Are you a startup founder looking for funding? If so, you may have heard of angel investors who are affluent individuals investing their own money in early-stage businesses. But what is an angel syndicate?
An angel syndicate is a group of angels who pool their resources to invest in startups. This type of arrangement allows individual angels to make larger investments than they could on their own and also provides startups with access to a wider network of potential mentors and advisors.
In this article, we'll look closely into what an angel syndicate is and if it's more beneficial for you to secure funding from this type of investment resource.
How Do You Define Angel Syndicate?
So how do you define angel syndicate? An angel syndicate is a group of investors who pool their money to invest in startup companies. The advantage of working with a syndicate is that you get access to more capital than if you were working with just one investor.
Additionally, each member of the syndicate brings their expertise and networks, which can be helpful to the growth of your company. Angel syndicates typically consist of between 10 and 20 members, each of whom contributes an equal amount of capital to the fund.
The lead investor, known as the syndicate lead, manages the day-to-day operations and makes decisions about which companies to invest in. There are many benefits for startups working with an angel syndicate instead of seeking funding from traditional venture capitalists.
For one, VC firms tend to be much more risk-averse than angels, so it can be difficult to secure funding from them unless your business has already achieved some level of traction or success. Additionally, VCs often work for large institutional firms so they usually have less flexibility when it comes to negotiating.
One of the benefits of working with an angel syndicate is that you have a team of experienced investors on your side. They can provide valuable advice and mentorship as you grow your business. And, of course, they also provide the financial resources you need to get your business off the ground.
There are many different types of syndicates out there, so it's important to do your research to find one aligned with your needs and goals.
However, if you can find the right fit, a syndicate can be instrumental in helping your startup succeed.
How Do They Work?
These syndicates typically have a lead investor who does the due diligence on potential investments and then presents the deal to the other members of the syndicate.
The lead angel in the syndicate does the due diligence on the startup and then presents the deal to the other angels in the syndicate. The angels all vote on whether or not to invest and then the lead angel makes the final decision. The lead angel typically invests their own money first and then works to raise money from the other angels in the syndicate. If the lead angel is unable to raise the full amount of money from the other angels, they may still invest their own money and lead the deal.
The lead investor also typically takes a larger ownership stake in the company than the other members of the syndicate.
The advantage of investing through a syndicate is that it allows business angels to diversify their investments across several different companies, mitigating some of the risks associated with early-stage investing.
It also allows angel investors to pool their resources and knowledge, which can be helpful for startups that are raising money.
The Benefits of Working With an Angel Syndicate
Angel syndicates are a great way to get funding for your business for the following reasons:
1. They Provide a Large Amount of Capital
When you work with an angel syndicate, you're tapping into a network of investors with deep pockets. This means you can raise a significant amount of money to fund your business.
2. They Give You Access to Mentors and Resources
In addition to providing funding, angel syndicates can also offer mentorship and resources. This can be invaluable as you're starting your business.
3. They Help You Build Momentum
Securing investment from an angel syndicate can help you build momentum for your business. This can attract more investors and customers, and help you grow your startup.
If you're looking for funding for your business, working with an angel syndicate is a great option to consider.
The Most Successful Angel Syndicate Investments in Recent Years
There's no denying that angel investing can be a risky business. But when it comes to investing in startups, there's also a lot of potential for huge rewards.
Just look at some of the most successful angel investments made by syndicates in recent years.
While there's no guarantee that every angel investment will pay off, investing through a syndicate can help diversify your risk and increase your chances of seeing a return on your investment.
Some of the most successful angel syndicate investments in recent years include:
- The Guild – An online community for gamers that raised $1.4 million from angels and venture capitalists.
- Bionic – A wearable technology company that raised $500,000 from angels and venture capitalists.
- myBestHelper – A housekeeping and errand-running service that raised $1 million from angels.
- ParkMe – A parking reservation service that raised $4 million from angels and venture capitalists.
- Tango – A mobile messaging app that raised $280 million from angels and venture capitalists.
While there are no guarantees in the world of angel investing, investing through a syndicate can help you diversify your risk and improve your chances of seeing a return on your investment.
Why Are They Important to the Startup Ecosystem?
Angel investors are important to the startup ecosystem for a variety of reasons. They provide seed money for new businesses, which can be crucial for getting a new business off the ground.
Angel investors also tend to be experienced entrepreneurs themselves, so they can provide valuable mentorship and advice to startup founders. Additionally, they often have a wide network of contacts that can be helpful for startups.
And finally, they can bring a lot of enthusiasm and energy to a new business.
Who Should Consider Joining One?
So who should consider joining an angel syndicate?
Working with an angel syndicate can be a great option if you're a startup founder looking for early-stage funding. You'll have access to a group of experienced angel investors who can provide funding, valuable mentorship, and advice.
Of course, there are also some downsides to working with an angel syndicate. One is that you'll likely give up a larger equity stake in your company than you would if you raised money from a traditional venture capital firm.
Another thing to remember is that not all angel syndicates are created equal. Do your research to ensure you're working with a reputable group of angel investors.
If you're still unsure whether working with an angel syndicate is right for you, the best thing to do is talk to other startup founders with experience. Ask about their experiences, both good and bad.
This will help you make an informed decision about whether an angel syndicate is right for your startup.
How Can You Find the Right Syndicate for You?
When finding the right angel investment syndicate for you, it's important to do your research and ask around. You can start by asking your friends or colleagues if they know of any good syndicates, and you can also look online for reviews.
Once you've found a few potential syndicates, it's important to sit down with the members and get a feel for what they're all about. Make sure you're comfortable with the members and feel like they're a good fit for you.
Remember, you will be working closely with these people, so it's important to find a syndicate you trust and feel good about.
Frequently Asked Questions
What do syndicates do?
A syndicate is a group of individuals or organizations that pool their resources to invest in a company or venture.
Are angel syndicates good?
There is no one-size-fits-all answer to this question, as the benefits and drawbacks of angel syndicates vary depending on the specific syndicate in question.
However, syndicates can generally benefit both startups and investors by providing a way to pool resources and expertise. For startups, this can mean access to a larger pool of potential investors and a greater chance of securing funding.
For investors, syndicates can provide access to a wider range of investment opportunities and the ability to spread risk across multiple companies.
How do angel syndicates make money?
Angel syndicates make money by investing in startups and early-stage companies. They typically invest small amounts of money than venture capitalists, but they also take on more risk.
Many angel syndicates are organized as limited partnerships, which means that the investors receive a percentage of the profits (if any) generated by the companies in which they invest.
Conclusion
Our guide has helped you define angel syndicates and understand how they can help you with your startup. If you're a startup looking for funding, an angel syndicate may be a good option. A syndicate is a group of investors who pool their money to invest in startups.
The advantage of working with a syndicate is that you get access to more capital than if you were working with just one investor.
Additionally, each member of the syndicate brings their expertise and networks, which can be helpful to the growth of your company.
There are many different types of syndicates out there, so it's important to do your research to find one aligned with your needs and goals. However, if you can find the right fit, a syndicate can be instrumental in helping your startup succeed.
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