Angel School has developed a proprietary Funnel Management framework for building and managing Angel syndicates. We’ve also measured benchmarks based on real-world experience running dozens of syndicates and deploying $ millions.
Syndicate leads would benefit from employing similar funnel management practices. Measuring their own metrics against Angel School Benchmarks will help identify areas of improvement.
TLDR:
- A Funnel Management approach to syndicates provides clear benefits to syndicate leads in terms of (i) scalability and repeatability, (ii) benchmarking, and (iii) deal course correction.
- Angel School’s experience indicates the following as best-practice benchmarks:
- Stage 1 to 2 conversion - LP consent rate: 70+%.
- Stage 3: Deal publication - 65% email open rate, 5% click rate.
- Stage 3 to 4 conversion - Deal engagement rate: 22% (after complete activation cycle).
- Stage 5 - Commitment rate: 29%.
- Referral Loop - 1 to 2% per engaged or committed LP.
- Beyond adoption of a Funnel Management Framework, syndicate leads should consciously develop hypotheses, design experiments, test new techniques and strategies against live dealflow to push their funnel benchmarks.
Introduction
Building and running a successful Angel syndicate requires syndicate leads to solve 3 separate challenges: (i) building and engaging an investor network, (ii) sourcing, filtering, diligencing and marketing deals, and (iii) efficiently raising deploying capital.
For all the work that goes into raising capital into a startup, we’re constantly thinking about optimizing everything we do- writing great copy, performing world-class diligence, maximizing allocation, and growing our network. None of that would be possible without a framework for measurement and benchmarking in place.
We’ve written this article to share AngelSchool.vc’s Funnel Management framework for optimizing syndicate performance.
1. Funnel Management for Syndicates
Angel School relies on a funnel approach for running syndicates- the same way Enterprise sales teams have a customer funnel.
Our funnel is based on real-world experience running dozens of syndicates and deploying $ millions. Our investment committee evaluates the success of each deal by analyzing its metrics.
The advantages that syndicate funnel management gives us are:
- Scalability and repeatability: Stable funnel metrics across multiple deals indicates your LP network is engaged. This makes syndicate fundraising highly predictable.
- Benchmarking: By examining metrics across multiple deals, we’re able to determine best practice benchmarks at every single stage of the funnel. For example, 20% of LPs committing to an investment sounds healthy but what’s a best-in-class commitment rate?
- Course correction: The average syndicate might last 2 months. Tracking metrics over that lifecycle gives signals of a syndicate that might be under performing, allowing us to course correct quickly.
2. Defining the Syndicate Funnel
The Angel School funnel has 5 stages.
Stage 1-
LP Outreach: Investor outreach is the process by which new investors are introduced to our syndicate. LPs find out about Angel School’s syndicate through our professional networks and word-of-mouth.
We onboard them to our CRM after speaking with them 1:1. Within a 30 mins Zoom call, you should be able to:
- Explain your investment thesis
- Communicate your syndicate’s value proposition
- Compel them to invest with you
- Answer questions and address resistance points
- Get consent to share dealflow with them.
While speaking with each person seems tedious, it pays off in terms by establishing trust with LPs and gives syndicate a better context to understand their investors than a medium like email or chat.
I’ve spoken with every single one of my 750+ investors and personally recommend it as best practice.
Stage 2-
Build Network: Once you get consent from an investor to share your dealflow, you can count them as part of your LP network. Congrats!
If you’re just starting out, this is your priority. Stay focused on this early on till you get to a network of 50 - 70 LPs. This is minimum base that gives you ‘critical mass’ for representative metrics lower in your funnel.
Stage 3-
Deal Publication: In order to decide what to invest in, you’ll need to find startups, screen them, decide what to invest in after performing due diligence, and assemble a dataroom for investors.
Deal publication is the process by which you notify your LP network about your exciting new company.
Stage 4-
Deal Engagement: Once a deal is published to your angel syndicate, a subset of your LP network will indicate interest in the deal. This can come in the form of an opt-in form, link tracking, dataroom access request or email replies.
Any LP that performs an indication of interest is considered as ‘engaged’ and can receive future communications on this startup investment.
Stage 5-
Investment: Engaged investors can be nurtured toward an investment decision through company updates, next-step notifications or investor calls.
They reach the investment stage when they commit capital to the investment. Angel School uses a web form to capture this commitment.
* PRO TIP* The Referral Loop: Notice the ‘referral loop’ on the side of our funnel? This is the secret sauce of the Angel School funnel. It works similarly to Dave McClure’s ‘AAARRR’ Pirate Funnel and has been adopted by growth marketers.
In our experience, the referral loop is most often triggered at stage 4 and 5 of our funnel. That is, investors who are engaged on a particular startup investment OR have already made an investment decision (mental or explicit), are much more likely to refer LPs to your network.
One thing that this referral loop so powerful is that a referred angel investor is almost immediately engaged on a deal. They’ve bypassed stages 1 to 3, and most likely are engaged at the deal level on 1st contact (stage 4)!
3. Setting Funnel Benchmarks
Now that we’ve defined our funnel, we need to set metrics at each stage to set benchmarks. To do this, we looked at our own real-world data from running dozens of syndicates that raised $ millions.
These benchmarks represent what AngelSchool.vc best practices produce today. However, we’re always consciously looking for ways to move the needle. We design experiments, test new techniques and strategies, and measure against live dealflow. Experiments that consistently generate a positive delta against our baseline are incorporated into our syndicate blueprint.
Stage 2 to 3 Conversion-
Build Network: Our first conversion point is getting an investor’s consent to be added to our CRM. In our experience, LPs should be saying ‘Yes’ at a 70% or higher rate.
Achieving this means that you’re targeting the right persona or that the LP referral. You’ve validated that this investor:
- Is an active angel investor or interested in getting started.
- Understands and relates to your investment thesis.
- Has the capital to and is comfortable to invest your syndicate minimum.
Stage 3-
Deal Publication: While it’s not a conversion point per se, it’s important to benchmark on deal publication. This is to ensure your LPs are looking at your deals. It’s easy to join a mailing list but it’s an entirely different matter to look forward to it.
Angel School relies on email automation to streamline email delivery and tracking to hundreds of LPs across the world. Our email newsletter sees a consistent 65 - 70% open rate and 5% click rate at the deal publication level.
Stage 3 to 4-
Deal Publication to Deal Engagement: Our 2nd conversion point is on deal engagement. These are the number of syndicate LPs that express interest in a particular deal. Angel School sees 22% deal engagement after a full activation cycle.
Angel School’s email newsletter embeds URLs when introducing a company. These URLs act as a call-to-action (CTAs) directing readers to a pitch deck, pitch video or dataroom. Links are restricted and require readers to request access. This allows us to maintain information control and capture deal interest.
For every syndicate raise, we plan a series of ‘activations’. These are designed to nurture investor interest in the company. For example, our 1st activation for a deal is always to introduce the new company. The next activation could be a monthly performance update on growth. Every deal also has an investor call which serves as the final activation before calling for capital commitments.
Stage 4 to 5-
Deal Engagement to Investment: Our final conversion point is getting investors to commit to the deal. The capital call takes place following an investor call with the Founder.
Angel School gets a 29% commitment rate from engaged investors. We’ve seen commitment rates as high as 45%.
* PRO TIP* The Referral Loop: The referral loop is the hardest part of the funnel to measure. We reply on anecdotal observations to ‘guesstimate’ it but it’s undeniably there. We estimate that every deal activation event results in a 1 - 2% referral effect; that is, 1 - 2% of engaged or committed investors refers a new investor to our LP network.
It’s a small but immensely powerful feedback loop that drives LP acquisition.
This is what our complete funnel looks like.
Conclusion
Angel School recommends the Funnel Management framework for syndicate leads at any stage of development; whether you’re just starting out or have a running syndicate already, the funnel helps you track performance.
We’ve also shared our benchmarks for today’s state-of-the-art. That said, we’re always developing hypotheses, designing experiments, and testing them in real world conditions. For example, a recent stage 3 experiment produced a 5% higher email open rate compared to our baseline.
Syndicate leads would benefit from examining their own metrics and identifying areas of improvement.
About AngelSchool.vc
AngelSchool.vc is a Fellowship program dedicated to helping Angel Investors build syndicates. We give Program Fellows a syndicate blueprint in just 8 weeks.
After that, they’re invited to join our Investment Committee (IC) to get real deal experience AND earn carried interest. Apply for the next cohort of our Syndicate Program here.
The AngelSchool.vc Syndicate is backed by 1000+ LPs and deploys $MNs annually. Subscribe here for exclusive dealflow.
