How is investing through a syndicate different to investing directly into the company?

When you invest through a syndicate on AngelList, you are not investing directly in the portfolio company. Instead, you are investing in a Special Purpose Vehicle (SPV) that pools capital from multiple investors to make a single investment in the company. This structure creates several key differences compared to direct investing.

Ownership:

When you invest through a syndicate, you do not directly own shares in the portfolio company. Instead, you hold a percentage interest in the SPV, which is structured as a limited partnership (LP). The SPV, in turn, owns the shares in the portfolio company. This means your ownership is tied to the SPV rather than the company itself, and you have the right to a proportional share of any profits or losses when the SPV liquidates its investment. You do not appear on the portfolio company’s cap table – the SPV is the single cap table entry. If the portfolio company is acquired or goes public, the SPV distributes proceeds to its investors based on their percentage interest.

Carry:

Syndicate leads earn carry (typically up to 15%) on the SPV's profits. This incentive motivates them to source high-quality deals and manage the investment process.

Investment Minimums:

Investing through a syndicate allows for smaller check sizes. While portfolio companies often require large minimum investments (e.g., $100K per investor), syndicates pool smaller contributions from multiple backers to meet that threshold. This enables individual investors to participate in deals they might not otherwise have access to.

Deal Flow & Lead Expertise:

By backing a syndicate, investors gain access to the lead’s deal flow and benefit from their diligence, network, and expertise in selecting and managing investments. These deals are often difficult to source independently.

Capital for the Startup:

For startups, syndicates streamline fundraising by providing a single cap table entry via the SPV rather than managing multiple individual investors. This makes their cap table cleaner and more attractive to future investors. By investing through a syndicate, you get access to high-quality deals and professional investment management, while startups benefit from efficient capital aggregation.

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