Syndicates on AngelList
When AngelList announced their concept for individuals creating syndicates on their platform to lead investments there was quite a buzz.
To me this idea is just under the umbrella that has been growing over the past few years called crowd funding. We first witnessed that with Kickstarter and then other platforms followed to participate and invest in someones creative project. Then we saw Crowdrise where we can give money to a cause. There is even Give Forward where the crowd can give towards medical bills. CircleUp where the crowd can back and own a piece of consumer product companies. Fundrise is another one that lets you invest directly in real estate deals. Need I go on?
What is interesting is that it isn't so much a change in consumer behavior but the ability for consumers who do not have access to these interests and opportunities to be able to participate.
I have built my own personal syndicate around the deals that I do. Each of the people I send deals to are people who I respect and look at the concepts differently than I do which is great. Over the past few years I have seen the shift in capital. There are more people out there at a younger age who are interested in taking their earned capital and putting it back into businesses that they understand. We are living in a time that because of technology there are countless businesses being built to change each industry. There are not only countless angels with deep pockets there are micro-VC's who have funds that can put in $150/200K at the onset where VC's want to participate with a much bigger check. VC's have huge amounts of capital raised that they need to put to work and as businesses cost less and less to launch and scale the VC community is willing to wait a longer time to put cash in because they need to put all that cash to work. In essence, the investment industry is changing in regards to where entrepreneurs raise their cash.
I was not going to do a syndicate on Angels List but changed my mind to do it and in the end decided against it. I wanted to see how it works and am interested in pulling in other like minded investors in to deals that I believe in. Yet what I would essentially be doing is building my own fund and I would rather have others get excited about particular deals like the personal syndicate I have. They can choose to opt in or not. It is not so different than crowd funding. If the crowd likes it (my syndicate) then it ends up getting funded. That is how I want angels list to work.
What I like about the syndicate is that there are many accredited investors out there who could be investing in start-ups but aren't quite ready to put in the amount needed and through angels list it gives them the ability to test the waters. It brings a larger group of people to the table for a deal. New investors first get to piggy back on others they believe to be educated investors. This helps the entrepreneur. In essence it is the democratization of capital.
Our lives are changing through these platforms but they need to be built and grow without the insular early adapters community in mind but a much broader reach. The merging of crowd funding and social media and everyone becoming their own brand is creating consumerization around the world and I am looking forward to more of these platforms getting to that big stage.
I’ve been thinking a lot about Syndicates and AngelList as well, and toying with the idea too.True, that you have been doing a non-AngelList version of Syndicates on your own for a few years already.But what you described if I understood correctly is a private Syndicate of sorts, where you’re not totally open to anyone, but selective, and you don’t even have to advertise it. I had asked Naval about private Syndicates on AL, and he told me they can be private. So, in essence you’d be offloading the administration of the syndicate to AL, without changing too much of your current workflow. Is that what you had in mind?
It appears to me that through a syndicate I raise money. It is my choice who to fund with that cash.I want to put up each company that I am funding and getting involved with and let each individual out of my syndicate choose if they want to fund that particular company or not.To me that makes sense because I am giving the opportunity to first time or starting out investors to make their own decisions based on the company I am funding with my own cashMake sense?
So you want to operate a Syndicate like a micro Fund of sorts, with an opt in/opt out choice to your syndicate members, on a deal by deal basis. If that’s correct?And are you planning on doing it on AL? (sorry, that part wasn’t clear to me.)
yes but i do not think you can do that on AL
From my understanding, the default is opt-out on a deal-by-deal situation (but I think the idea is that you should not opt out too many times) -> https://angel.co/help/syndi… and https://angel.co/help/syndi…
Interesting, I fully believe that anyone should be able to do anything they want with their own money. (Hence, even unaccredited investors ought to be able to invest in anything they want.)That being said, I started a syndicate for kicks just to see how it works. I am not a name investor-so I didn’t expect anyone to join, and I didn’t push it.With the angel group I started, no one gets carry etc. As a result, I have done more than my share of free work for startups. Syndicates would allow me to monetize that.I have a gut feel about how this will all work. I think it becomes Bayesian. If you have a name, or track record-you will be able to raise a syndicate easily. Absent that, it will be a grind.Interestingly, because I have committed a ton of capital to midwestern deals (because I believe in the midwest)-not coastal, the game is slightly different. Angels I speak with on the coasts invest in companies knowing they can “acquihire”. That doesn’t happen here.Acquihire can make your track record look pretty good. But, it doesn’t show that you are investing in the fog.