Syndication has numerous benefits. It stimulates angel investment and empowers angel investors to build and maintain a portfolio of investments. It also benefits startups, as it streamlines the funding process for the entrepreneur. The collective group of investors have a higher net worth and a larger network than angels working on their own. They are able to finance startups at earlier stages than most VCs. Syndicates also have a more diversified portfolio and a greater ability to pool resources. These resources include skills, contacts and experts. Due to the nature of syndicate groups, investors can often develop more due diligence.
Read more about syndication in Peter’s Post
How this works in the Real World
A wonderful example of the success of AL syndication is Blockchain Capital. Blockchain is a Venture capital firm that has experienced immense success. In January, they closed their second fund at $13 million. This fund is obviously impressive, but results for potential investors has been immense. The large fund permits Blockchain to form an AngelList syndicate. The syndicate invests alongside the fund and allows smaller, accredited investors opportunities to participate in large deals. And, they can participate with an investment as small as $1,000. Brock Pierce (cofounder and managing partner of Blockchain) says AngelList syndicates are “democratizing early-stage financing and allowing small accredited investors access to high-quality deals.”
For Blockchain specifically, this shift means that for every deal, the amount a firm offers the entrepreneur is the same amount of financing from the Angel List syndicate. Additionally the AL syndicate gets to invest under the same terms. Individuals are allowed to participate on a deal to deal basis, which allows for great flexibility and a constantly expanding network. Large numbers of small investors are now possible with AL syndicates. This is beneficial to the entire economic ecosystem, as it allows new investors to get their feet wet and it gives startups additional funding.
Specific to AngelList
Investors get access to a lead’s investments and benefit from their experiences
Leads get carry for their current investments, with the ability to invest 5-10x their normal investment amount and access to more deals and experts.
Once a startup has the attention of the lead making a large investment, they have access to the syndicate investors’ networks and earn more capital with fewer meetings.
Join the RVF Syndicate on AngelList
Check out AngelList’s FAQs for more information on syndicates through the site