Want a Smoother Angel Ride? Syndicate.
Mary Jane Grenzow | May 21, 2009
It would perhaps be naïve to think that the current state of the economy has been beneficial for anyone. While some may view the current status of the market as the perfect time to buy, others have been tightening the purse strings in response to their shrinking portfolios.
These shrinking investments have not left angel investors unscathed and some are shying away from making investments. Not only is the status of growth in the market a problem, but some may view now as the wrong time to launch a startup – no matter how promising the opportunity.
For those startups that are seeking seed money, angels are still a primary source for consideration due to low entry barrier, simple and quick decision process, low return rate requirement and flexible time limitation relative to venture capital. In the Chinese market especially, angel investing is taking a more dominant position, especially in high-technology firms.
In reality, now is the perfect time to invest. Valuation is low, helping to produce a better overall return. In addition, this is a great time for angels to invest in syndication. Thanks to the free-flow of exchange of information and deals between angel groups, companies are better prepared with their presentations and angels are more educated about the industry.
Angel syndicates are enjoying strong growth as angels are seeking increasing opportunities to spread the risk through pooling their money. Not only is this good for investment-shy angels, it also benefits those companies seeking investments as syndicates are investing much higher amounts than stand-alone angel investors. According to a survey of Angel Capital Association members, the average pooled investment in 2008 was US$281,000. Individual angel investment ranged from US$10,000 to US$200,000 per startup.
Remember that old saying that you are always safer in pairs? The same is definitely true in investing. It can be scary to go in on a deal all by yourself. It can be especially intense if you are a new angel and the opportunities seem to outweigh the amount of time you have to evaluate each one. In working with others, you have the opportunity to share the burden, even if you do have to share the spoils.
Often dubbed “Smart Money”, syndicate investing allows for not only the pooling of financial resources, but also expertise and skills. By combining incisive business knowledge together with cash, angels of all backgrounds can benefit from working together. This creation of Smart Money is causing the number of angel syndicates to experience strong growth.
If you’re not sure how to get stared with a syndicate, you haven’t been asking the right questions. Use your networking skills already in place to identify opportunities in your field of investments. Others are looking, too and enough of the right conversations will create for you the right connections.
Filed Under: Angel Investing Basics • Syndication
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[...] risk is not news to angel groups, a main reason why these strategic investors pool their resources instead of venturing alone. By spreading the risk, angels can more widely diversify their [...]
[...] angel investor as these groups bring a diverse set of talents and skills to the table that can be leveraged to maximize the return on investment. And, by participating in an organized group, angels can more [...]
Syndicated investing provides a window of opportunity for people who are new.
Syndicated investing provides a window of opportunity for people who are new.
It is quite right that irrespective of the current economic meltdown Angel investments are going stronger by day. There are number of factors which helps in this regard as mentioned in the article. Further as far as I know only Angel syndicate investments promises a window of opportunity for people who are new or who wants to earn money through a reliable investment.
Syndicate investing is a safer and more beneficial way to go, for we will share the burden while working with others. Also definitely there are a lot of other great information we can share with each other, as mentioned in the article, some financial resources, expertise and skills. So it is better for us to have a try.
I absolutely agree with this article. Syndicates are definitely the way to go. It's safer and easier in my opinion. A lot of people, especially those new to investing, will be more eager to go in with someone rather than risk more capital on their own. It's definitely a winning proposition.