The Foundry Group has stopped making new investments through its AngelList syndicate, arguing that the effort involved was too great.
The firm invested in 42 companies in 2014 and another 17 or so in 2015. Three of the companies received follow-on investments from Foundry Group’s main fund.
However, the firm concluded the potential return from the investments was too small given the size of its funds and the amount of its efforts, according to a blog post from Managing Director Brad Feld. It also said it was disappointed it hadn’t been able to build a broader network of angel investors through the site, the post said.
“Even if we generated a huge multiple on our overall FG Angels investment (say 10x), the impact on our fund return is limited given the size of the investments we were making,” the post stated.
The withdrawal could prove a significant setback for AngelList, which has been a pioneer in bringing seed investing online through the use of crowdfunding and self-forming syndicates. Foundry Group was among its earliest adopters and committed $2.5 million for its first year of activity, with $50,000 of an investment coming from it and the rest from syndicate members.
In its post, Foundry Group said the average size of a syndicate investment in 2014 was $316,000, and it noted that 116 syndicate members participated in at least one deal. Thirty investors participated in at least half of its syndicate deals.
The firm said overall it has invested about $3.2 million on the site in a young portfolio that will take a long time to mature. The total represents less than one non-AngelList fund investment, which is typically $5 million to $15 million, or larger when including the late-stage Foundry Group Select fund.
More so, while the firm’s partners could offer help in a “generic early investor way, the time to value ratio was way off,” the post said.
“While we regularly did short, quick hit help via e-mail, whenever someone wanted to spend an hour or more with one of us, we eventually realized that our investment and ownership in the company was dramatically underweighted.”
On top of that, the site generated little “incremental learning,” the post said.
Photo courtesy of Shutterstock.