by Tweed on February 16, 2012
Over the past year at Thomvest Ventures, we’ve seen startups raise money much faster and at valuations sometimes several times higher than was possible just a short time ago. One place that the investor community has pointed to as fueling the recent fundraising boom is AngelList, a website that allows startups seeking funding to post their profile for potential investors. Critics argue that the compressed fundraising cycles enabled by AngelList disrupt established proprietary deal flow networks and lowers investment standards as herds of investors chase “hot” opportunities and founders choose the highest bidder over more strategic or value-added investors.
To find out for ourselves, we created an AngelList account and began looking at startups that fit our early stage focus on B2B companies. When a startup makes a profile on AngelList, the listing is vetted by Naval and Niv, AngelList’s co-founders. If it makes the cut, the startup is categorized by industry, and then introduced by email to investors whose preferences match the company. Since creating the account, we have asked for introductions to 24 founding teams (the majority of which we met in person), offered competitive term sheets to two companies, and invested in one that we found particularly impressive called FlashSoft.
FlashSoft claimed that its software could boost server performance 3-5x by sending “hot” data to solid state flash drivers and “cold” data to disk drives. While at the time the company didn’t receive interest comparable to the buzz surrounding some of AngelList’s consumer web startups, it seemed to us that if the team could deliver on their lofty claims, FlashSoft could develop a very large business.
After a good initial meeting, we proceeded to do our homework on the company. We found that customers couldn’t stop raving about FlashSoft’s software in our due diligence calls: they had done extensive testing and found that the product lived up to its performance claims. As part of our review of the company, we also asked technical experts at Avalanche Technology, another Thomvest portfolio company, to meet with the team and confirm the potential we saw in FlashSoft.
Following our diligence process, we gave FlashSoft a term sheet and led its Series A investment, excited about the company’s future. After everything was complete we asked Ted Sanford, FlashSoft’s co-founder and CEO, about his experience using AngelList. Ted told us that AngelList’s team had given him coaching on how to list FlashSoft’s profile and navigate the funding process. The listing on AngelList had helped Ted get a sense for which investors were interested in what they were doing, and led to multiple term sheets. In the end, we were fortunate that FlashSoft chose to work with us based on our experience in the industry and our interactions with Ted and the rest of the team.
Since the investment, the team has seen strong traction among customers and partners, and has continued its leadership position in the space by releasing Linux, VMware, and Windows versions of its software. Flashsoft was also the first software company ever to make it on Storage Search’s Top SSD Companies and has had positive reviews from various analyst firms including 451 Group.
Today we are pleased to announce that FlashSoft has been acquired by SanDisk. We believe that the combination of FlashSoft’s software and SanDisk’s hardware will mean great things ahead for customers, partners, and for the teams at both companies. For our fund and for our co-investors, our 10-month partnership with FlashSoft has led to a solid financial return on our investment. Our experience has demonstrated that AngelList is democratizing the way startups receive funding, and we’ll continue to search the site for great teams to invest in.