What Is a Syndicated Investor?


a group of eggs 150x150 What Is a Syndicated Investor?You’re facing an angel investor’s dilemma. You’ve looked at proposal after proposal from early stage startups and finally, you found one. You feel it in your gut; after spending countless hours reviewing the deal, you believe that this company is on solid ground, and you want in. So where’s the dilemma? This startup needs more capital than one angel (that would be you) can or will invest in a single deal. End of story? Absolutely not.

A syndicate of good guys

It’s not uncommon for a group of angel investors to form a syndicate, or for a single angel to join a syndicate, with the purpose of loaning a relatively large sum to a single startup company. (For those of you who are hooked on film noir, who own copies of Chicago Syndicate and The Big Heat, and who consequently believe that the word “syndicate” spells trouble – it’s time to move on.) In the world of finance, there is nothing underhanded or shady about syndicated investing.

It’s a simple concept: a syndicate is an alliance that brings together a large collection of angel investors to invest in a particular startup; they share the risk, and they’ll eventually share in returns from their investment. In most cases, one angel group will take the lead in deciding whether to form an investing syndicate; the group’s leadership will decide who they want to invite to join the syndicate and they’ll coordinate the syndicate’s activities.

None of us is as strong as all of us

Some angel investors say they no longer approach their investments from an individual perspective; instead, they make business deals in association with an angel organization of some sort. Their reasoning is pretty solid. The collective wisdom of the group is focused on screening every startup for potential. Each member of the group brings a distinct set of skills and experiences that will add to the overall strength of the group. And for new angels, working with an angel group is the perfect classroom to learn the ropes.

Angel groups can be formally organized (you call your lawyers and they draw up the paperwork to form an LLC or some other legal entity) or they can be a more informal, member-managed group (you’re probably still going to want to consult with legal counsel). And at some point, an angel group may make the decision to join with another group to take advantage of a particular investment opportunity.

Before you become a syndicated investor, you probably will want to work with a legal expert who specializes in financial services who can put together the details of the syndicate. Then, of course, you must make yourself entirely familiar with the terms of the agreement to ensure that your investment offers many of the same rights and privileges as an individual angel. Along the way, you may find value in the words of poet Alexander Pope, who tells us, “There is a certain majesty in simplicity . . .” (A brief interpretation for those lacking in poetic spirit: keep it simple.)

* For series, references are published in the last installment of the series.

 

  • LJ

    This is no surprise that many angel investors are starting to work in this manner. For most investors you do not want to lose on your investment so you make sure that you are not going to before you start the investing process. It would be wise for any angel investor to join an angel investing group. I appreciated reading this and will looking at this from a hole other perspective now.

  • themermaid

    This made a very interesting read. You are right, a group is always stronger than an individual, and I guess angel groups will prove that truth over and over again. This is the first article I have read on this site, and this has gotten me more curious to know more about how this company started and so on. I would love to read some more articles here before I decide to join you.

  • katia cosimetti

    You're right if you're in a right group and doing the right things,it's almost assistance is available ..and may I add there's always power in unity it seems you have a perfect agenda for your members

  • katia

    You're right if you're in a right group and doing the right things. There's always power in unity. It seems you have a perfect agenda for your members.

  • ade dayu

    Now that the global economy is so shaky…..executive have little confidence in their projections that is why the need to pool each other talents and resources to fully understand and manage the risk …You are right that none all of us is strong.

  • henry

    This is the first time I encountered the term “angel investor”or “angel syndicate”but the first thing is to have knowledgeable people in the organization who are looking broadly and challenging assumptions about the future

  • ade dayu:

    Now that the global economy is so shaky…..executive have little confidence in their projections that is why the need to pool each other talents and resources to fully understand and manage the risk …You are right that none all of us is strong.

  • bambang

    Now that the global economy is so shaky.executive have little confidence in their projections that is why the need to pool each other talents and resources to fully understand and manage the risk .You are right that none all of us is strong.

  • ANANDAKRISHNAN

    When it comes to planning to set up a new investment the new thinking goes it is not just the concept that matters it is also the mindset ,I sincerely believe from my experience that the best investor to join with are those with already good have plan that could match up the risk involve

  • Ricardo

    I guess that's another variation of the KISS principle – Keep it simple stupid…

    I wonder how difficult it would be for a new angel to join an existing syndicate?

  • http://venturehype.com The Hyper Team @ Venture Hype

    The term “angel” has been around since early 1900's. It's commonly used to describe individuals who have the capital to invest in new ventures. Venture Hype is dedicated to delivering useful information to prospective investors such that more individuals would invest in startups. Our goal is to make money and make a difference.

  • http://venturehype.com The Hyper Team @ Venture Hype

    There’re several ways, assuming you’re not acquainted with any seasoned angel investors:

    - Join angel groups, whose members often co-invest.
    - Attend events that are catered to prospective angel investors.
    - Join the Chamber of Commerce and network with members who are investing in startups.
    - Attend startup events: Organizers often invite angels to speak. Introduce yourself during networking sessions.

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  • crimson45

    This is not new to some investors, they have to do this because sometimes they really need a a good amount of cast to establish one company that they know has a solid ground. No man is an island that's what they say and I really believe that we need others too.

  • http://venturehype.com The Hyper Team @ Venture Hype

    There are many benefits in joining an angel group. This post, “Angel Investing: Team or Solo Sport,” may help you decide whether you want to go it alone or do it as a group.

  • http://venturehype.com The Hyper Team @ Venture Hype

    Thank you. Yes, we strive to deliver information in everyday language so new investors wouldn't feel intimidated.

  • http://venturehype.com The Hyper Team @ Venture Hype

    Pooling funds, expertise, and resources would be ideal in a good economy too.

  • http://venturehype.com The Hyper Team @ Venture Hype

    Pooling funds is certainly one of the many benefits in co-investing. There are other benefits which you may learn by reading “Angel Investing: Team or Solo Sport

  • http://venturehype.com The Hyper Team @ Venture Hype

    There are many benefits in joining an angel group. This post, “Angel Investing: Team or Solo Sport,” may help you decide whether you want to go it alone or do it as a group.

  • http://venturehype.com The Hyper Team @ Venture Hype

    Thank you. Yes, we strive to deliver information in everyday language so new investors wouldn't feel intimidated.

  • http://venturehype.com The Hyper Team @ Venture Hype

    Pooling funds, expertise, and resources would be ideal in a good economy too.

  • http://venturehype.com The Hyper Team @ Venture Hype

    Pooling funds is certainly one of the many benefits in co-investment. There are other benefits which you may learn by reading “Angel Investing: Team or Solo Sport.”

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