For business angels who have some deal flow to share, joining a syndicate that aligns with your values and interests may be the next natural step in your investment journey.
What is an angel syndicate?
An angel syndicate is a group of investors that pool their resources to invest in start-ups. Most syndicates give themselves a name, and they may have an area of expertise e.g. fintech or healthcare. (For example, see our interview with Adrien and Antoine of Mozza, a syndicate that focuses on products in Europe and the US.)
Even if you’re part of one or more syndicates, it doesn’t stop you doing your own business angel deals on the side. A syndicate or going solo – they are just different ways of operating. Which you pick (or how you split time between them) will depend on how much time you have, what your interests are and even how well-known you are in the relevant circles.
Syndicates usually have a lead investor – the person who is the main voice or representative for the group. The syndicate lead tends to act as a liaison between the group and the investee company, chasing for those quarterly reports, helping to organise pitches and presentations, as well as being the one to field and share ‘asks’ from the investee to the group. In this way, business angels are still involved but less active than they would be on their own.
Joining a syndicate can also give you power in numbers, combined value and expertise.
How to leverage your community ?
More specifically, you can leverage your new syndicate network to:
- Invest in bigger tickets, but write smaller cheques.
{{learn_quote_1}}
- Become more well known in the investment eco-system. Investment is still a people-driven business. As part of a respected syndicate, it may be easier to network and drive certain opportunities, as well as the chance to get to know your co-investors.
- Receive financial incentives. Carry, or carried interest, refers to the share of profits when a syndicate exits a deal. A syndicate lead, in return for their hard work, can set a carry rate i.e. 20% that would apply to the profits made from syndicate co-investors on a deal. To learn more about carried interest, read our blog here.
- Pave the way for more professional activity. As you gain experience in syndicates, possibly becoming a syndicate lead, you may want to launch your own fund. It’s more time-consuming, but it means you’re more in control and don’t have to fundraise for every deal, while still able to leverage a network.
{{learn_banner}}
“If you have $250,000 to spend a year on business angel deals and you want to do 25 deals, that is $10,000 per opportunity. If you make a syndicate deal, you probably can invest $100,000 per opportunity.”
