Some call it a bubble. Some say that valuations are crazy and that the delirium around startup investments has reached an unsustainable threshold.
When you look at the macro picture of our technology-powered world and note the infancy of many areas, as well as the obvious expansion and proliferation of technologies – it less than surprising when you see a large overseas investment fund with 12 billion under management in the form of China Science & Merchants Investment Management Group (CSC) supplying AngelList with $400m for a seed fund.
This new fund, called CSC Upshot, will ride the momentum that AngelList has created from supporting $250m in investments in 650 startups, with companies such as Uber in the mix. Their network of 4,400+ investors operating across 165 “syndicates” on their platform creates a ripe environment with strong downline effect.
Typically, you see billion dollar funds seeking a much different investment approach, working with companies in later stages of growth, with less risk and more economic indicators, than that which comes with more speculative early stage startups.It’s telling when you see a large fund dip their toe into early stage investments, almost conflicting with their proven growth stage investment DNA.
In a time where Chinese public equity markets experience such a decline, we’re seeing more companies putting money into North American businesses, in the likes of Alibaba placing $200m in Snapchat, and China’s Uber-rival, Didi Kuaidi putting $100m into Lyft. Many smaller deals fall under the radar, and most startup companies in North America do not have ready access to Asian capital investment opportunities.
AngelList co-founder Naval Rainkant offered up his thoughts in saying, “Firms often raise more money to get more fees. But with our model, we can just add more syndicate leads so we can keep putting money into the same kind of companies at the same stage. CSC Upshot is about Chinese LPs expanding globally and showing that Chinese companies can go out globally and compete in a way that gets them exposure at the very earliest stage, instead of waiting for the Series D round.”
AngelList was originally offered a billion dollars for this same fund, but to avoid the risk of completely flooding the market, the deal arrived at a more palatable $400 million. The plan is to spread the investment out over 6 to 8 years, investing around $30-40m in the first year, to see how the investment method can scale without concern.