AngelList created a platform for angel investors to create funds, Syndicates and index funds. AngelList has stated on their site that, they were producing 46% returns. They are revolutionizing seed and venture fund creation by reducing management and overhead fees through this innovative technology.
As pressure continues to lower fund fees many syndicate leads are offering lower management and carried interest fees than traditional Venture Capital funds which typically charge a 20% carry. The above chart is a snapshot in time of the structure of some of the early syndicates.
- Upfront fees to set up a syndicate
- One-time cost of ~$8000, prorated across all investors in the syndicate by their investment amount. For example, if AngelList puts together a syndicate for a $500K investment in a startup, and you put in $50K, you would pay approximately $800 in costs.
- These costs are paid to third parties such as state regulatory agencies, payment processors, and accountants. AngelList does not profit from these fees.
- Lead investors can choose to take an additional carry of up to 20 %
- as can be seen with the above snapshot of the break out of fees offered for 2015 more are dropping below the traditional Venture Capital Fund fee ratio of 2% management and 20% Carry
- More info on the reduction of fees >
- One can have 40 investors with just one signatory on deals.
- It provides pro-rata rights to invest in subsequent rounds.
- It packages and aggregates angel money into large bundles making it easier for angels to attain rights they might not otherwise have.
The Rise of Syndicates
The Syndicate allows a lead investor to create a fund-like structure to have Backers similar to Limited Partners. An individual can create their own or join others. We wrote an in depth article on how to do this. AngelList also wrote an in depth piece on the economics of Syndicates.
As example a lead can have 40 investors with just one signatory on an investment, which helps keep the cap table clean. The syndicates provide pro-rata rights to invest in subsequent rounds. It packages and aggregates angel money into large bundles making it easier for angels to attain rights they might not otherwise have. Naval Ravikant of AngelList is a successful Syndicate lead and founder himself, @Venture Hacks @Vast @Epinions @Twitter @Heyzap @Uber to name a few. Christian Catalini of MIT Sloan explains syndicates:
- $1 Billion invested
- 200+ Active Syndicates,
- 200-350k typical check size
- 1,133startups funded in 2018
- 255 angels and VCs leading investments in 2018
- 28% of top-tier U.S. VC deals are in the portfolio
- - all from 2018 in review