AngelList has been quite a phenomenon in Silicon Valley. It constantly transforms and is hailed as a sort of “disruptor” to alter the traditional way of funding early startups. In China, for sure we have copycats of AnglList, and there is this one called “AngelCrunch”. I noticed its birth in 2011; honestly did not pay too much attention and almost threw it into complete oblivion until recently the news of its “speedy crowdsource fundraising” RMB3.35 million within 14 days from at least 7 committed angel investors for an online music platform “LavaRadio” rekindled my unspeakable interests in it.
We know AngelList is already testing the idea of bringing smaller, accredited investors to put in USD 1,000 or more in seed stage of startups, along with those larger investors. However the scheme has to be in partnership with broker-dealer SecondMarket, not only to comply with securities law in US but also to create LLC fund to aggregate all the small investors and process all the transactions. So basically startups just need to deal with the LLC fund, instead of various small investors.
Now turn my eyes back to “LavaRadio” deal, Angelcrunch seemed to follow such trend, albeit not in the same mechanism as AngelList. After all Angelcrunch has not fully developed in China yet. While I felt excited for this new progress made by Angelcrunch, suddenly my burning question became “Is China ready for such AngelList kind of funding?”
With my usual caution, I would say “Not Yet”.
1) AngelList kind of funding often requires a robust and salubrious Angel ecosystem; does China have that now? I do not think so.
2) AngelList helped to pass the JOBS Act (a law intended to encourage funding of US small businesses by easing various regulations). In China legality in this area is more likely lag behind or simply missing. What if dispute arises later on for “LavaRadio”? Who’s going to be responsible of solving the conflict?
I remember a veteran VC once told me “Many overseas ideas and concepts are good but when they are implemented in China, some seem to turn into monsters…” Laughed at his slightly exaggerated comment, I realized that I do not care whether we are raising monster or beast, but all I care is the creature must learn to adapt to China’s unique business environment & culture, and what is more important to survive.
Though Angelcrunch still has a long way to go in China and I do not know how it will look like in the end, AnglList’s ideology of more open, transparent, efficient, commoditized game rule of seeding and fundraising should be universally applied. Even from a futurist point of view, it must be something China startups desperately need, however again the timing and system are not mature right now.
LavaRadio got featured on the website of AngelCrunch
Image credit: AngelCrunch
The piece was written by Cecilia Wu, a contributor for Technode based in Shanghai who currently works as a market analyst for L’Atelier BNP Paribas. She is profoundly interested in internet related business & startups in China and holds a Master degree in Economics from McGill University.