AngelList Syndicates is a must for investing in early stage equity offerings as it improves access, reduces fees and overhead to build a venture portfolio. AngelList syndicate investing provides infrastructure similar to a venture fund. Simply put if you feel like getting in early and improving the amount of capital behind your investments syndicates are the way to go.
Christian Catalini of MIT Sloan explains syndicates:
A syndicate allows investors to participate as a lead investor or a follow on to the lead in exchange for the the lead's carried interest. The carry represents a share of the profits of an investment that is paid to the managers of the investment.
Carry, short for carried interest, is a share of the profit of an investment that is paid to the managers of the investment. Syndicates use deal carry so investors can opt out of any investment or stop investing at any point in time.
Syndicates eliminate management fees leaving more capital for investment. On average, syndicates invest 97% of the capital they raise.
Access to Rising Star Fund Managers
One of the major attractions and benefits of syndicates are the deal access that investors receive. Investors get access to a lead’s investments and to the leads professional knowledge and experience. Syndicate Investors get access to fantastic opportunities and exciting deals, leads get carry while start-ups receive vital capital with less hang-ups and cutting down the time involved with the process. It’s a Win-Win for everyone involved.
With AngelList you can chose to invest directly into a particular company, or join a syndicate where you can reduce your risk profile by investing alongside a lead into a group of pre-selected companies. Investors get access to a lead’s investments, therefore their due diligence, and subsequently they receive great benefit from the leads experience in the sector as well as their picking and managing of investments.
Raise More Capital
The lead can command 5 - 10x their typical investment dollar amount. Leads can leverage this increased investment amount, giving them access to more deals. It is also possible that the lead can improve their syndicate's investor rights. A lead can enhance their brand as a fund manager. With AngelList leads gain access to a network of potential co-investors who can be experts in a broad range of industries.
And of course the start-up gets the benefit of a lead that makes a large investment along with providing direct access to a diversified and knowledgeable syndicate investor’s network without having to endure lengthy legal proceedings and complexity in their cap table.
Creating a Syndicate
In order to create a syndicate you will have to join and create a profile at angle.co. Once your profile has been created enter information about how many deals you expect to syndicate each year. Commitments start after you syndicate your first deal.
- Make a significant investment in each deal
- Provide an investment thesis for each deal
- Disclose potential conflicts of interest such as warrants
- Review and screen potential investors in each deal
- Sign a side letter making you an independent contractor of AngelList Advisors
- Respond to questions from syndicate investors about their investments
Syndicate investors have to be accredited. The fundraising information for a syndicate deal is only visible to accredited investors who have been invited to participate in the deal; the start-up can limit the information as well as exclude certain investors from observing the deal all together.
- Discuss terms with the lead
- Share information on the raise in a private deal setting
- Invite investors – AngelList affiliated funds are under NDA and are automatically invited to invest in all deals.
- Closing the deal – deals can be closed in as quickly as 72 hours.