Foundry Group to Invest $2.5M in AngelList Startups, Seeks Partners

While many investors and entrepreneurs debate the effects of crowdfunding and general solicitation for startups, the Foundry Group is taking action.

Today, the Boulder-based venture firm announced plans to invest $2.5 million over the next 15 months in companies raising money on AngelList, the top website for young companies seeking early investment.

The project is called FG Angels, and its goal is to make 50 investments in AngelList companies by the end of 2014. Foundry Group will put in $50,000 in each investment, and is looking for syndicate partners.

It’s Foundry’s first side fund and something of an experiment, managing director Brad Feld wrote on the firm’s blog. It also is an attempt to get a close view of how early stage investing is changing with the advent of crowdfunding.

“We recognize that the landscape for early stage investing is constantly evolving. While we aren’t worried about being negatively impacted by crowdfunding, we figure that the best way to really understand it is to participate,” Feld wrote.

Foundry Group’s directors are prolific angel investors on their own, with many investments in seed funds and direct personal investments in startups. There’s also the ties Foundry Group has to the Techstars startup accelerator, which Feld co-founded.

So while the legal details of how the fund operates are different—the money is coming from a Foundry Group fund, which will receive the earnings from exits—the method for picking companies to invest in will be the ones the directors have relied on for a while.

“For these seed investments we will focus on people over ideas (the idea is the price of admission), will decide quickly, and will run in a pack with other angels as we don’t have to be the lead investor. We will be acting like angel investors in these investments—it’ll be unlikely that we’ll follow on in later rounds, unless the company specifically fits in one of our Foundry Group themes, and we won’t be taking board seats in these companies,” Feld wrote.

What impact the fund will have globally or locally is to be determined, but the lack of active angel investors in Colorado is something that has been on Feld’s mind, judging from several comments he made during Denver Startup Week.

During the final presentation of the week, Feld identified angel investing as a weak spot in Colorado’s entrepreneurial world.

Early and growth-stage venture capital firms will find promising Colorado companies and back them with the money they need, he said, but the number of local individuals willing to cut $25,000 or $50,000 checks is much more limited.

There are enough “rich people” in Colorado to sustain an active angel investing community, and cultivating it is one thing local entrepreneurs can do to improve the ecosystem, Feld said. He advised Colorado entrepreneurs to “put all of your energy into teaching rich people how to be angel investors.”

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