a market, the admins will email them startups in that market before everybody else. If the startup performs well among those investors, the admins will email it to everybody else (who isn’t blocking the startup’s markets).

Organizing the markets with a tree

Investors don’t need to worry about following and blocking every single market on AngelList. The markets are set up as a tree—like your desktop file system—with markets inside other markets. So when investors follow a market, they also follow its submarkets. Likewise with blocking.

If you prefer to view the markets as a flat list, go to http://angel.co/markets/list:

Sorting

Whether you’re viewing the markets as a tree or list, you can sort them by namerecently added# of followers, and # of blockers. Approved investors can also sort the markets by # of startups. Here’s a picture of the the flat list, sorted by followers:

Searching for markets

The search box at the top left of the site lets you search for investors and markets (and startups too, if you’re an approved investor):

Again, investors who follow mobile will also follow all of its submarkets like mobile commerce, mobile advertising, etc. Or if they’re only interested in mobile coupons, they can just follow that instead.

Stealing from Quora

We stole a lot of the design for markets from Quora’s topics. There are some differences and technical details that we’ll write about soon. But we refer to Quora and Facebook a lot while we’re designing. The rest of the web is going to look like Quora in a few years anyway, so you may as well steal from the best.

Serving new markets

We’re very excited about this feature. It’s going to increase the relevancy of the startups that we send investors. And it will let us serve startups and investors in markets that we haven’t been able to serve before (biotechnologyclean technologylife sciences, you name it).

The markets tour continues in Part 2.