When you invest through a syndicate on AngelList, you’re not investing directly in the startup. Instead, you’re investing in a Special Purpose Vehicle (SPV) – a legal entity that pools capital from multiple investors to make a single investment in the company. This structure introduces several key differences compared to direct investing:
Ownership
As a syndicate backer, you don’t own shares in the portfolio company directly. You own a percentage interest in the SPV, which is typically structured as a limited partnership. The SPV holds the actual shares in the company and is the only entry on the company’s cap table. If the startup is acquired or goes public, proceeds flow to the SPV and are then distributed to you based on your ownership percentage.
Carry
Syndicate leads typically earn carry – usually up to 15% – on the SPV’s profits. This aligns incentives and rewards them for sourcing strong deals and managing the investment.
Investment Minimums
Syndicates allow investors to write smaller checks. While startups often require large minimums for direct investors (e.g., $100K+), syndicates aggregate smaller contributions from multiple backers to meet that bar. This lowers the barrier to access and helps investors diversify.
Deal Flow & Lead Expertise
Backing a syndicate gives you access to the lead investor’s deal flow, network, and diligence. These are deals you may not be able to access or evaluate on your own.
Capital for the Startup
Startups benefit from syndicates by getting a single cap table entry instead of managing multiple individual investors. This keeps their cap table clean – a key consideration for future fundraising.
In short, investing through a syndicate offers professional deal access, smaller check sizes, and portfolio diversification for investors – while giving startups efficient access to capital.