At the beginning of summer, I was brought on as an AngelList associate intern at Rockies Venture Club. Unsure of what that would entail, it turns out, I was going to be building a following on AngelList, one of the most disruptive, and uniquely social investment platforms to date. The focus of this post is not about the platform or how useful AngelList is, because it been vindicated by many notable Venture Capitalist and by the amount of capital that has been raised on the platform already, but to rather talk about AngelList in accordance with social proof.
Social proof is the psychological term for people following or replicating an effort, with the hope of being correct, or making the right decision. This is amplified by a well-known industry leader or a popular figure. Simplified (and somewhat jokingly), it’s seeing Michael Jordan endorse something, and then everyone else jumps on the bandwagon because, well… he’s Michael Jordan.
In the context of AngelList, this means when a well known industry leader or group starts a fund or backs another one, there is a large following to back their position. Just because there are a ton of backers for an idea doesn’t necessarily make it a good one. And this is one of the problems venture capitalist Bryce Roberts finds wrong about AngelList. Roberts cites this social proof as one of the reasons he deleted his AngelList account, and takes firm stance on the fact that social proof is not validation. It’s the less taken side on an argument that is mostly pro AngelList and likes social proof, so it’s a read thats worth it for the different prospective.
My thoughts on this are with the majority of the community in that this social proof is validation, and quite good validation at that (at least in the context of AngelList). It carries weight beyond social trends because of the credibility of the investors. This process can save time and can bring better deals to the top. While I agree that previous success does not guarantee future success, there is a reason that industry leaders on top, and just because they can create a following does not mean any less. While doing your own due diligence is probably the right thing to do, following the heavy hitters can provide valuable opportunities. It is similar to having a financial advisor, or going to a doctor, as Fred Wilson explains in one of his blog posts, they are there to help you, not the other way around. You have the choice to listen to them and act on what they say. Just because there is a big following doesn’t mean you have to join in, but do you trust the advice of people with experience? Most definitely.
I encourage everyone to go take a look at the Rockies Venture Fund page on AngelList and see what our first fund is about.