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 is an angel syndicate and if it's more beneficial for you to secure funding from this type of investment resource.
What is an Angel Syndicate?
If you're thinking about starting a business, you've probably heard of angel investors.
But what is an angel syndicate?
An angel syndicate is a group of angel investors who pool their money and resources to invest in startups. These investors typically have a lot of experience in the industry they're investing in, and they use their expertise to help the startups they invest in grow and succeed.
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.
If you're thinking about starting a business, working with an angel syndicate is a great way to get the resources and support you need to succeed.
How Do Angel Syndicates Work?
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 angel typically gets a carried interest in the deal, which means they get a percentage of the profits if the startup is successful.
The lead angel also typically gets a larger percentage of the startup if they invest their own money. The other angels in the syndicate typically get a lower percentage of the startup and do not have as much control over the deal.
However, they still get the opportunity to invest in a startup that they believe in and they get the chance to make money if the startup is successful.
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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 More Startups Are Seeking Angel Syndicates
As the startup ecosystem has evolved, so has the way that early-stage companies seek out funding.
In the past, most startups would turn to venture capitalists for funding, but now more and more startups are seeking out funding from angel investors through a syndicate structure.
There are a few reasons why this shift is taking place.
First, angel investors are typically more willing to invest smaller sums of money than VCs. This is ideal for early-stage startups that may not yet be ready for a large investment.
Second, angel investors tend to be more hands-on than VCs. They often have more experience starting and running companies, so they can provide valuable advice and mentorship to startups.
Third, angel investors are typically more understanding of the risks involved in early-stage investing. They know that most startups will fail, so they're more likely to give startups a chance to succeed.
Overall, the angel syndicate structure is a win-win for both startups and angel investors.
Startups get the funding they need to grow, and angel investors get the opportunity to invest in promising companies.
FAQs in Relation to What Is an Angel Syndicate
How do angel syndicates make money?
Angel syndicates make money by investing in startups and early-stage companies. They typically invest smaller 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.
What do syndicates do?
An angel syndicate is a group of investors who pool their money to invest in startups.
Conclusion
What is an angel syndicate? An angel syndicate can be a great way for startups to raise capital by pooling resources and making larger investments than they could on their own. This type of arrangement also provides startups with access to a wider network of potential mentors and advisors.
If you're seeking funding for your startup, working with an angel syndicate may be the best option for you.
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