Why I Won’t Game AngelList

I think AngelList is awesome and I’m a huge fan of what they’ve done. Nivi wrote a great post celebrating their 1.5 year anniversary today: 1.5 Years Of AngelList: 8000 Intros, 400 Investments And That’s Just The Data We Can Tell You About.

One of the powerful constructs of AngelList is social proof. It’s become an important part of the seed / early stage venture process as very early stage investors pile into companies that their friends, or people they respect, are investing in. AngelList does a nice job of exposing and promoting social proof during the fundraising process in a way that is both legal and non-offensive.

However, as one would expect, entrepreneurs focus on taking advantage of every opportunity they have. As a result, I’ve been getting a request on a daily basis to either “follow” or be listed as an “endorser” for various companies. These requests fall into two categories: (a) people I know and am trying to be helpful to and (b) random people.

I’ve decided to say no to both categories unless I’m investing in the company. And I encourage everyone involved in AngelList to do the same. I think the concept of social proof is super important for something like AngelList to have sustainable long term value. I don’t ever want to be on the end of a conversation with someone who invested in a company on AngelList, runs into me, and says “things are sucking at company X – why did you ever endorse them” and for me to say “I have no idea who you are talking about.”

As with many things in life, the key lesson is to do your research. It’ll be interesting to see how AngelList copes with things like this over time – I expect Nivi and Naval will stay one step ahead of the problem. However, if you are an investor or entrepreneur – help by having some discipline on your end – it makes things better for everyone.

  • http://freepository.com John Minnihan

    I’ve talked abt this exact issue w/ everyone I know in the business (which, as you know, are all folks you know + work with too).  In fact, the ‘signaling’ topic came up last week over dinner w/ an entrepreneur you also know well, and the topic will almost certainly come up tonite over dinner w/ another of my old VC friends.

    It’s a tough one, made tougher when those involved are friends.  ‘Have discipline’ nails it.

  • Bonnie

    An endorsement is a transfer of credibility. Why would anyone park their credibility in a place they can’t protect?

    • http://www.feld.com bfeld

      Totally agree.

    • http://www.feld.com bfeld

      Totally agree.

  • http://blog.calbucci.com/ Marcelo Calbucci

    I absolutely agree and I think it’s an easy fix for AngelList to limit the number of people one can ask to endorse a startup (maybe per week), but they could also penalize people who keep asking random people to endorse them. Maybe display how many “pending” or “unapproved” endorsements a startup has and making it clear to the entrepreneur asking for the endorsement that is going to happen.

  • http://blog.calbucci.com/ Marcelo Calbucci

    I absolutely agree and I think it’s an easy fix for AngelList to limit the number of people one can ask to endorse a startup (maybe per week), but they could also penalize people who keep asking random people to endorse them. Maybe display how many “pending” or “unapproved” endorsements a startup has and making it clear to the entrepreneur asking for the endorsement that is going to happen.

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  • Naval Ravikant

    Thanks Brad. We appreciate your using the system as it’s meant to be used. We’re adding anti-gaming mechanisms shortly, and people who squander their credibility will lose it.

    • http://www.feld.com bfeld

      Awesome!

  • http://gregcohn.com/blog gscohn

    Interesting post Brad.  I think a similar dynamic applies to advising startups and introductions — if I don’t feel strongly enough about a company to either be an advisor or investor, I give real thought before introducing them to high-demand contacts, to make sure I’m genuinely doing both parties a favor.  It’s a good forcing function.  

    On the investment front it’s similar — now having made a (very) few angel investments for the first time this year myself, I really notice the difference in the way I feel about making introductions for the companies I have invested in vs. haven’t, and it’s making me more thoughtful about those intros. 

    All that said, since I have limited capital to deploy and since I avoid investments that could create a conflict of interest with my employer, I do find there are situations where I want to endorse a team (whose founders I know and whose plan I like) even though I’m not in a position to write them a check.  I wouldn’t want to let it be gamed, and it certainly isn’t specific to their investor offering terms, but I definitely see value in those kinds of endorsements on angellist, particularly when they are meted out thoughtfully from subject matter experts.

    In a similar way, I don’t assume that if someone is connected to you on LinkedIn that you are implicitly “vouching” for them in a serious way — LinkedIn is simply too promiscuous a culture for that to be meaningful generally, even if some users are very careful and selective.  On the other hand, if you were to write a public recommendation for someone on LinkedIn, I would absolutely take that seriously.

    Like any other social network, it comes down to the kind of culture that angellist and its participants collaboratively create.  Hopefully people behave thoughtfully and derive value from the thoughtfulness of others — and hopefully Naval is able to successfully foster that kind of behavior in managing the community.

    My only angellist endorsement has already converted to an investment — I wonder if there’s data on that conversion rate…

  • http://www.Wishery.com Cooper Marcus

    May I respectfully submit that you are painting this topic with too broad a brush: Follow and Endorse are two very different things.

    Following is akin to following someone on Twitter or liking a Facebook page – surely no one will come back to you later and complain that they lost money because you added someone to your Twitter follow list? Following helps make Angel List work – your followers see that you Followed a startup, and they’ll then perhaps follow too – with them having done nothing more reviewing the startup’s Angel List profile. This cycle of Follow -> notification -> more Follows repeats, and the startup ends up with a self-selected audience that is interested in following their progress.

    Endorsing is a much stronger statement – and I absolutely agree that endorsements should be made with exceptional care. 

    So, if you know someone and are trying to be helpful, why would you deny their startup the non-reputation-endangering act of Following when it could be incredibly helpful to them?

  • http://www.Wishery.com Cooper Marcus

    May I respectfully submit that you are painting this topic with too broad a brush: Follow and Endorse are two very different things.

    Following is akin to following someone on Twitter or liking a Facebook page – surely no one will come back to you later and complain that they lost money because you added someone to your Twitter follow list? Following helps make Angel List work – your followers see that you Followed a startup, and they’ll then perhaps follow too – with them having done nothing more reviewing the startup’s Angel List profile. This cycle of Follow -> notification -> more Follows repeats, and the startup ends up with a self-selected audience that is interested in following their progress.

    Endorsing is a much stronger statement – and I absolutely agree that endorsements should be made with exceptional care. 

    So, if you know someone and are trying to be helpful, why would you deny their startup the non-reputation-endangering act of Following when it could be incredibly helpful to them?

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  • http://venturehacks.com nivi

    Brad, thanks for the thoughtful post and for being part of the AngelList community since the early days.

    This is very helpful feedback and we’re going to take a look at the endorsements feature. I suspect we’ll make some changes.

    Regarding follows, it’s a very useful way to stay up to date on companies (their updates show up in your feed and in a weekly digest). So I say follow the companies you want to follow, don’t follow the rest, and ignore the signaling issue.

    • http://venturehacks.com nivi

      Brad, we took a close look at endorsements and decided to nuke it. Should be done today. There’s a good idea there but the execution was just so-so. Please let us know if you have any other suggestions.

      • http://www.feld.com bfeld

        Nivi – awesome! This is a great example of listening to feedback and thinking about it. It just raises my belief even higher that y’all are doing something great / powerful. Well done.

      • http://freepository.com John Minnihan

        Impressed.  +219

  • http://twitter.com/jkeera jkeera

    Great Post! Social Proof is taken for granted not only on something like AngelList but with things like Facebook, Twitter, and other sites where a friend or brand asks you to like or retweet something without any qualification. You also see a lot of this with student surveys, student bplan competitions, etc…

  • http://www.mycampmate.com Tyler

    Great post and thoughts.  I agree with you Brad and as a “New Guy” to Angel list have had to hold myself back from those types of things. Wanting to get endorsed is an itch the new entrepreneurs need to control and manage.

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  • Ty Danco

    OK, I am taking the pledge not to endorse those I don’t invest in, but I still plan to follow some companies that I am not investing in. There can be lots of good reasons why: I’m interested but just browsing for now; I want to learn more about the sector and wish to better learn which folks are playing in that arena, etc. Even to follow if I have a competing investment is legitimate–that’s just doing public research, although getting intros to suck out info is a definite moral no-no.

    I have used AngelList a lot, and have invested 8 times through them and recommended other portfolio companies to list there. I pay attention to signalling: are past investors not following on in the current round? For a site like this that makes social proof easily discoverable, this becomes a quick shortcut to improving due diligence…especially when that may often be undertaken long distance via Skype. For me, follows are an irrelevant factor, and intros unimportant…especially if to a VC analyst cranking through dozens of intros a quarter.

    There will always be people trying to game any system, but it only works if people pay attention to such things.

    An aside to Naval and Nivi: my one request is to make sure you limit the growth. The best part of AL has been the high quality of the companies found within. The Signal to noise ratio is critically important in order to keep investors’ attention and participation.

    • http://www.facebook.com/peter.bordes Peter Bordes

      i’ll take that pledge as well. 

  • Hemi

    Great post.  I immediately drew a correlation to LinkedIn and the random “Invites” I get from people I do not know.  Cheapens the value of connecting through a common middleman.

  • http://www.facebook.com/peter.bordes Peter Bordes

    Brad good post. i think that so far that might be the only weak link in the AngelList platform. other than that i have had a great experience. invested in 3 co’s so far due to the incredible efficiency AL.com has created. i dont think i would have been able to run MediaTrust and be this active as an angel without the site..

    my biggest fear is that linke everything else it gets cluttered and spammy. this is one of the key things i like about the platform.

    Nivi and Naval please keep this tight. I love what you have created.

    Thank you!

  • Rich

    When I poked around AngelList and was clicking on various links. It appear that I could not introduce a company. It seems like you have to post your company then wait for someone to introduce it or for people to find it and folow it.

    I imagine you get more people interested by posting more about your company. Kinda’ like building publicity.

    The problem is that passive fund raising is not for go-getters (entrepreneurs). It stands to reason they would try to connect with people listed on AngelList in an active manner. So, if they can’t do that via AngelList they resort to email or some other form of communication.

    If I am correct and entrepreneurs cannot actively connect with investors on AngelList. Then that is a failing on the part of AngelList, not the entrepreneur.

    I know that I would not want to invest in an entrepreneur that sits around and waits. That’s like people who send a resume and wait. They are not good to have around. 

    Another way to look at it is this. How many times have you gotten laid by sitting at home next to the phone waiting for it to ring?

    • Naval Ravikant

      Entrepreneurs can take certain actions on their own – send messages through people connected to both their startup and to the target investor, post updates that investors will see in their feeds, etc. If by active connection, you mean just email any investor that they want, well, that’d be a giant spamfest.

    • Naval Ravikant

      Entrepreneurs can take certain actions on their own – send messages through people connected to both their startup and to the target investor, post updates that investors will see in their feeds, etc. If by active connection, you mean just email any investor that they want, well, that’d be a giant spamfest.

  • http://www.howardlindzon.com howardlindzon

    AGREED.  been doing that since day one but it helps to hear it often.   

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